Although the commercial property market remains under pressure, there are signs of recovery in some of the sectors, says Marna van der Walt, chief executive of JHI property services company.
“Retail sales for May increased by a higher than expected 4.6% compared to May 2009 (still pre-World Cup), and some of South Africa’s major mall owners – including JSE-listed property funds and institutions – agree that in recent months there have been some positive changes in consumer spending trends and the demand for space at retail centres,” says van der Walt.
“As the retail sector is positively influenced by the manufacturing sector, it is encouraging to note that manufacturing productions increased by 7.9% in May 2010 compared to May 2009.”
She says although there are some reported improvements in the property market, there are also some setbacks. The latest statistics on the total number of liquidations for May 2010 showed an increase of 35.7% over those in May 2009. Unemployment rose to 25.2% in the first quarter of 2010, and rising electricity costs and municipal charges as well as possible higher fuel prices are negatively affecting disposable income.
“The ratio of household debt to disposable income declined from 79.8% in the fourth quarter of 2009 to 78,4% in the first quarter of this year, but this reduction may be negatively affected by the increases mentioned above. And though the inflation rate, currently at 4,6%, is still within the Reserve Bank’s target range of 3-6%, the increases in electricity tariffs and municipal charges are considered the biggest threat to the inflation rate, and may lead to higher interest rates.
“Most property owners are experiencing some strain from increased vacancies and lower rental collection due to increases in liquidations, unemployment factors and operating costs, and we expect this trend to continue for the next six to 12 months.
“Generally, the commercial property market is still under pressure and it may be a while before the situation begins to improve significantly. However, vacancies are expected to start declining towards the end of the year as a result of the reduction in the number of new developments in the market,” she says.
