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Commercial property performing well in SA, claims expert | 18 July 2013

The size and quality of tenant are two characteristics that are driving the performance of commercial properties in South Africa, according to bdlive.co.za.

According to Gary Palmer, CEO of Paragon Lending Solutions, the tenant side of the commercial property market is in a “healthy state” and is improving.

Furthermore, the sector is experiencing “strong competition for assets and competition among banks looking to lend against these properties”.

Commenting on the sector, Palmer said: “The minute you have an income-producing asset with strong tenants and strong covenants, then that is in huge demand.”

In addition, low interest rates in the region means it is a ‘good time’ to borrow cash to fund investment opportunities, but building costs do remain high, cited africanfinancialnews.com.

Palmer did admit he had seen “a huge uptick” in the number of inquiries for commercial property finance but did concede that segments of the commercial property market were under pressure – especially “non-blue-chip tenants” in commercial properties.

Palmer also noted a shift from banks when it comes to income which does not require large capital holdings, such as unsecured lending. He believes the move is “creating opportunities in the unlisted commercial property sector” for short-term non-bank lenders due to the way they are (or aren’t) governed.

“There is a huge opportunity in SA for shadow banking – non-bank lenders who are prepared to take a different view and are not governed by the same requirements as banks are,” he said.

The views expressed in this post are those of the author and are not necessarily those of Qube Global Software. All facts are verified where possible directly by the author.

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