Steady return in a tough economy
Those seeking a solid return on investment should look to the commercial and industrial property sector.
According to Improvon’s, Business Development Executive, Grant Lewington, commercial and industrial property in South Africa is largely held in JSE listed funds, with a small component of the sector held in private hands. “Improvon is one of the private owners,” says Lewington. The company owns a blue chip portfolio of industrial properties in some of the country’s most desirable industrial nodes.
Location is very important when it comes to return on investment over time. A node must have good access and visibility. “Moreover, one needs to think of where the node is headed in the future,” Lewington advises. “Is it likely to undergo any major change due to legislative or demographic shifts? Is there any reason that the node may degrade over time? Research into such questions is vital to ensure that the investment will be realised over time, and that the node is desirable not only at the present time, but going forward,” he continues.
Investment in South Africa’s property sector is largely dependent on the economic cycle, as this directs where people invest their money. While the majority of investment into JSE listed properties is in the retail and commercial property space, the economic climate makes industrial property the most attractive option. “The current economy has caused a decline in investment into retail and commercial property. Industrial property is good choice in such a climate because it promises steady growth over time – without factories and warehouses the country’s economy would certainly collapse,” reports Lewington.
In addition, investment into industrial property offers a number of other benefits. Industrial property is less complicated and more cost effective to develop. Moreover, whereas retail and commercial property owners are faced with multiple tenants to deal with, industrial property owners generally work with only one tenant per building – reducing the risk associated with the investment. “Of course, with the lower risk is a slightly lower reward, as is the case with any investment,” Lewington admits, adding that in the current climate, the reduction in risk is well worth it.
Yet how does an organisation such as Improvon attract tenants to the market? “Most importantly, tenants will be attracted by the offering,” states Lewington. “Most tenants are seeking a turnkey solution that will minimise the capital they have to outlay. To this end, they are looking to the developer or landlord to provide solutions around infrastructure, storage, data cabling and green issues. Tenants want to move in and start working immediately, putting capital into their actual business rather than the building they’re renting”
It also goes back to location. “Of course, the right location with easy access makes a building attractive to potential clients,” Lewington concludes.