Increasing international investor interest in SA

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Aerial view showing prime land available for purchase and development at Samrand, mid-way between Johannesburg and Pretoria. Aerial view showing prime land available for purchase and development at Samrand, mid-way between Johannesburg and Pretoria.

Opportunities currently exist in the marketplace for investors and developers to acquire large tracts of prime located land or a meaningful share in sizeable ‘greenfields’ property development projects which offer the potential for sound long term investment, reports Wayne Wright, business development director for JHI Properties.

“The reality is that during the economic slowdown over the past three to four years the property developments market has been more or less stagnant, however, with the prevailing low interest rates and increased positive market sentiment, coupled with relatively low building costs, we are now beginning to see signs of renewed interest in such projects as well as the structured release of significant parcels of land.

Further to this we also note an increasing trend towards existing landowners seeking to form joint ventures with investors in order to collaborate and jointly finance and develop projects for end users ie tenants, or for investors to become owner-occupiers of developments,” says Wright.

“Investors coming on board as partners or developers in these profit-structured deals stand to benefit from discounted land values in prime locations, in projects which incorporate a range of mixed-use developments such as industrial/office/hotel projects, retail ie shopping centres, commercial/office developments, and office/residential projects.

These can range from an entry level of several million rand for co-investment in development projects, to the region of R50 million for land and developed buildings, to billions of rand for acquisition of an overall scheme.”

At present, JHI are marketing several such opportunities, including 11ha of prime vacant land in Morningside, Sandton; a prime 114ha development site adjacent to the Cradle of Humankind and strategically and prominently positioned only about 10 minutes from Lanseria Airport; as well as sizeable parcels of land from 5000-10 000sqm in size at the Samrand development, mid-way between Midrand and Pretoria.

Comments David Reid, investment broker for JHI Properties: “Located along the rapidly developing N1, N3 and R24 belts the prime 200ha vacant site at Samrand is the last remaining undeveloped land centrally situated at the convergence of Johannesburg and Pretoria, and within easy reach of East Rand and West Rand.

These parcels of land provide ideal opportunities for distribution and warehousing type industrial operations as well as modern office parks. With its own off-ramp, the site offers potential for developers, owner-operators and investors, and already has an approved electricity supply of 50MVA.”

Wright says it is positive to see that existing property owners and investors are showing increasing interest in the marketplace, seeking investments to acquire across a range, and predominantly situated in industrial and office nodes across Johannesburg and Pretoria in Gauteng.

“A number of these are co-investors, such as private funds with their own portfolios. We are also seeing BEE companies which have built up significant wealth, looking to acquire commercial buildings which are government-leased, and currently we have at least a dozen such investors seeking this kind of property.

The advantage of BEE companies is that they are able to get extended government leases up to the level required by the banks in order to secure loan finance.”

He says on a further positive note South Africa is attracting international developer interest – particularly from the Far East – in acquiring property either for own use or for the open market.

“This trend is further boosted by the relaxation and increase in high bulk permission by certain councils, a factor which is encouraging high-rise, mixed-use developments such in Sandton CBD.

In addition to CBD’s being an attractive development node, so too are important transportation links such as airports and train stations, including the Gautrain, all of which facilitate the development of mixed-use precincts.

In this regard JHI Properties are currently marketing opportunities on behalf of ACSA in various cities in South Africa, for example Cape Town International Airport and King Shaka International Airport near Durban,” says Wright.

Commenting generally on the commercial property investment market he adds: “At present we are seeing an acute shortage of A grade investment stock on offer, and selling at non-market related yields.

In regard to pricing, financial institutions are willing to lend monies for acquisitions based on their loan to value ratio, however this is currently not meeting the expectations of sellers.” For further information contact JHI on 011 9118000 or email wayne.wright@jhi.co.za or  david.reid@jhi.co.za

 

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Property Developments in South Africa  |  JHI Properties
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