Rand's plunge against the dollar, and interest rate and inflationary fears, are depressing factors for the industry
Property Editor
THE festive season held little cheer for many players in the commercial property industry as the local currency plunged to more than R13 to the dollar and fears of interest rate increases and inflationary pressures increased.
High interest rates can be devastating for the commercial property industry. In 1998, at the height of the emerging market crisis, interest rates soared to 25%, while a slowdown in economic activity depressed rentals and capital values as vacancies declined.
Viruly Consulting director Pauline Larsen says a weaker rand is of concern mainly to developers. Its volatility affects investor sentiment. Investors, especially foreigners, fear being stuck with a rand- denominated investment, she says.
People invest in property mainly for an income stream, but this is undermined by a weaker rand.
The currency weakness has negative spin-offs for new developments as building costs are set to rise.
However, Larsen points out that the weaker rand makes SA's exports competitive on global markets, so the industrial property sector which has been under pressure for the past decade, showing capital value decreases could benefit.
Marriott Property Services' David Green says the rand's weakness might stimulate international interest as investors take advantage of more affordable property values.
Those already in SA might take advantage to acquire or lease more space, he says.
'Without an interest rate increase we do not see the rand weakness as a problem,' says Green.
Fears of the weak rand's effect on property come as property analysts warned of weakening fundamentals in the industry. Vacancies across the retail, office and industrial sectors are rising.
The SA Association of Property Owners' latest survey shows rising vacancies in popular nodes across the country, with Sandton and surrounding areas in the northern suburbs of Johannesburg particularly hard hit.
The retail sector seems to be suffering from oversupply following the introduction of new centres around the country. The new centres include Canal Walk outside Cape Town, Gateway Theatre of Shopping in Umhlanga, KwaZulu Natal, and the Zone in Johannesburg. All struggled to secure anchor tenants, and their subsequent bargaining put rentals in the sector under pressure.
Publisher: Business Day
Source: Property Editor
Commercial market sees little cheer
Posted On Wednesday, 16 January 2002 14:01 Published by eProperty News
Rand's plunge against the dollar, and interest rate and inflationary fears, are depressing factors for the industry
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