Western Cape Seminar First URERU Seminar of 2020

First URERU seminar of 2020

More than 110 SAPOA members, property practitioners and students attended the first Urban Real Estate Research Unit seminar of the year, sponsored by Quoin Online. Seminar guests were welcomed to UCT by Head of Department of Construction Economics and Management Professor Kathy Michell, before she handed over to Master of Ceremonies Rob McGaffin, who introduced Professor François Viruly and Dave Russell, Director at Baker Street Properties

By Mark Pettipher

Source graphics: JLL

McGaffin kicked off by thanking SAPOA for helping to drive the seminars, then thanked Quoin Online for its continued patronage – the company has been sponsoring the quarterly seminars almost since inception. Quoin Online is a specialised property business encompassing the full spectrum of skills sets required to offer clients the highest level of service for property trading. Individuals with vast experience in specific disciplines joined forces to provide this unique service. Recognising a need in the market for an efficient web-based property transaction system, the partners created a state-of-the-art software that will allow buyers and sellers to transact on property anywhere in the world. M

François Viruly covered the property industry’s international trends in the commercial sector. Alarmingly, he mentioned that South Africa is in its 73rd month of recession – the longest cyclical downturn since World War II. He further said the country is not talking about the depth of the cycle, but rather its length; and linked the downturn to the international market, saying that we seem to be trying to get out of our slump during a general global economic slowdown.

He highlighted the SAPY trend, commenting that we’re currently showing growth of less that one percent, which doesn’t bode well for the country.

Moving onto international trends, Viruly pointed to a number of major shifts, and showed that the best-performing sectors included logistics and residential (specifically student accommodation, affordable housing and retirement complexes). There was also a mention of healthcare and hotels, and an increase in tourism.

Viruly concluded his presentation with a statement about South Africa’s property market being problematic. We’re awaiting next month’s international grading, although it is commonly thought that South Africa will once again be downgraded because we will continue to have issues with energy supply. He did reiterate that we’re trying to take corrective measures while the rest of the world is in an economic slowdown.

Dave Russell, a veteran of the industry for more than 37 years (and a SAPOA member for 17 years) followed with an overview of the state of affairs in Cape Town, drawn from seven commercial property nodes. He began with the issues the country as a whole faced last year, with two construction companies going out of business, national debt increasing and the ongoing Eskom saga, before moving on to Cape Town’s water supply woes and the area’s high unemployment rate. Here he also pointed out that Cape Town development activity is at its lowest since 2006.

On a positive note, he compared Cape Town’s office vacancy rate to other business nodes in the country, honing in on the difference between Sandton’s vacancy rate at 15.9% as compared to the whole of Cape Town at 7.3%. This seems to show that Cape Town is still an attractive city in which to do business and invest in property. In fact, looking at the overall trends and statistics being published in South Africa, it’s a buyer’s market in the commercial and residential sector. What is more, it’s also proving to be a tenant’s market, because vacancies are driving rental prices. However, since the property market operates in cycles, we seem to be hitting a plateau, with office rentals being maintained at 2017 rates.

Russell also spoke about the cost of getting in new tenants, and presented the following future trend predictions: ● There will be very little property development. ● What development there is, is coming on stream now, and we’ll see an increase in vacancies as a result. ● Rental income will remain flat as operating costs increase. ● There will be continued demand for office space from e-commerce BPOs, tech companies and co-working spaces. ● Space efficiency will become a tenant requirement, affecting building design. ● Green will become more important as demand grows to address high energy costs, water issues, climate change, the drive for renewable energy and a move towards zero-carbon buildings.

● Eskom will continue be create issues, and there will be a need for investment in alternative energy sources, such as wind, solar and gas. ● Office buildings will be reused and converted to hotels and residential. ● Tourism will increase. ● Tenant retention will become key for landlords. ● There will be more “Black Friday” specials.

In numbers

In Office

www.ureru.uct.ac.za