Retail property was expected to deliver better results to investors this year, while the office sector would continue to experience more pressure than other sectors, real estate investment trust Dipula Income Fund CEO Izak Petersen said on Monday.
However, businesses in all sectors would come under pressure from rising costs, he noted.
“Sustained economic challenges will make the year difficult, [with] tenants likely to [experience] the most strain from increases in municipal costs and electricity,” Petersen said.
He explained that property owners were responding to the pressures their tenants faced by finding ways to make their buildings more efficient and drawing on alternative energy and water sources, reducing running costs.
Meanwhile, the market could also expect an active listed property sector in 2014.
“Despite the expected challenges, listed property should still deliver a relatively good return compared with other asset classes, so it remains a compelling investment case,” Petersen said.
“Investments into foreign funds and assets by South African listed property funds, tenant-driven developments, sector consolidation, the trade of private portfolios and transactions between listed and unlisted funds are all likely to feature in the sector this year,” he added.
Further, a fair amount of new property development was expected to come on stream in 2014, mostly in urban areas. However, Petersen noted that there would be some rural retail development.
“With low levels of investment property stock in the market and relatively low capital available, listed property companies are expected to consider mergers and acquisitions as a means for growth,” he pointed out.