SA commercial property's journey over the last 10 years, and its prospects for the next 10 years will be in the spotlight at 10th Annual Investment Property Databank (IPD) Property Investment Conference on 18-19 July 2012 at Westin Grand Hotel Arabella Quays in Cape Town.
Fittingly titled "10 Years Back - 10 Years Forward," the conference considers a decade of SA property and sets out to provide strategic insight into opportunities that lie ahead.
Over the last 10 years, ungeared investment property in South Africa both listed and unlisted, delivered astounding compound total returns of 407%. This performance is well ahead of other asset classes with equities delivering 314% total returns over the last decade, bonds 208% and cash 135%.
Stan Garrun, managing director of IPD SA says, "The past decade has shown the South African commercial property sector to be very innovative and adaptive. We have never been at a more important crossroad, as countries around the world reel from European contagion having just emerged from the property crash of 2008/9. Elsewhere, political upheaval and economic recession continue to negatively influence the markets. Thankfully and relatively speaking, South Africa was able to avoid the ill effects of many of these global trends.
"We embark on the next decade as a resilient and well-structured sector; though not without challenge. Speakers at this conference will apply the best lessons of the past and imagine the geographies and investment patterns of the future; to counter the inevitable risks and take advantage of the opportunities that will arise."
Like the sector it represents, this conference has evolved to become the pre-eminent property event in the country. Sponsored by Liberty Properties, it promotes South African commercial property against other asset classes, both locally and globally. With its line-up of industry professionals speaking, the conference will continue its record of identifying future trends essential for property investment in a challenging global and domestic marketplace. Academic, industry experts
The conference will provide access to experts including Prof Francois Viruly of the University of Cape Town Department of Construction Economics and Management and Head of Listed Property Funds for Stanlib, Keillen Ndlovu.
Viruly reports that in the past ten years the South African property market experienced the strongest property boom since the 1960s.
"Commercial property investors ventured into new geographic areas such as South African townships and, more recently, across the African continent. The sector successfully adapted to a difficult financial environment from the global financial crises. It also effectively responded to operating cost increases exceeding the inflation rate and rental increases," he says.
At the same time, the South African listed property sector changed from an untouched and unloved asset class in 2002 into the most respected asset class in 2012, points out Ndlovu.
The listed property sector has grown from less than 1% of the FTSE/JSE All Share Index in 2002 to over 3% in 2012. The rapid growth of the listed property sector, as well as new listings, has also offered new opportunities for investors across the sector.
Ndlovu says that listed property has been supported by consistent income growth, which has been driven by a combination of economic growth and declining vacancies. "Office vacancies have fallen from about 23% in 2002 to about 10% in 2012. Overall, commercial property vacancies across the office, retail and industrial sectors have fallen from about 13% in 2002 to about 7% in 2012." Critical trends
In the next 10 years, the property market must adapt to several critical trends.
The population density of SA cities is expected to rise significantly in the next decade. "While this will introduce new urban management challenges, it will also offer new opportunities in the residential and commercial property sectors," says Viruly.
He believes investors will increasingly focus on opportunities that arise from rapidly changing transport systems. This will include development opportunities around, bus stations, railway stations and airports.
"A changing transport network will also change the way suburbs connect and the access all income groups have to cities and property developments. The delivery of green buildings will become the norm, and the sector will continue to respond to changing work and retail trends."
This should see a greater emphasis on mixed-use developments that successfully combine home, work, play and social amenities. The sector will also see the benefits arising from a growing middle class in South Africa and across the entire African continent.
Ndlovu foresees the listed property sector growing with new listings, as well as property acquisitions and developments by existing counters.
"This will improve size, choice and liquidity. Consolidation will also come into play at all levels in the listed property sector. This will further improve liquidity."
The sector, which plays mainly in the customary retail, office and industrial sectors, may exploit opportunities in new sectors and regions, including the rest of Africa. A larger sector could also support specialised, sector-specific funds.
"As the sector grows bigger we could see most fund managers, who continuously overlook the sector, start to take it more seriously. Environmental, social and governance issues will also be given more attention by the investor community," concludes Ndlovu.Other speakers
- Vice-chancellor of University of the Free State, Professor Jonathan Jansen
- IPD UK senior director of group business development, Dr Peter Hobbs
- Fund chairman of Cornerstone Real Estate Advisers in Europe and principal for Reid Advisers, Ian Reid
- MD of Old Mutual Property, Peter Levett
- Stanlib Direct Property Investments chief investment officer, Amelia Beattie
- Broll CEO Malcolm Horne and research manager, Sanett Uys
- Founding CEO of the Green Building Council of South Africa, Nicola Milne
- Director of Fortress Asset Managers, Craig Hallowes
- Research director of IPD South Africa, Jess Cleland