TRENDS
Embracing the Times
Commercial Success and Failure
A
JOFF VAN REENEN
Founding Director and Lead Auctioneer of High Street Auctions .
ccording to Lao Tzu , the ancient Chinese philosopher and father of Taoism , the simple fact of the matter is that if you do not change direction , you may end up where you are heading which is often not where you want to go . And , by the end of a rollercoaster 2017 , all indications were that South Africa was heading straight for an iceberg of Titanic proportions with little chance of avoiding the collision .
And the impact of the accelerating instability on an increasingly edgy investor market was perhaps most clearly evidenced in the auction sector because , although the industry is one of the most resilient during economic downturns , it is also one of the most reflective of the prevailing economic climate .
As a result , 2017 proved to be not only a bumper year for The High Street Auction Company and the real estate auction industry as a whole , but also one of the most interesting . We saw numerous market shifts precipitated by a spike in private sellers diversify- ing their investments , REITS making significant portfolio adjustments , and corporates disposing of assets .
And , contrary to what many would expect from such responsive market activity , the consequences were far from doom and gloom . The unprecedented volume of high-yield regional and suburban shopping centres that came onto the market last year galvanised a subdued retail sector and the mass reshuffling also provided smaller , emerging funds with exceptional investment opportunities that were previously unavailable to them .
However , the dramatic turn of events in the political arena at the 11th hour with the election of a new ANC leader appears to have initiated the chain of changes required to set the country on a promising new course . Not only have we entered 2018 on an unexpected positive note , we do so with a stronger rand , renewed investor interest and promising signs of movement in local markets .
So the question is : where will the smart money go this year ?
And the short answer is that , for the most part , it will stay where it has always been – in commercial real estate in the major metros . Although we have noticed an upsurge in offshore investment , especially in overseas retail markets , we will definitely see increased commercial development , especially in Cape Town and Gauteng ’ s central business nodes .
One of the market driving forces is the growing appetite for modern office and retail space in the key hubs where vacancy levels are considerably lower than in B-grade properties – especially older buildings in outlying suburbs - and these investors are likely to come under increasing pressure .
We also expect to see increasingly competitive bidding for pre-zoned land which has now segued from an emergent to an established trend and auction lots we offer with zoning redevelopment processes already complete are now snapped up quickly .
Although many investors were deterred by the Western Capes water crisis last year when stringent restrictions were imposed , the impact on the market is likely to abate this year . Both residents and corporates are quickly adapting to a new way of life by accessing alternative water sources and installing water saving features and , with Day Zero already pushed back to the July when rainfall is expected , investor interest will resume and life will go on .
The general rule of thumb for making sound commercial real estate investments this year is to buy in close proximity to CBD ’ s , airports and main transport routes .
If President Ramaphosa is able to maintain his momentum by kickstarting immediate delivery on some of his promises , we are likely to start seeing market recovery in the major metros within a matter of months but the turnaround will be slower in smaller towns and rural areas as the trickle-down will take some time .
The expression “ may you live in interesting times ” is purported to be an old Chinese curse and , although it is undeniably apropos to South Africa right now , it is a blessing in many ways as significant growth and progress are seldom achieved without the impetus of challenge .
44 MARCH 2018 SA Real Estate Investor Magazine