Commercial Property Looks to Elections to Escape the Doldrums

Investors Wait on Outcome of Elections, While Commercial Property Sector Holds its Breath

The commercial property sector appears to be holding its breath while the outcome of the 2019 General Elections is confirmed. This is according to the CEO of Galetti Corporate Real Estate.

“As with the residential property market, the commercial sector remains fairly stagnant as investors and occupiers await the outcome of the 2019 General Elections. With Ramaphosa expected to win, we predict that there will be far more confidence in the commercial property market once the results are out. This will have a knock on effect in all sectors as ‘Ramaphoria 2.0’ takes hold,” said Galetti CEO, John Jack.

Jack believes that investors will be far more decisive than they have been over recent months post the elections. “Investors have been cautious during the lead up to the elections which has impacted movement within the commercial property market. We believe once the results have been announced deals will start to pick up again and we will see yields strengthen once again,” he said.

“Investors have been aware of the fact that occupiers are not making any bold decisions until such a time as the political uncertainty has passed. Come mid-May we will see occupiers begin to make commitments again, whether that be investing in infrastructure, plant, inventories or property leases. As tenants begin to start acquiring new space, cash will start to flow back into the industry which will have a knock-on effect for the whole sector At the moment, everyone is waiting patiently for some sign of clarity,” he said.

The commercial property sector is currently sitting in a ‘recovery begins stage’ where vacancies have been increasing and rental prices have dropped in certain markets up to 30% below previous highs. “As a result, landlords have created rental incentives which has created a lot of value for occupiers as they now have more power over rental rates, which has driven these prices down. We expect this to continue once the election results have been announced as occupiers begin to take up space again. Once there is movement in the market we should see the rental prices begin to climb again,” he said.

“We believe that a positive election outcome will also have a positive impact on the MPC announcement scheduled for later this month. We expect the repo rate to remain stable, unless there is a surprise election result. This will of course impact both investor confidence and decisions from occupiers,” adds Jack.

The retail sector will feel the positive effects first. “When South Africans feel confident in the market the first thing we do is spend money. This increased spending will have a significant impact on various industries including warehousing, logistics, industrial and manufacturing.“

Ramaphosa’s focus on industrialisation will very soon start to have a positive impact on the commercial property sector as well, but this will take some time once we move past the elections and start to see actual progress in this area.

Source: Galetti Corporate Real Estate

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