invest in property now

Business conditions are contriving to create the need to auction commercial and industrial property, which has the great advantage of having infrastructure and services already in place.

Business conditions are contriving to create the need to auction commercial and industrial property, which has the great advantage of having infrastructure and services already in place.

Given this scenario, auction properties realised surprisingly modest prices at recent sales, but therein lies opportunity for investors prepared to take a medium-term view, says Park Village spokesman Lawrence Wulfsohn.

"It's apparent that prices paid now will be handsomely rewarded down the line in that the fundamentals for commercial and industrial space demand are strong.

"For instance, on the office space front, decentralised regions of Johannesburg are showing continued robust rental growth.

"Perhaps even more importantly, in the climate of fewer new developments, we expect demand for existing office space to increase, suggesting that rentals still have considerable potential for further growth.

"Rode and Associates says growth in replacement costs (building cost plus the cost of land) has outpaced market rental growth.

"By implication therefore, this has discouraged new developments.

"Now, however, in the face of negative vacancy rates, rental levels are accelerating and in due course no doubt this will attract new office development.

"However, building costs continue to increase as well at about 15 percent a year on an input/profit margin basis, according to the Bureau of Economic Research at Stellenbosch, and there will therefore be a lead time before new developments do actually start arriving on the market on a large scale.

"The net result has to be increased demand for existing office space auction stock, accompanied by rising rental returns and increasing market values.

"As for industrial property, Eskom's moratorium on electricity certificates for new developments is likely to support rentals in the medium term.

"Again, to quote the Rode organisation, industrial rentals in the central Witwatersrand increased 30 percent in the fourth quarter of last year, so there are excellent returns to be had from investing in industrial space auction stock as well.

"It's a message that the market should take note of when our next sale comes up on August 27 2008."

l For further information, contact Lawrence Wulfsohn on 011-440-6797.

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