Cape Town Industrial Investment Property supply (in fact all commercial and Industrial investment property, nationally!) is at an all time low.
A well known investor reported to me recently, that in his 20 years as a fund mangager, investment property analyst and investor, he has not experienced such a shortage of commerial and industrial investment property, across South Africa.
My opinion as to why this is happening is as follows:
Property owners are reluctant to sell properties (if they are well tenanted) as interest rates are low and even with a low yielding commerial or industrial property they are better off than receiving bank interest. Also, if they sell a property, the historical “below prime” funding they are probably enjoying will be unlikley to be repeated. There are also few opportunities for reinvesting in commercial and industrial property at the moment.
The properties that are coming to the market, usually have looming vacancies, so investors are having to look at repositioning and tenanting these properties. The difficulty is that banks are reluctant to fund these properties unless the investor is prepared to invest substantial equity. Whilst there is good investor demand, these investors are cautious and selective. Sellers, in many cases, still have unrealistic expectations as to selling prices they can achieve, leading to thin trade in investment property sales, as 2013 draws to a close.
Guy de la Porte is an Industrial and Investment Property specialist in Cape Town.
