Despite the challenging economic environment, current trends suggested that this year could be another bumper year for commercial property transaction activity in South Africa, according to Lightstone.
Ndibu Motaung, the head of commercial property at Lightstone, said transaction activity valued at R23.8 billion had already occurred in the first two months of this year.
Motaung said the biggest contributor was the transfers of large assets in separate transactions valued in excess of R650 million each to Redefine, Capital Property Fund, Investec Properties and a private fund.
But Motaung said they did not anticipate many more of these large transactions in excess of R600m in the rest of the year, because of limited quality stock availability and various funds holding on to their most prized assets.
However, Motaung said the listed property sector might surprise, especially smaller listed funds that were still building portfolios.
“Such funds will possibly buy secondary and non-performing assets for refurbishment, which was a noticeable trend in the majority of good commercial nodes in South Africa,” he said. Lightstone said total commercial property transaction activity grew by 12.8 percent to R118.5bn last year from R105bn in 2014.
It said key contributors to this rapid increase were transactions by a private buyer in KwaZulu-Natal for potential development opportunities in Ezakheni C and Umlazi A, worth more than R940m in value. However, Lightstone said there were a few notable deals by prominent funds, including Investec Property Fund’s acquisition of Zenprop’s portfolio for R7.1bn and Liberty’s 25 percent acquisition of Melrose Arch, which contributed to the significant increase in transaction volumes last year.
Lightstone said commercial property transaction activity rose year-on-year between 2012 and last year and while the listed property sector’s activity dipped slightly, the unlisted sector saw tremendous growth of 40 percent. There was a 19.4 percent decline in transaction activity by the listed property sector last year.
Redefine led the pack with a 30.9 percent or R6.4bn contribution to the transaction activity, followed by Capital Property fund at 21 percent or R4.3bn.
Gauteng’s three biggest metropolitan municipalities accounted for 57.4 percent of the transaction values and collectively were the largest contributors to the overall sales activity last year.
Lightstone said although sales in the City of Johannesburg dropped by 3 percent to R29.7bn last year, the city still stood head and shoulders above the other metros in terms of transactional activity.
It said there was a 64.5 percent increase in sales activity to R11.7bn in the City of Tshwane from R7.1bn in 2014.
“Investors may be looking for additional opportunities to invest and drive commercial property development outside of Johannesburg, which is now restricted to prime areas and ultimately restricts growth opportunities, and Tshwane may be the next ideal area for growth.
“Tshwane has seen impressive infrastructure and transport developments over recent years, including the Bus Rapid Transit system and Gautrain, could be factors contributing to its appeal,” Lightstone said.
The City of Cape Town was in second place for all of commercial property transactions, but held the top spot for residential property transactions.
Nedbank continues to dominate the banking sector with a more than 33 percent market share of commercial property finance transactions, followed by Investec at 22.3 percent.
Absa had the greatest improvement last year, increasing its commercial property bonds by 117 percent to more than R20bn from R9.2bn in 2014 while lending by Standard Bank was lacklustre with a 1 percent decline.
The average bond per transaction increased to R33.5m last year from R28.7m in 2014.