Reflecting on the past year, Norman Raad, CEO of Broll Auctions & Sales says the company’s property auctions have progressively been well attended throughout the year – particularly the most recent two auctions – but the determining factor lies in the quality of properties taken to auction.
“The most recent auction was successful in terms of confirmed sales, but this is occurring pre- and post-auction more often than usual, with a lot more negotiating taking place throughout the campaign. Highlights of the last auction were the sale of Liberty Gardens in Bruma and offices in Kyalami Business Park. Both properties were purchased by owner-occupiers as the sellers became more realistic and the opportunities were therefore available.”
Raad says the industrial sector hasn’t shown any signs of recovery, as small and medium-sized manufacturing businesses continue to feel the full effects of the struggling economy. “Smaller industrial property prices have in fact seen a reversion in values. Property owners are having to reduce rentals for struggling tenants, instead of having to find a replacement, which could take months or even years in some areas.
“As a result, the industrial market is being supported by larger multinational storage and logistics companies. South Africa has lost tremendous ground when it comes to manufacturing, where most items or components thereof can be imported at lower cost. What we have seen however, is an emerging market for the smaller tradesman industry for the fitters, carpenters, electricians and iron mongers, willing to rent alongside one another in smaller sized workshops.
“While the retail sector is facing massive headwinds, smaller retail centres are well positioned to capitalise during these difficult times, as they are predominantly occupied by niche businesses catering for a captive market. Larger centres are and will always be in demand, but stock is limited and sellers are few.”
Raad observes that the commercial sector is looking to reinvent itself, as massive oversupply is overshadowing demand. Offices are being converted into residential dwellings, hotels and storage. “The demand for offices is different across all demographics, but over the past years, we have seen multiple consolidations across major companies, leaving huge vacancies in outlying towns, which find it most challenging to fill the space in the current economy. Owner-occupiers are the one sign of life in the sector, as the CEOs are always looking to save costs, move closer to the staff and home, and most importantly stay away from the traffic congestion in the greater metropolitans and cities.
“Cape Town and Durban remain an anomaly in the current economy with new prices being achieved every month. The commercial market in Cape Town has seen massive growth in values over the past years as most buildings suitable for residential conversion are sought after and enjoy the most aggressive bidding at the auctions.”
The stand out properties on auction through Broll at 12h00 on 22 November 2017 at the Wanderers Club in Illovo, Johannesburg, include the landmark Federal building in Cape Town’s vibrant CBD which will be strongly contested by all investors who missed out on the previous properties auctioned and sold over the year. Set on an erf of 462sqm and with a gross lettable area (GLA) of 3 700sqm, the 11-storey building is perfectly suited for a residential conversion or hotel and fronts onto Heerengracht Street, just around the corner from Thibault Square. The building has been sectionalised into 28 sections from ground to top floor, with ground level currently retail and floors one to five having been used as a beauty school and the remaining six for student accommodation.
A retail centre and development land in Mauritius is one of the island’s first properties to be auctioned outside the country and is well positioned in a strategic traffic node on the M2 at the epicentre of major urban areas in the North, only five minutes from Grand Baie and 15 minutes from Port Louis. Comprising a GLA of 7 715sqm, Circle Square Retail Park has superb exposure and easy access from the highway and includes a fully let motor dealership and complementary businesses in the one half, and design and furniture themed outlets in the second part. With the entire project encompassing 3.4ha in extent, the vacant land – which can be excluded from the sale – is situated behind the centre, and is rezoned for a further mixed-use development, with a residential and community living influence.
Another iconic building going on sale at the auction is well-known The Safari Hotel in Hillbrow/Berea in Johannesburg, comprising a total GLA of 10 404sqm and consisting of 10 fully let retail shops and 293 self-contained apartments. Says Raad: “This well-managed building has the potential for significant income, as a further 21 rooms can be developed on the first floor. The owners have decided to sell to highest bidder after many years and numerous offers. Also included in the sale is 495sqm of vacant land opposite the building which is also zoned Residential 4 with primary rights allowing for shops at ground floor, business purposes, places of amusement and a hotel. The property is situated within Johannesburg’s inner city on the north end of Berea/Hillbrow, just a few 100m off Willie Street and Louis Botha Avenue. This iconic building has been in operation for many years and has earned itself a very respectable reputation in the hospitality and housing sectors.
Among other prime properties to be auctioned on 22 November are five modern cluster residences developed on one stand in a sought after address in Bryanston Drive in Bryanston, Johannesburg, which is currently used as a corporate guesthouse for overseas guests and employees. The two larger properties are both four bedroom homes, while the third and fourth are used as a short stay guesthouse/ hotel with seven rooms each. Says Raad: “With a total building extent of 1 770sqm, set on a combined erf is 5 714sqm, this is a great opportunity for a large family compound or guesthouse establishment.
“As to 2018, what can we expect?” says Raad. As previously mentioned, I don’t profess to be an economist, but when it comes to bricks and mortar, I believe that we are going to see more of the same for the next couple of years. Even if the current economy were to experience a massive correction and there were signs of political stability, the current property market would only start to see insignificant change in a while.
“We are looking for hope to shift the confidence dial, but in the meantime, opportunities must not be ignored. These will reveal themselves in the coming years and the prudent and intelligent investor will recognise the potential value in a better economy, and make offers. We will get through this time in our country and we have to believe that there are enough invested new age South Africans looking for a better future, who will rally behind the correct change to ignite the economy into growth and improvement.”