Growthpoint Properties Limited, South Africa’s largest JSE listed property company, has reported an exceptionally strong year for commercial property leasing.
During its financial year to 30 June 2008 Growthpoint concluded leasing deals valued at R2,44bn for over 800,000sq m of space in its property portfolio.
“This reflects a highly active market, riding the crest of the wave, which generated good increases in rental levels,” says Steve Grupel of Growthpoint’s leasing team.
Competing for the top earning sector, retail, with leasing deals valued in excess R995m over 166,000sq m narrowly beat offices, which represented a total deal value of R926m for 181,000sq m. Industrial contributed deals valued at R516m for some 455,000sq m of space let.
“With changes in the economy there is a slowdown creeping into the market, most notable in the retail sector, which will make these ‘super’ figures a challenge to sustain. However, this is only a slowdown and both lease and rental growths are still positive,” says Grupel.
Commercial property fundamentals remain strong, asserts Grupel, and while the higher interest rate levels will have a tapering effect on retail leasing, the lack of developable industrial land and the rise in office occupancy, the slowdown in new development as a result of the energy crisis and infrastructural limitations are all positive drivers of rental growth.
Grupel explains that annual escalation rates have moved from an average of between 7% and 8% to between 9% and 10%, as a result of a number of factors, including the direct impact of higher costs applicable to the running of properties.
External brokers, active across all sectors, accounted for 16,2%, of the total deals concluded during the financial year. “Strong relationships with brokers, retailers and South Africa’s leading corporates remain key in this competitive market,” notes Grupel.
Cape Town
Growthpoint’s Cape Town office concluded deals on a total of 220,000sq m valued just short of R700m.
Without a doubt, offices are the star performer in the Western Cape, accounting for R415m in deal value over 65,000sq m of space
“New developments and acquisitions such as MontClare Place, The District and The Estuaries contributed to the superb office leasing, as well as properties from the former Paramount portfolio, which provided us with the opportunity to fill vacancies and increase rentals,” says David Stoll, who heads up Growthpoint’s Cape Town office.
While the sustainability of this performance is unlikely, with fully-let premises and a shortage of vacant space inhibiting further leasing growth, there are a number of new opportunities for Growthpoint’s leasing team in Cape Town. This includes the redevelopment of 11 Adderley in the CBD, formerly Shoprite offices, which will bring a further 22,000sq m of reasonably priced space to market.
“Nearly 30,000sq m of deals were facilitated by external brokers. Some 190,000sq m of deals were concluded by our own strong team of brokers, who proactively optimised the positive market conditions,” says Stoll.
The performance of retail and industrial property in Cape Town was also impressive, if somewhat less astonishing than offices. R142m of retail leasing deals were concluded over 19,000sq m of space and R136m worth of industrial leases were finalised over 135,000sq m of premises.
Property24