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Roll on 2020, say weary investors

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There was, however, some good news during past year

The end of the year is nigh, and for commercial property investors and stakeholders, 2020 cannot come soon enough.

An election result that put moderates back in the economic driving seat and the Rugby World cup Win were both events expected to usher in a new era of clean government, international investment, economic prosperity, improved sentiment and social cohesion, says Frank Reardon, chief operating officer of Fundamentum Property Group.

Both, however, seem to have had short-lived effects.

And yet, he adds, “one cannot underestimate the importance of the economic moderates’ victory for the long term well-being of South Africa in an otherwise tough year characterised both locally and abroad by tension, unease and bumpy economic and political conditions”.

The failure of the economy and sentiment to respond positively to the Ramaphoria phenomenon, and the events that focused the country on its social and economic failing, was a big negative of 2019 for Reardon. Furthermore, trade wars and Brexit weighed down on international sentiment.  

“Looking back though, it has not all been bad news. There were some big changes that, in retrospect, could have gone a lot worse for the South African property industry.”

In terms of trends, Reardon says the global WeWork phenomenon, “and its up and down ride”, focused the property industry on user experience and flexibility.

“Trends of this type coupled with the seismic trends that have swept through the office, retail and logistics property sectors will continue into 2020 and beyond.”

Summing up the 2019 market, Joff van Reenen, lead auctioneer and director of High Street Auctions, says: “The market was nervous, but with good stock comes good buyers. It all comes down to the quality of your assets and how well you price them.”

A highlight of the year for Van Reenen was the “very high demand” for retail property and development land for Residential 3 Zoning – which permits a density of 21 to 40 dwellings a hectare and is good for small townhouse complexes.

“Developers’ appetite remains high for these sites across the country, but around Joburg in particular.”

It is believed 2020 could offer good opportunities for savvy investors. Picture: Tobia Zils

This demand, he believes, will continue into 2020.  

A lowlight, however, was the re-emergence of xenophobia which affected the market.

“Investors get anxious when there’s pervasive violence of this nature and they don’t spend.”

As we enter 2020, it “would be wise” to keep an eye on future interest rates, foreign exchange rates and fluctuations in the retail and industrial sectors, advises Craig Mott, a regional sales manager for the Rawson Property Group.

“These trends will exercise influence on the overall economy as well as the commercial property market.”

For that reason, commercial property such as warehousing, factories, offices, retail outlets and apartment blocks will continue to be bought and sold, albeit at a slightly slower pace.

He also believes rents will increase as loans remain tough to secure. However, one should not expect much growth in the market of industrial and commercial properties.

“Another year of single digit returns on commercial and industrial property is to be expected. Businesses may put off buying an expensive property, instead trying to negotiate a better deal with their landlord or relocate to premises with more favourable rates.”

Mott says 2020 may also offer great deals for savvy, well-informed investors.

Van Reenen believes 2020 will be much the same as 2019.

“It’s going to take a lot of hard work for the market to recover. It will take at least a few years before we see a real change in the economy. My advice is to batten down the hatches, and run lean and mean. As Clem Sunter would say, you need the mind and nose of a fox, but we will survive the slump. The market always does.”

Reardon predicts “another challenging year” with the upside being some positive action and direction on state-owned enterprises and the “rampant corporate and government corruption that has crippled South Africa”.

“The country’s credit rating remains on a knife edge with the prospect of a ratings downgrade very real,” he says.

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