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Jan 23, 2012:
Cautious optimism for 2012... this is the opinion of Rodney Luntz, Managing Director of the High St Property Co.
Luntz says, “ I believe that the prospects for the commercial property sector for 2012 are definitely a lot more promising than 2011. In a very short time frame, we are already seeing an uptick in enquiries in both the office and industrial sectors of the market.”
“However our optimism is being tapered with the looming recession in the Euro Zone which is further spurred on by the recent credit rating cuts for most of the Eurozone countries as well as a down grading of South Africa’s rating to negative. The only way we are going to see real growth in the commercial property industry is with the growth of our local economy. If the Euro Zone does go into a recession this will definitely have an impact on our economy and that in turn will impact the commercial market. What we have seen over the last couple of years is that each year does get better than the previous one and thus we are cautiously optimistic about 2012. However there are too many uncertainties which could ruin the party,” comments Luntz
“The office market remains a concern and we are seeing a slight decrease in vacancies, however these aren’t of such significance at this stage. We do expect this market to remain under pressure for 2012 and only start showing meaningful improvement in the 2nd half of 2013. This obviously is good news for tenants who remain in a strong position when it comes to renegotiating leases or relocating to new properties. Tenants need to seriously consider their strategies going forward to take advantage of the current oversupply as 2012 may be their last opportunity,” he says.
“The industrial market has withstood the downturn well over the last few years and has remained relatively stable, but if the Euro does go into a recession and the economy doesn’t have substantial growth, this sector will be hit. However we are cautiously optimistic that the Industrial market will show slight improvement this year. The new toll road system is also likely to have an impact with companies looking at locations which could minimise the cost of such tolls.”
“The retail market could spring a bit of a surprise as already retailers are reporting a substantial increase in their retail sales over the quarter. With interest rates likely to remain low for quite some time, consumers are finding more money in their pockets which has boosted retail sales. According to SAPOA consumer spending is up 30% in the four years to September 2011 The strength lies in the regionals and super regionals as opposed to the smaller community and neighbourhood shopping centres. The smaller community shopping centres are sitting on vacancies of approximately 8.1% and neighbourhood on 10.2%, whilst regional are sitting on 3.2% and super regionals 2.4%. However what is of concern is that the number of shoppers frequenting malls has declined. Average foot count dropped 15.2 % in the period 2007 -2011. This is clearly due to the number of new centres that have sprung up nationwide over the last couple of years. This need to be carefully monitored as already experts are warning of an oversupply of malls.”
Luntz concludes, “As we get into the swing of 2012 and February looms, we will certainly watch both global and local factors closely and work with both our property owners and tenants to ensure that we maximise opportunity in all sectors to create a win-win situation for all parties involved.”
For more information, Rodney Luntz can be contacted on (011) 684 2707 or rodl@highst.co.za