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Despite South Africa’s industrial property sector outperforming the retail and office property markets, the fundamentals were not conducive to major expansions, investment analysis and market indexcompany MSCI subsidiary IPD executive director Stan Garrun said on Friday.
Speaking at a South African Property Owners Association- (Sapoa-) hosted research breakfast, in Sandton, he said that, over the past 18 months, the industrial property sector had performed well, delivering good returns to shareholders.
A total return of 9.9% had been achieved by the industrial property sector in the first six months of 2014, with strong income returns of 5.2% and capital value – at 4.5% – stretching “a lot higher” than the office and retail sectors.
This was a rise on the 9.1% overall return, of which 3.9% was capital growth and 5% was income return, reported during the corresponding period in the prior year.
Garrun suggested that, should the growth trend continue during the final half of the year, the full 2014 returns growth would reach 18%, compared with the 17.1% achieved in the prior year.
During the first six months of 2014, the retail property sector achieved returns of 7.4%, with the office property sector lagging at 5.8%.
However, Garrun noted that, while the industrial property was “in a good space”, the demand side remained fragile in a constrained market, with no room for growth or expansions.
Further, rising operating expenses were surpassing gross income.
Operating costs had increased 5.7% over the period under review, while gross income had recorded a 3.7% hike.
The rising operating costs had detracted 2.7% from the overall half-year returns, Garrun stated.