Niche Opportunities

MEDIUM-TERM BUDGET FRAMEWORK OFFERS NICHE OPPORTUNITIES FOR THE COMMERCIAL PROPERTY SECTOR

From a real estate perspective, October's medium-term budget was a lackluster mixed bag which inspired caution rather than optimism, however, it did highlight considerable scope and opportunity for well-positioned companies within the commercial property and development sectors.

This is according to Brent Townes, Commercial Property Chief Operating Officer for Lew Geffen Sotheby's International Realty in Cape Town, who says that the fiscal space gained from better-than-expected tax collections and the commodities boom is an unexpected windfall which could tip the scales, especially with regard to energy.

"With power generation being a primary concern, Government is finally looking to shift the focus from merely servicing Eskom's considerable debt and keeping the lights on, to maintaining and stablising the existing fleet whilst also establishing alternative sources of power generation in a meaningful way.

"And, over and above ensuring future energy security, investment in this sector has significant knock-on effects, including economic stimulation in undeveloped areas, the creation of much-needed employment opportunities and the expansion and improvement of South Africa's infrastructure."

He cites Freeport Saldanha as a prime example: "South Africa's first Freeport is a special economic zone and customs-controlled area within a port that is dedicated to the Energy and Maritime sector.

"And, via the creation of the Industrial development Zone (IDZ), Freeport Saldanha has been positioned as the alternative energy hub through which to enable the renewable energy sector as well as initiate the unlocking of the ocean economy.

"This, in turn, precipitates the need for locally situated commercial properties such as warehousing and cold storage facilities as well as office space for associated services like logistics."

Although the budget was less encouraging for other commercial sectors, Townes says that there is at least a glimmer of hope.

"The Governments intent to clean up the SOE's and their property portfolios may have an incremental upgrade on the office space sector, but it will be muted at best.

"And, considering that Telkom's recent efforts at property sales (by tender) failed to create much of a stir, I suspect that any movement seen in this sector will largely be limited to privately held properties."

"And we expect the retail sector to continue at its current growth levels because, even though there will be better Vat refunds, City support mechanisms and a crack-down on corruption.

The retail sector will also benefit from improved Vat refunds and support mechanisms, however, with Covid, mechanization, technology and the work-from-home trend all having played a role in shaping the new normal, how people shop has irrevocably changed.

"Retail has undoubtedly been on the road to recovery during the past year but it's a slow growth trajectory and we expect the current growth path to continue for the medium term.