SAPOA Chairperson and Chief Investment Officer at Stanlib Direct Property Investments, Amelia Beattie, has been active in the commercial property sector for over 15 years and shares her insights into property trends and how best to sell the South African story, despite its challenges, to the rest of the world.
A severe contraction in rental growth numbers, and the mounting impact of traffic and infrastructural problems particularly in cities means that the property industry needs to start thinking much more creatively about how to make and conclude deals, as well as develop new solutions that will bring in international partners. Furthermore, the industry must think laterally about how South Africa can maintain its position as the gateway into Africa. The fundamentals of the property proposition in South Africa are strong, with positive returns on rentals, but the sector needs to find fresh ways of making the rest of the world see the true value of the property sector and overcome the challenges facing the industry.
Issues such as unsecured lending, most especially in retail, pose a risk and have the potential to derail the sector as the practice is placing large amounts of stress on the economy. Looking at retail group Edcon in particular, it is possible to conclude that the organisation is ripe for business rescue, but by the time the company is ready to admit defeat, it will have a hugely negative impact on the rental portfolio. For this reason, Stanlib Direct Property Investments is in the process of formulating a formal response to the Department of Trade and Industry to challenge current business rescue legislation in an attempt to mitigate these risks.
Skills deficits within local municipalities provide further challenges as there is a noticeable paucity of inspectors, valuers and town planners. It is imperative to fill this gap, and industry bodies have a responsibility to work with government to implement educational programmes and skills plans. A substantial 87% of Chief Financial Officers within municipalities do not even have financial qualifications, and the only way to begin to bring down this figure is by industry and government partnering and combining resources to implement skills strategies.
Despite the obstacles, South Africa’s property sector remains, by and large, ethical and transparent. This is the story that should be sold to potential international investors, together with examples of the types of properties on the market – it will then be possible for investors to understand that available commercial properties locally are up to the standards of any investment overseas and in fact, frequently offer better value.
Fitting the South African story into the bigger African picture will offer more opportunities for the sector, as there is global wave of investment flowing into the continent. The country could ride this wave by investing in global trends such as sustainability and implementing independent valuations. There are enormous opportunities in sustainability, but it is vital to take it down to home level and start with the individual, otherwise it is doomed to fail. Once there is buy-in from individuals, it will filter upwards and catch on at macro levels. It is also important to find unique selling points for renewable energy, instead of merely focusing on return-on-investment.
Valuations undertaken independently of municipalities is a further trend that could boost the South African property sector. Most owners get their properties independently valued, so by implementing this policy, it could save time and money by eliminating double valuations. However, there is a need to standardise valuations and it will take time to implement, but it will undoubtedly offer a wealth of opportunities in the future.