Greenfields opportunities in Gauteng
With the prevailing low interest rates and increased positive market sentiment, coupled with relatively low building costs, we are now beginning to see signs of renewed interest in 'greenfields' property development projects as well as the structured release of significant parcels of land.
Opportunities exist in the marketplace for investors and developers to acquire large tracts of prime located land or a meaningful share in projects, which offer the potential for sound long term investment.
There is also an increasing trend towards existing landowners seeking to form joint ventures with investors in order to collaborate and jointly finance and develop projects for end users i.e. tenants, or for investors to become owner-occupiers of developments.
Investors coming on board as partners or developers in these profit-structured deals stand to benefit from discounted land values in prime locations, in projects which incorporate a range of mixed-use developments such as industrial/office/hotel projects, retail i.e. shopping centres, commercial/office developments, and office/residential projects. These can range from an entry level of several million rand for co-investment in development projects, to R50 million for land and developed buildings and billions of rand for acquisition of an overall scheme.
Samrand opportunities
Opportunities include 11 ha of prime vacant land in Morningside, Sandton and a prime 114 ha development site adjacent to the Cradle of Humankind and about 10 minutes from Lanseria Airport.
Located along the rapidly developing N1, N3 and R24 belts, the prime 200 ha vacant site at Samrand is the last remaining undeveloped land centrally situated at the convergence of Johannesburg and Pretoria and within easy reach of East and West Rand. Sizeable parcels of land, from 5000 to 10 000 sqm in size provide ideal opportunities for distribution and warehousing type industrial operations as well as modern office parks. With its own off-ramp, the site offers potential for developers, owner-operators and investors and already has an approved electricity supply of 50 MVA.
BEE wealth looking for investments
Existing property owners and investors are showing increasing interest in the marketplace, seeking investments to acquire across a range and predominantly situated in industrial and office nodes across Johannesburg and Pretoria in Gauteng. A number of these are co-investors, such as private funds with their own portfolios.
BEE companies, which have built up significant wealth, are looking to acquire commercial buildings, which are government-leased. The advantage of these companies is that they are able to get extended government leases up to the level required by the banks in order to secure loan finance.
International developer interest
South Africa is attracting international developer interest, particularly from the Far East, in acquiring property either for own use or for the open market. This trend is further boosted by the relaxation and increase in high bulk permission by certain councils, a factor which is encouraging high-rise, mixed-use developments such in Sandton CBD. In addition to CBDs being an attractive development node, so too are important transportation links such as airports and train stations, including the Gautrain, all of which facilitate the development of mixed-use precincts.
At present, we are seeing an acute shortage of A grade investment stock on offer and selling at non-market related yields. In regard to pricing, financial institutions are willing to lend monies for acquisitions based on their loan to value ratio, however this is currently not meeting the expectations of sellers.
About Wayne Wright
Wayne Wright is the business development director at JHI Properties.
