Property investment decisions are big decisions that need a proper landscape to provide direction. Without that, it’s difficult to invest in this sector.
Uncertainty is not good – yet, we’ve seen great volatility over the past two years with a depressed economy and significant geopolitical risks.
The property industry has been the hardest hit. At Broll, we have managed to navigate this uncertainty alongside our investment clients. We’ve had to understand that decisions are taking much longer and that people are even holding back.
Our continued optimism hinges on the fact that more and more, we are experiencing investors and even the general public telling the government that we’ve had enough of empty policies and talk. We now need action. If our government takes the hint, we believe we’ll see positive energy begin to spiral into the broader economy and people will start putting both their money and their heads on the block.
But, it’s early days.
Especially in this uncertain environment, yields are closely scrutinised by investors. A peek at the MSCI property index will show that returns remain positive and are in double digits which is promising.
We’re excited by the residential space which is currently one of the most evolutionary segments of the property market
According to the property sector’s transformation charter, South Africa’s property sector is worth R5.8-trillion. Of which R3.9 trillion sits squarely in the residential segment. But the institutional investor has not paid too much attention to this until now. At the same time, the office segment is performing slowly.
We are now seeing true evolution as the industry has been able to respond and say, okay, let’s do conversions and follow where the trends are leading.
This change has probably stemmed from government’s focus on human settlement and growing migration into our cities. With a historic shortfall in accommodation, there has always been a need. This has been an incentive for exploring and visualising solutions.
Admittedly, some investors are evolving more slowly than others, but the shift has already started and we are seeing the conversion of previous office buildings into apartment buildings in Midrand and Rosebank in Johannesburg. This is a growing trend.
Industrial portfolios are also picking up. This is driven mainly by technology with institutional investors moving towards industrial and warehousing spaces because of the advent of online shopping. Although South Africa often lags behind other markets where this has been happening for some time, we are learning from them and definitely venturing in that direction.
When it comes to retail, we are seeing the risk of large malls becoming big boxes as large retailers go out of business or downscale.
Again, this is a learning curve and a continuing trend in the wake of online retail. Broll is well equipped to help investors and landlords to respond having learnt from our local and international markets. Recent visits to Europe and the U.S.A. have shown us that these can be opened to accommodate public services, including medical facilities.
In conclusion, as advisors to property investors, we need to spread the message that the government can’t evolve alone. As the private sector, we have a significant role to play in working together with the government to innovate and help our economy gain traction.