Foreign investors, particularly from the UK, Ireland and Germany, are increasingly looking to buy South African commercial property as a medium to long-term investment option, despite the ongoing strength of the rand, according to Golding Commercial Properties (CGP), a subsidiary of the Pam Golding Properties group.
Commenting on foreign interest on Monday, Peter Golding, CEO of GCP, said price was not the issue. For example, GCP had received many enquiries from a number of leading, mainly UK-based international groups, and recently the company had been approached by a major German financial institution wishing to invest $20-million in prime commercial property for a closed-end fund.
“The investors are seeking quality stock and tenant credibility,” he explained.
“Although in the South African context, and given the sum to be invested, this may necessitate the acquisition of more than one property, the investors would prefer a single, prime commercial property, A-grade and with a 10-year lease with a branded corporate.
Cape Town, in particular, was receiving growing interest, Golding said.
“With its high appeal and tremendous international exposure, Cape Town continues to be seen in an extremely positive light by potential offshore investors, who perceive tremendous capital growth in the property market. While the market nationally is currently characterised by a lack of available, quality stock, opportunities do exist in centres such as Johannesburg, Bloemfontein, Durban and Port Elizabeth, and even in smaller towns where yields are attractive and where the strength of the tenant underpins the investment value of the property.”
Added Chris Immelman, head of GCP’s leasing and sales division: “This huge demand for quality commercial stock in Cape Town presents an opportunity for corporates who own their own buildings to consider the benefits of undertaking a corporate sale and leaseback — thereby unlocking capital which can then potentially be better utilised in the business. There is also a possible tax advantage as rental is tax deductible,” he said.
He noted that, even with the strengthening of the rand, there was still a significant discount between South African commercial properties and “First World” properties.
“Investors from the UK, Ireland and Germany are currently seeking commercial properties in South Africa with capital ranging from approximately R10-million to R200-million to invest,” he concluded. – I-Net Bridge