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South Africa Real Estate Report Q3 2011 Published on July 2011

Report Summary The South African property market was less impacted by the global financial crisis relative to most regions around the globe. The resilience of the market was boosted by the 2010 football World Cup, which provided significant stimulus to the sector, and the surge in international visitors had a positive impact on the retail and hotel sub-sectors in the country. However, the property sector has weakened following the completion of the World Cup and despite a still reasonably strong economy. At the margin, the commercial real estate sector will benefit from new projects, which will lift overall rental rates. However, it does not seem the World Cup has had a substantial medium- to long-term impact on the commercial real estate sector. It has undoubtedly provided the impetus for substantial investment in new sporting and transportation infrastructure which, in turn, will contribute positively to the overall business environment in South Africa. However, take up in commercial office space in South Africa has been relatively low in 2010. Net take up of prime office space in Q410 was actually negative in comparison to the previous year. Yields have also remained relatively flat in the retail sub-sector in South Africa. Retail sales figures show growth of 9.92% year-on-year (y-o-y) for the first quarter of 2011, though rentals have remained flat. A more robust consumer may provide an opportunity for landlords to increase rental rates, but vacancy levels have remained little changed, which currently counters this opportunity. This is particularly evident in second-tier centres. South Africa is still in an urbanisation phase, with a number of newer high-density trading areas being developed or recently completed. This will inevitably put some pressure on street frontages in quieter areas. The residential sector softened in February 2011. Standard Bank's median house price fell to a 1.5% y-oy growth rate in February from 2.3% y-o-y in January. Even though interest rates are historically the lowest in three decades and household disposable income has been growing over 2010, the residential sector is struggling. High levels of debt and uncertainties about employment security are dampening demand. According to SEEFF, a major player in the housing market in South Africa, tightening credit from the major banks has also resulted in a more cautious home buyer in South Africa. The South African economy has continued its recovery ' BMI forecasts 3.5% growth in 2011 and 4.0% in 2012. The overall picture for the economy is one of moderate growth. The rebound of the consumer sector will be a key driver, but headline growth is likely to be reined in by rising imports.

Table of Content Executive Summary .... 5 SWOT Analysis 6 South Africa Real Estate SWOT .... 6 South Africa Economic SWOT ...... 6 South Africa Business Environment SWOT ........... 7 Real Estate Market Overview .. 8 Table: South Africa's Real Estate Market ' Historic Rents, 2009 And 2010 (m2/month, US$) ...... 9 Table: South Africa's Real Estate Market ' Net Yields, 2010 And 2011 (%) ......... 9 Table: South Africa's Real Estate Market ' Terms Of Rental Contract/Lease, Mid-2010 ........... 10 Industry Forecast Scenario ... 11 Real Estate Outlook ........ 11 Table: South Africa's Real Estate Market ' Rentals, 2010-2012 (m²/month, US$) .......... 12

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>> Get this Report Now by email! Table: South Africa's Real Estate Market ' Forecast Net Yield, 2008-2015 (%) . 13 Construction And Infrastructure Outlook ........... 14 Table: South Africa Construction And Infrastructure Industry Data, 2007-2015 14 Table: South Africa Construction And Infrastructure Industry Data ....... 15 Macroeconomic Outlook . 19 South Africa ' Economic Activity, 2008-2015..... 21 Business Environment ......... 22 Real Estate/Construction Business Environment Ratings ........... 22 Table: Middle East And Africa Real Estate/Construction Business Environment Ratings ........... 22 South Africa's RECBER .. 23 South Africa's Business Environment ..... 24 Table: BMI Business And Operation Risk Ratings .......... 25 Table: BMI Legal Framework Rating ..... 26 Table: Middle East & Africa, Annual FDI Inflows ......... 32 Table: Trade And Investment Ratings ..... 34 Table: South Africa ' Top Export Destinations, 2001-2008 (US$mn) ..... 35 Competitive Landscape ........ 37 Company Monitor ...... 38 Aveng ...... 38 ERA Real Estate South Africa ..... 40 Group Five .......... 41 Liberty Properties ........... 43 Murray & Roberts Group ........... 44 Orion Real Estate ........... 46 Pam Golding Properties Group .. 47 SA Corporate Real Estate Fund .. 48 Seeff Properties ... 49 Wilson Bayly Holmes-Ovcon ...... 50 BMI Methodology ...... 52 How We Generate Our Industry Forecasts ......... 52 Construction Industry ..... 53 Bank Lending ...... 54 Real Estate/Construction Business Environment Rating . 54 Table: Weighting Of Indicators .. 55 Project Finance Ratings Indicators ........ 58 Table: Design And Construction Phase .. 58 Table: Commissioning And Operating Phase ' Commercial Construction ......... 59 Table: Commissioning And Operating Phase ' Energy And Utilities ...... 60 Table: Commissioning And Operating Phase ' Transport .......... 61 Sources ... 62

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South Africa Real Estate Report Q3 2011