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Retail property in South Africa records above average returns | 30 September 2013

South African property investors have been alerted to significant growth in the retail sector, as assets in this category outperformed industrial and office buildings in H1 of 2013.

Retail properties delivered an improved ten per cent total return between January-June, courtesy of a 5.9 per cent capital return and 3.9 per cent income return.

Industrial buildings followed closely behind with a return of 9.1 per cent (3.9 per cent capital, 5.0 per cent income), with offices returning 7.9 per cent (3.5 per cent capital and 4.3 per cent income return).

This was recorded in a period when the country’s property sector outpaced equities and bonds, delivering an average return of 9.2 per cent, with higher capital growth proving to be the key difference.

Eprop.co.za says the reading is 30 basis points more than the biannual return in December 2012, which stood at 8.9 per cent.

Higher capital growth of 4.9 per cent was chiefly responsible for the improvement between January-June, with investors also welcoming an income return of 4.2 per cent during the period.

The total return may have been even stronger had it not been for a six per cent increase in operating costs from December 2012.

This continues to represent a key challenge for investors, who saw their operating bills grow to represent 47.3 per cent of their gross rent – up from 46.3 per cent in December 2012.

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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