Sandton, Bryanston already have a glut of offices — and Rosebank is next, says Investec
- The Investec Property Fund has reported a negative rental reversion rate for the past six months - which means that lower rents were secured than before.
- The fund says this is due in part to an oversupply of offices in Sandton and Bryanston, with Rosebank also increasingly seeing a glut offices.
- The fund is selling local properties and investing in European industrial facilities.
- For more stories, go to Business Insider South Africa.
Landlords are finding it increasingly difficult to hike rents due in part to a glut of offices in Gauteng, as results from the Investec Property Fund, released on Tuesday, show.
“Rental growth remaining under pressure with visible or foreseeable oversupply across all major offices nodes, in particular Sandton, Bryanston and within the next 18 months, Rosebank,” according to the fund.
The fund owns more than 100 properties in South Africa, including The Firs in Rosebank, 1 Protea Place in Sandton, and the Design Quarter in Fourways.
For the six months to end-March, the group reported an average rental reversion rate of negative 6.9%. A rental reversion rate indicates whether expiring leases that were renewed in the past six months had higher or lower rental rates than before. A positive rental reversion rate confirms that higher rental rates were obtained.
It said the negative rental reversion rate reflects the depressed state of the market – but is in line with its strategy to fill space rather than have properties stand empty. Its vacancy rate fell to 2.4%, from 4.0% a year ago.
Redefine Properties, which owns more than 300 large properties, last week reported an average rental reversion rate of negative 6%.
The Investec Property Fund says an agreement with the embattled retailer Edcon, which has negotiated lower rents with landlords, also took a toll.
Along with the weak rents, the funds also saw its rates bill go up by a massive 25.8% due to significant municipal revaluations of its offices.
The fund posted a final dividend of 73.51 cents per share (cps) for the six months ended 31 March 2019. For the past year, the full year dividend was 142.3 cps - 5.1% higher than the previous year. This was primarily thanks to a strong performance of its European properties.
Four properties were sold in the past six months, and management plans to sell another R600 million worth of SA properties over the next twelve months.
Given the “prevailing challenging macro-economic environment in South Africa”, the fund is not using the proceeds to buy local properties, but investing in its European portfolio instead. So far the fund has invested in €83.7 million in European logistics facilities, which has so far delivered a total return (in euro) of 26% since the initial investment a year ago.
The fund is also investing €64.5 million 21 primarily industrial properties, in the Netherlands, France and Germany.
The Investec Property Fund's share price dipped 1.4% following the results.
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