Whilst the uncertainty of global markets currently haunts investors, the certainty of income streams on commercial property are proving to be relatively comforting for commercial property investors.This is according to Tony Bales of Bales Delaporte Commercial Property Dealmakers who says that whilst various tenants are feeling the squeeze and interest rates are higher than they were 24 months ago, on the whole, income streams from commercial property investments have held up extremely well in South Africa. “Investors have been reluctant to sell their income producing property assets as these are currently showing their resilience to downturns - just like they are supposed to in a balanced portfolio of assets. The listed property sector, whilst it has lost value, has continued to increase net incomes consistently year-on-year. Rental growth should continue in this sector for a number of years as leases expire and rentals revert upwards to market related levels. Those funds more exposed to the retail sector are likely to have a lower growth in rentals.”However, according to Bales, property assets that do not show a positive cash flow have been put under severe pressure and vacant land and vacant buildings are proving more difficult to sell in the current market - even if purely due to the fact that financiers are taking a far more conservative approach. “With the global turmoil likely to last longer than initially anticipated, commercial property investors need to plan and strategize accordingly. Tenants wanting longer leases should be taken very seriously as whatever can be done to enhance the medium term certainty of income streams will enhance a property's value. It is this certainty that many current investors (and financiers) are seeking.”“Conversely, value investors are circling like vultures on any opportunity that may show uncertainty and consequently a perceived reduced price. These investors often have the cash and knowledge to re-position and re-tenant buildings and hence add significant value.”
“Add certainty to one's income streams and additional value will automatically follow,” concludes Bales.