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Huge value to be had in commercial property

Huge value to be had in commercial property

Owning a property is good as owning a business. While there’s no crystal ball that gives us certainty regarding the economy, one thing I can say through experience is that as an investment, bricks and mortar has always held its own over time – and arguably better than many other businesses, says Norman Raad, CEO of Broll Auctions and Sales.

“Owning a property is as good as owning a business, the only difference is it’s in property,” he says.

He explains that although he is certainly not an economic or political analyst, he strongly believes that this country has enough qualified and good people to make a difference. The current situation is not sustainable and leaders are presenting themselves and coming to the fore every day, and with that comes hope.

“It seems a bit more of the same at the moment, and until we have some change at the top to move the needle in a different direction, business and the economy in general is not going to be easy.”

Raad says buyers have been sitting on their hands or looking to invest offshore, or just hold foreign currency as the country’s economy continues to report increased unemployment, increased inflation – albeit below the SA Reserve Bank’s target range, increased vacancies through businesses closing down, increased bad debt and lower returns.

“Although it just simply isn’t easy at the moment, if you believe that change is not too far away and hope ignites the needed change and moves the needle, then now is absolutely the time to buy.”  There have been so many opportunities in the last nine months, where calculated and prudent buyers have identified value and transacted, he points out.

Raad says the properties on auction this month, at 12 noon on Wednesday 20 September at The Wanderers Club in Illovo, Johannesburg are filled with value for any investor or owner occupier.

The disparity between replacement costs and existing offices has reached an all time spread, with office vacancies on the increase as the economy takes strain and with inflation hurting the new build costs, the value in existing commercial buildings is massive. Vacant buildings are a clear ‘no-no’ for all property owners and it would be wise to sell than to hold onto an existing vacant building. In the same breath, therein lies the gap for the investor who has a plan and vision for the building, says Raad.

“Properties on auction include offices in Kyalami and Bruma which both offer so much potential and value. ‘The reserve prices should be completely achievable as these commercial buildings have absolutely everything going for them for owner occupiers,” he says.

Situated in Kyalami Business Park, the office comprises a triple storey office building comprising a GLA (gross lettable area) of 2,205 square metres with panoramic views over Kyalami Race Track and with a Vodacom tower lease in place, generating a sound income stream.  According to Raad, these offices are extremely well suited for marketing companies or design, project management or architectural companies as they provide tremendous exposure overlooking the track, as well being supported by the many businesses in the park or the rapidly developing Waterfall Estate. The property has great access to the highways but possibly one of the most notable factors is the security.

The Bruma property which also goes on auction enjoys the quality of B-grade offices at a below market rate per square metre, excellent exposure and easy access to all highways, including the M1 and N1, and Johannesburg CBD. The property is ideally suited for call centres, government offices and any multinational company in search of a head office with easy access to transport, and at the epicentre of all the areas across Gauteng.

The property includes five floors of offices comprising a GLA of 8,744 square metres with 285 parking bays. Set on landscaped gardens it is positioned close to Eastgate and Bedford shopping centres as well as China Mall.

“Retail properties remain sought after, and the smaller community centres very seldom have vacancies as the rentals achievable are higher than offices and industrial properties, making the investments much more attractive.”  An interesting property on auction is a small retail shopping centre, Clermont Square set on an erf of 1,868 square metres in Durban with national tenants and long-term leases.

“As Johannesburg is enjoying the turnaround from grime and crime with the ongoing redevelopment of new residential buildings, a well- positioned Newtown property with a good signage opportunity and comprising a GLA of 1,750 square metres will be hotly contested as buyers continue to unlock value as the opportunity beckons.”

Raad says among a range of other properties, there are a few land parcels going under the hammer, which is of interest because when the country’s economic woes abate, land prices will be the first to increase. “Right now the fact is that sellers have become realistic without any delusional expectations in the current market which means that buyers can enjoy land ‘banking’ at below market prices.”

While it is most certainly a buyer’s market at present, it would be unwise to stay out of the market when opportunities avail themselves. We have seen so many investors and property owners waiting for a signal of hope heralding change in the country’s lacklustre past five years, but it only takes a small change for the market to once again gain momentum. The year will continue to see a lot more properties come to the market, however,  whether you have faith in 2018 will determine whether you are a participant in the property market or are a mere spectator.


Broll Property Group

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