Sep 25, 2012
Little sign of full-blown property recoveryBack
Industrial|Property Owners Association/ Investment Property Databank|Rental|Electricity Costs|Retail|Stan Garrun
© Reuse this
Property investment overall delivered a return of 5.9% in the period ended June, which comprised 1.5% capital growth and a 4.4% income return for the first six months of the year.
“A significant industry obstacle was the sky-rocketing operating costs, which are quickly outstripping income growth and pushing cost ratios to unattractive levels,” the report said.
Electricity costs continued to rise, and at a monthly average of R12.8/m2, it now makes up one-third of the total operating cost bill for property owners. Rates and taxes constitute a further 20% of the total.
The burden of costs is being felt jointly between tenants and owners; however, around three-quarters of total costs fell to the tenant to pay.
The report noted that the picture was worst in the office sector. Plagued by stubborn vacancy rates, which shifted from 12.1% in December 2011 to 15.0% in June 2012, and negligible rental growth at just 0.1%, office properties have also seen the highest growth in operating costs across all property sectors.
Offices in inner city and provincial nodes are the hardest hit, with rental levels moving backwards.
Nevertheless, the report stated that there was room for cautious optimism as gains were evident in particularly the retail and industrial sectors.
“Retail property returned the top capital growth rates at 1.7%, along with solid 3.7% rental growth and strengthening occupancy rates. Vacancies in the sector improved from 6.0% to 5.7% over the first half of the year,” explained IPD MD Stan Garrun.
Positive rental growth at 4.2% and declining vacancies from 4.3% to 4.1% are likewise good news for industrial property investments.
Six months ago, the IPD’s 2011 results showed 10.4% yearly returns in property investments overall, with a slight uptick in the second half of the year that suggested a possible recovery. At the same time, vacancies increased to 6.9%, rental growth declined to 6.2% and yields weakened by 36 basis points, to 9.6%.
“Although returns for the first half of 2012 are better than 2011, the results show a fairly muted picture of performance. We are still not seeing any substantial recovery,” Garrun noted.
Edited by: Mariaan Webb© Reuse this Comment Guidelines
Other Construction News
Updated 25 minutes ago In her first Budget Vote speech as Deputy Minister of the newly-created Department of Small Business Development (DSBD), Elizabeth Thabethe has assured Parliament that the department will “aggressively” explore opportunities for small, medium-sized and...
Updated 37 minutes ago President Jacob Zuma says South Africa is making progress in the fight against corruption, as evidenced by the Special Investigations Unit (SIU) probes he has authorised in the last five years. Between 2009 and 2014, the President signed 36 proclamations with five...
Updated 43 minutes ago South Africa's biggest union took the latest pay offer to its members for approval on Wednesday in a fresh effort to end a three-week strike that has halted output at several car factories. More than 200 000 metal and engineering workers led by the National Union of...
Recent Research Reports
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
Real Economy Insight: Steel 2014 (PDF Report)
This four-page brief covers key developments in the steel industry over the past 12 months. It provides an overview of the global and South African steel and stainless steel markets, South Africa’s major steel producers and events that have shaped these markets.
This Week's Magazine
Local aerospace company Denel Aerostructures (DAe), part of the State-owned Denel Group, has won a fourth contract to manufacture parts for the Airbus A400M military air transport and air-to-air refuelling aircraft. The new contract, which was won in an international...
Although CEO Mark McChlery and chief marketing officer Bob Skinstad likened themselves to children in a playground when taking on the task of “reengineering and repositioning” the Seartec brand, the “young, dynamic and enthusiastic guys” were like proud...
An increasing number of buyers, in both the new and used car markets, are opting for finance structures that lower their monthly repayments, says asset financing company WesBank. These include the use of large balloon payments (also known as residuals), as well as...
Tertiary education institutions can use search engine giant Google’s Chromebook to provide secure mobile end-point devices for students on which they can share documents, work collaboratively on documents and access education materials and applications being used...
Local ceiling and partition company Abbeycon has beaten global competition at the Saint-Gobain Gypsum International Trophy competition, which was held last month in Berlin, Germany.