Property values in South Africa’s commercial property sector have improved, but are still lagging behind levels prior to the international economic recession according to information released by the Investment Property Databank (IPD).
It shows that about 70% of sales concluded in 2010 were at prices above the market-adjusted valuation and these figures were higher for retail and office properties, but significantly lower for commercial properties.
The report covers about 1 800 properties owned by listed and unlisted funds.
Jess Cleland, head of research at IPD, says that about 25% of properties reduced in capital value in 2010 implying that there was still some uncertainty in the market and that a full market recovery in the commercial sector had not yet begun.
The figures for 2010 are significantly better than those for 2009 when 40% of properties dropped in value.
Stan Garrun, managing director of the company, points out that property valuations are fundamental for the commercial property sector as a vast amount of information including analyses, reporting and decision-making must be drawn from the assessments that are done by professional valuers.
He says the commercial property sector generally suffers a shortage of liquidity and relies on quality reports from valuers instead.
However, Garrun points out that this rise in valuations could represent a turning point in the property cycle for the commercial sector. He adds that the fundamental drivers of commercial property must be watched closely so that market conditions can be accurately reflected.