Sapoa CEO Neil Gopal
Efficient towns and cities with competitive rates and taxes would benefit from increased commercial property investment and development during 2014, the South African Property Owners Association (Sapoa) said on Monday.
“Local authorities with competitive rates, lower utility costs and incentives for property developers and owners will fair substantially better in attracting private sector investment,” Sapoa CEO Neil Gopal said, urging local authorities to capitalise on this.
“Public sector infrastructure spending – like roads, rail and housing – will also have a positive impact on private sector developments,” he added.
Gopal further stated that, during 2014, property development activity would continue on a larger scale with developments such as Waterfall Business Estate and Steyn City, in Johannesburg.
Meanwhile, he said, while South Africa’s low economic growth outlook of around 2%, the current-account deficit and the possibility of an investment ratings downgrade by rating agencies would have a negative impact on all sectors of the economy, the retail sector was expected to continue its positive performance. The office sector, however, was expected to remain under pressure.
“Much of sub-Saharan Africa is starting to attract new multinational investment and this is also bringing more diversification to the local property market with increased interest in retail development in other African countries,” Gopal said.
With regard to listed property owners, he expected more consolidation among smaller funds this year to boost their scale and liquidity.
The potential of residential real-estate investment trusts (REITs) was also expected to be explored by the property sector this year, Gopal said, adding that this interest was not limited to sub-Saharan Africa, as investments were also taking place in Europe, Australia and the US.
“The new REIT structure has also paved the way for inward investment into our listed property sector,” he explained.
However, Gobal cautioned that the sector would remain vulnerable to several risks this year.
“We could see increased pressure on tenant retentions and rental growth given the low levels expected for gross domestic product growth,” he said.
Further threats to commercial property included unsustainable levels of increasing rates and taxes, electricity costs, skills shortages in the public sector, the low economic growth rate, poorly conceived legislation, corruption and maladministration, Gopal concluded.