Domestic investment in real estate remains in a period of recovery, despite battling “sticky” vacancy rates across most segments, below inflation retail-trading growth and unlet speculative developments, Investment Property Databank (IPD) South Africa head Stan Garrun said on Wednesday.

Speaking at the twelfth IPD South Africa Property Investment Conference, in Johannesburg, on Monday, he noted that, despite the challenges, signs of industry improvement were showing, with “outstanding” returns recorded in certain property pockets.

“Absolute value-add and proactive management is making a difference for savvy investors and managers. One thing is for certain; the real estate market in South Africa has been able to buck the trend before and opportunities continuously beckon,” he commented.

Garrun added that, while the “vagaries” of interest rates and the capital markets had created “tough” conditions for the property market in 2013, the market had since managed to claw back some of the ground lost, but remained significantly below the high of May 2013.

Simultaneously, direct real estate performed “fairly well” in late 2013, though fundamentals had remained under pressure in certain market segments as risk-adverse investors bypassed what was sometimes considered a small, volatile market.

“Presently, we face an even less certain world, with economic fall-out escalating in many regions. Several international real estate markets are still flat and directionless, yet there are good signs in European safe havens, such as the UK and Germany, as well as in the US,” Garrun asserted.

This, he added, intensified the need for reliable asset flows, with asset owners in the west increasing their allocations to real estate at a scale that could indicate a structural change.

This conclusion was supported by a report released earlier this year, which noted that, as confidence returned to the real estate industry following the global financial crisis, the industry needed to gear up to adapt to a “fundamental shift” that would “shape its future” over the next six years.

Engineering News Online reported in March that professional services firm PwC’s ‘Real Estate 2020: Building the future’ report predicted that rapid urbanisation, evolving technology and innovation, increasing sustainability demands and demographic changes, particularly within emerging markets, would change the face of the real estate industry by 2020.

“The real estate industry is at the centre of rapid economic and social change, which is transforming the built environment. Already thousands of people migrate from country to city across Asia, the Middle East, Latin America and Africa, attracted by the wealth of these new economies,” PwC global real estate leader Kees Hage was quoted as saying.

By 2020, the twenty-first century’s “great migration” to the cities would be well under way, but the “huge” expansion swelling the fast-growing countries of Asia, Africa, the Middle East and Latin America, would deliver mixed results.

Citing a local example, PwC asset management and real estate leader for Africa Ilse French said, despite Gauteng’s R110-billion infrastructure budget, the province could struggle to absorb its ever-growing population on the back of strained electricity and water resources and stressed education and health facilities.