Last year presented the property sector with the toughest trading conditions since mid-1998, says Quintin Rossi, national leasing executive of Redefine Properties.

To a greater or lesser degree, said Rossi, these challenges were faced by all big groups – and the property sector, always lagging the general economy by six to nine months, will probably not experience significantly improved conditions until the third quarter of 2010 or later.

In 2010, Rossi says, greatly increased electricity costs may also retard the property sector’s recovery.

Emphasising the diversity and the spread of Redefine’s 3,6 million m² property portfolio (spread over 403 properties, recently revalued at R18,2 billion), Rossi says the recent acquisition of ApexHi’s R12 million assets had made it one of the most evenly distributed portfolios - geographically and sector-wise - in the country. It has 55% of gross lettable area in Gauteng, 16% in the Western Cape and 14% in KwaZulu-Natal. Thirty eight percent of the GLA is in commercial properties, 33% in retail and 29% in industrial.

Equally significant, says Rossi, is that 59% of the let space is occupied by A grade tenants (national, provincial and local government departments, parastatals, national retailers and listed companies), 13% has B grade tenants (professional firms and medium size companies) and 28% have ‘other’ tenants.

“The high percentage of A grade tenants ensures above average returns and it is Redefine’s policy to dispose of lower rental properties and to continue to increase the A grade tenant proportion of the portfolio,” he says.

When Rossi was appointed in November 2009 he was mandated to reduce Redefine’s vacancies. In the 2009 financial year this ran at an average of 8,5%, which Rossi considers a satisfactory level considering the tough conditions – but he is confident this can now be reduced.

“Industrial space has been the most stable performer - here vacancies were kept to 6,5%. In retail, the figure was 8,3% and on commercial 10,2%. Rental increases in the past year averaged 7,35% and on new leases the average rent a square metre rose from R55 to R65.

“Despite the difficult conditions, in 2009 Redefine signed 397 leases with a total gross monthly revenue of over R30 million. Of these 220 were new leases, and the remainder renewals. This was a good achievement, but it is particularly encouraging that in the last quarter of 2009 we had more enquiries for rental space than we have had for a long time, peaking at 125 000m² to 170 000m². We have recently been able to achieve a conversion rate of 10% to 12% on these enquiries.”

Capitalising on the ground gained so far, Redefine Properties will introduce a new broker loyalty programme in the next few weeks - details of this will be announced shortly.

“Broker and tenant relationships will be even more crucial in the year ahead because 29% of Redefine’s existing leases will come up for renewal this year and we aim to reduce vacancies by 50% before 2011. I believe the 50% reduction target is achievable in view of the successes we have had so far and the slow but steady increase in demand which is likely to speed up rapidly in the second half of this year.”

Rossi says demand will be boosted by the World Cup. Although this will primarily benefit the hospitality and retail sectors, there will also be spin-offs for companies like Redefine which have properties in areas where new infrastructure development is creating active trading and commercial nodes. For example, in Braamfontein the Gautrain line will make access to two large office complexes a great deal easier.

Although he is not involved with the acquisition or development of new space, Rossi says the company has acquired 82 Maude Street in Sandton which will bring 8 200m² of A grade office space to the portfolio.

Other important developments are all in the retail sector: Horizon View in Roodepoort (20 325m²), Terminus in Klerksdorp (7 619m²) and Alberton Mall (5 458m²) in Alberton. About 3 500m² of new space is in the pipeline to be developed at CTX Freight Park and another 13 000m² is under discussion to be developed on a turnkey basis at Golf Air Park, both industrial projects in the Greater Cape Town area.