There is a buzz in the air around SA's property market. Confidence levels are high despite a square kilometre of empty office space, declining industrial property investment and signs of overdevelopment in some subsectors of retail property.
Developers are sharpening their pencils and trying to figure out how they will finance future development despite being more than a little overborrowed.
The future looks bright, yet the FM is unable to get a clear picture of the market in 10 years' time from the denizens of this enormous asset class. It's worth about R700bn, excluding the residential sector, with about 10m m² of office space, slowly rising retail vacancies and an unknown amount of industrial property.
The property industry is not used to looking too far into the future, after decades of boom and bust, and despite rapidly improving statistical and research resources.
The Investment Property Databank (IPD) is one of the best things to happen to SA's property market in a decade. The UK-based and highly regarded research and benchmarking company has been collecting data on a growing portfolio of institutionally owned property here for eight years.
Property investors who subscribe to IPD - but not tenants or the public - now have a fistful of statistics categorised by type of property, size, value and region.
These investors are mainly large insurance companies and pension funds that are investing policyholders' funds, or listed property companies in which those institutions and individuals invest. IPD is making them better investors because they can now compare their portfolio performance with their peers who also contribute to IPD's statistics.
They also have a history of the sector's performance. It shows that retail property has given better total returns than offices and industrial property for five of the past six years (offices did better in 2000) and cumulatively over eight years (see table).
But industrial property has produced the best income return (see table) since 1994, while retail has had the best income growth, at an average of 8,8%/year.
For users of property, the most valuable information is the rents in each category over the eight years (see table).
And for landlords comes the bad news, that office vacancies have grown to 23,7% of total lettable space in 2002 (see table).
Industrial vacancies peaked at 12,3% last year and are beginning to fall, while retail has been steadily rising from 0,5% in 1993 to 2,9% in 1998 and 6,3% in 2001 and last year.
But what does this tell us about the future? Well, imagine navigating your way along a highway while looking through the rear view mirror because it is difficult to see out the windscreen. You can get an inkling of what's ahead by observing that, say, the cars streaming behind in the opposite direction are wet, or that the cars following you are slowing down or speeding up. That's the problem with the property market.
IPD statistics, anecdotal evidence and SA's few property experts have yet to give us a fair idea of how good the news is ahead of us and where the opportunities lie for landlords, tenants and investors.
