Looking back at the annual total returns for commercial property as measured by IPD, we see that the 10.4% recorded in 2011 is somewhat disappointing and speaks to the double-dip notion that economic commentators alluded to back in 2009/10. As such this return is then actually not surprising. Perhaps more importantly are the drivers of returns as reflected in the first graph below; in particular the flat net income growth and more specifically the disparity between the growth in income vs. costs. This is also reflected further below showing how Net Income is a function of Base Rent + Fixed Recoveries + Variable Recoveries – Operating Costs and whereby the latter two aspects have grown in proportion.

In a select poll run by IPD concerning the outlook for 2012, 74% of respondents anticipate an improvement on 2011’s results and 24% anticipate a deterioration.

The eProp Commercial Property Confidence Index (CPCI) conducted over February/March 2011 polls industry expectations regarding business conditions for the next six months; the following is noted:

The eProp Commercial Property Confidence Index reached an aggregate level of 52 in March 2012. This is the first time since March 2008 that the index has broken the neutral 50 mark and speaks to a slight improvement regarding the outlook for the sector overall (see graph below). We will look at the eProp CPCI in further detail in our next edition.

According to a recent report by Jones Lang LaSalle (JLL), focusing on Johannesburg, the commercial market is “beginning to favour landlords in the prime office accommodation as they are beginning to achieve asking gross rentals and reduced vacancies albeit limited speculative completions”.

The graph below shows the ratio of unlet new office space to total new space. The general trend has been one reflecting a lowering ratio, however in the case of Durban and Johannesburg, the ratio has increased. In Durban's case it is more a function of new space being absorbed into the mainstream market, whereas in Joburg's case the amount of new space on the market (just over 358,000m²) has increased to its highest level since Q3 2009. With the ratio of unlet new space at just under 60% - whilst not that high by historical perspective - could still negatively impinge on the overall vacancy rate going forward.

According to JLL nevertheless, investors are still conservative in committing to new speculative developments due to uncertainty, suggesting that speculative developments represent about 36% of the pipeline in the next 2 years. With all the committed construction activity in the Johannesburg area, office stock is expected to reach over 8,6 million m² in 2012 and 8.8 million m² in 2013.

JLL indicates that Sandton and Bryanston continue to be nodes of choice for office accommodation where heightened activity was noted during Q1 2012. Large deals in the market during in this period are the take up of over 16,000m² by the law firm CLA Cliff Dekker in Sandton and the 3,000m² office lease by Huawei Technologies SA in Bryanston.

Accommodating your company’s staff is an expensive business. Research shows that after salaries and IT expenses the cost of office accommodation is generally the organisations third largest cost

Alliance Group will be selling Oak Park in Oak Avenue, Ferndale this month — this property is a well-maintained five-storey office block which is multitenanted and has a low maintenance exterior.

A new Industrial Vacancy Report has been brought out by Sapoa covering the major industrial nodes of South Africa and shows that the vacancy rate is on average under 3 percent

IPD and Absa Commercial Property Finance invite you to the IPD Understanding Property Derivatives training course taking place on Thursday, 14th June 2007 at the Melrose Arch Hotel in Johannesburg

Programme and Registration form for the IPD Valuation Conference 2004

Unit trusts recognised for consistent top performance of their underlying property assets

Using different methodologies leads to distrust in the investment community.

Programme and Registration for the Valuation Conference on 29th May, 2003.