Property Investment in South Africa: A Mixed Bag for 2023
Despite a series of tumultuous years, property investment in South Africa is still promising, with expected returns of between 10% and 15% for 2023, according to Broll Property Group. However, the market still has to overcome significant challenges before it can fully bounce back.
Key Factors Impacting the Market
- Load shedding
- Changes in work patterns
- Civil unrest
- Interest rate hikes
A Tough Environment, but Opportunities Remain
While the property sector faces a hard climb to reach pre-pandemic levels, opportunities for investors and landlords are still present, especially in the commercial real estate sector.
Sector Performance: A Closer Look
- Office Sector: Struggling due to the shift to remote and hybrid working, with high-quality office spaces being rented at lower prices.
- Retail Sector: Most developments are expected in this sector, with convenience and lower-LSM centres holding their values well.
- Logistics Space: Performing significantly better than others, with demand for fit-for-purpose industrial space on the rise.
Valuations: Winners and Losers
- Office Market: Hit hardest, with relatively flat rentals.
- Retail Sector: Some rental growth in popular regional centres.
- Industrial Sector: Activity picking up and demand for logistics buildings flattening.
- Alternative Investments: Greater demand for data centres, hospitals, and student accommodation.
Challenges for Landlords
- Rising rates and taxes
- Need for alternative power supplies
- Increased security measures
Energy Crisis and Security Concerns
The energy crisis has compelled property owners to ensure uninterrupted service to their tenants, while the threat of civil unrest has led to increased investment in security measures for properties, especially malls, distribution centres, and logistics premises.
The Bottom Line
While the South African property market faces a series of challenges, opportunities still exist for savvy investors and landlords. It’s essential to keep an eye on the factors impacting the market and to adapt accordingly to make the most of the available opportunities.