There is a definite slump in the property market, with vacancy rates remaining stubbornly high and property developers adopting a cautious ‘wait-and-see’ approach given the current economic climate. Paragon Group Director, Estelle Meiring, says there are, however, opportunities for those who can look at property with a fresh eye.
With a lot of speculation as to the end of Greenfield developments in the high-end precincts of Rosebank and Sandton, Estelle highlights that there will be a lot of repurposing of buildings even here, as is happening in Johannesburg.
Developers have become cautious due to the larger trends in the country such as the weak economic climate, political noise and land ownership concerns. Estelle stresses there is reason to hope that the economic climate will start improving, especially towards year-end.
Retail is hit the hardest by electricity increases
The high vacancy rates in the office-space sector are also prevalent in the retail and industrial sectors. With high operating costs, the retail sector will likely be hit the hardest by the substantial upcoming electricity increases.
Estelle says that the office space sector is the biggest underperformer at the moment. This isn’t because of any uptake in manufacturing growth, but because the drive towards online shopping has seen an increased demand for logistics and distribution infrastructure.
“It has been relatively easy to make a profit in the property sector over the last 10 to 15 years. We have experienced fantastic growth but are not going to see that in the next few years. The factors that fuelled the boom have dissipated and the dynamic has shifted,” says Estelle.
Growth areas in residential properties
The demand for mid-level housing has slowed down as well as a result of consumer affordability issues, but the affordable housing segment is a prize growth area. “That is why conversions make a lot of sense. If you start off with the right building and refurbish it properly, you can actually produce a quality product that is quite affordable. Shell House is a prime example,” says Estelle.
Paragon Architects South Africa (PASA) undertook a project for client HCI Properties, part of Hosken Consolidated Investments (HCI), to convert the former ANC Shell House headquarters at 51 Plein Street into a 563-unit residential development.
“We are not as well-known for this kind of refurbishment work as for some of our more iconic buildings. However, we certainly have the skill set and I can see us becoming more prominent in this sector as the market shifts,” says Estelle.
Prospects in Cape Town
Besides overseeing new projects such as the Paragon Group’s latest private-university project, Estelle has also been shepherding the group’s latest venture in Cape Town, where it has opened a regional office at the Pavilion on the Waterfront. “We were getting more and more enquiries from potential clients and could discern a gap in the Cape Town market for our unique service offering. The reaction has exceeded our expectations. While the market is affected by similar national concerns, I think Cape Town is going to outperform most of the other big cities in the next few years.”
The half-yearly vacancy data rates from the Investment Property Databank (IPD) revealed that there has not been as much over-building in Cape Town. “I am not talking about a massive boom, but there are interesting opportunities there,” concludes Estelle.
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