Positive shift in auction activity in commercial property market
A noticeable shift in the commercial property space has seen sellers once again coming forward and market momentum increase, says Norman Raad, CEO of Broll Auctions and Sales.
“Following on the recent financial crisis and inherent challenges presented, such a shift can sometimes be very positive for the property market as change and movement is always needed. No one wants to see a decline on their balance sheet but in an upward interest rate cycle the values of properties will automatically decrease as yields increase.
“We will most likely see values remain the same as commercial property rental escalations offset the increased yield effect. This current cycle brings challenges but simultaneously present opportunities as properties will find their way to market to reduce exposure and raise capital in order to alleviate financial constraints.
“Bearing in mind that the property market always experiences a lag effect when the economy begins to bounce back, we believe notwithstanding the immediate economic and financial challenges faced we are a resilient nation and adapt to overcome challenging situations. We have seen this landscape before where we don’t necessarily need the actual interest rates to decrease in order to turn the property market around, rather a change in sentiment will have a huge effect and impact on recovery.”
Raad says it is at such times that true entrepreneurs capitalise on a shift in the market and make things happen, backed by a prudent and calculated approach. Property has never been a short term investment view, and one can generate wealth in times of adversity and challenges in the property industry.
“This was evidenced at our recent auction held at the end of February (2016), which drew national investor interest and saw a number of commercial properties change hands, including two prime development sites, among other well positioned properties with sound investment potential. Due to some unique opportunities which became available through corporate decisions to dispose of non-core assets, the auction was well attended and achieved a high confirmation rate for the first time in a while. This was a direct result of sellers’ acceptance of current market related prices.”
In Gauteng, in Spartan an industrial warehouse of 5 997sqm was acquired for R23.5 million, a double-storey office building with a gross lettable area (GLA) of 3 280sqm in Ormonde sold for R12.4 million, while a Parkwood development site of 3 123sqm fetched R8.4 million and a site of 3 353sqm in Hurleyvale on the East Rand sold for R4.1 million. Reaffirming the value of prime located retail a neighbourhood shopping centre with a GLA of 5 131sqm in Jeffreys Bay was purchased on auction for R13.2 million. In Parkhurst in Gauteng a stylish double-storey office building with a GLA of 220sqm sold for R5.6 million and in Brakpan on the East Rand eight flats and a retail shop was acquired for R1.4 million.
Adds Raad: “We are definitely seeing sellers and the market, namely buyers, moving closer together resulting in successfully concluded sales. As brokers, we are well positioned to understand sellers’ new acceptance levels and it is our responsibility to bring the buyers to the table.
“With sellers now attuned to realistic pricing, valuations corrected with yields increasing within a tougher economic environment and vacancies occurring, there is no better time than to start looking for opportunities as an investor or owner-occupier. The listed property funds and corporates are all looking to dispose of non-core assets and in this basket there will always be those the buyer can identify and unlock the real potential.”
Broll Auctions and Sales hold their next national auction at 12 noon on Tuesday 19 April (2016) at the Wanderers Club in Johannesburg. One of the prime properties on auction is an immaculate A Grade office building in a prime elevated location in Peter Mokaba Road (formerly North Ridge Road) in Morningside, comprising a GLA of 4 648sqm, which includes a small downstairs restaurant catering for staff meals and meetings. Secure and with covered parking, this property is close to all amenities and has easy access to the N3.
For further information contact Bradley Stephens, MD of Broll Auctions and Sales on 087 700 8269 or 082 443 7731 or email [email protected].