12 Sep 2011
The inner city of Johannesburg is attracting property investors with some snapping up bargain buildings for refurbishment and redevelopment at auctions.
Auctioneers report an increase in the number of investors, developers and savvy property buyers buying commercial buildings as they are beginning to see value in this area.
According to Auction Alliance, property buyers and investors still regard property as an asset class as revealed in the commercial multiple auction held across the country in Johannesburg.
The South African commercial real estate market returned to double-digit annual performance in 2010 with a 13.3 percent total return from the 2009’s 11 year low of 8. 8 percent, according to the South African Property Owners Association and Investment Property Databank report Q2 2011.
The report shows that the headline total return is still dominated by the income component, which was 8.9 percent while capital growth was 4.1 percent.
Income returns remains the backbone of the total returns generated by property investments in South Africa.
Furthermore, the reports states that property as an investment offers a number of benefits over alternative asset classes, such as a steady income stream that acts as a hedge against inflation, coupled with the potential for capital growth.
In August, Auction Alliance successfully sold the entire city block in the Johannesburg CBD for R18.7 million.
The property is located in New Doornfontein at the corner of Voorhout, 8th, 9th and Miller Street on the periphery of the Johannesburg CBD and two blocks from Ellis Park Stadium. This property block consists of 10 stands measuring 5 745 square metres.
Auctioneer Michael Sacks, says the huge renewal projects currently underway in the Johannesburg CBD, Braamfontein and Doornfontein nodes has positively encouraged investor sentiment in the area and created investment opportunities.
“The sale of this property demonstrates the significant investor and developer demand currently being experienced for inner city property,” says Sacks.
Coming onto the auction floor on 28 September is an office building and Stuttafords building in the Johannesburg CBD.
Situated at the corner of Biccard and Steimens Streets, this office building is within close proximity to the Johannesburg Municipality. There are also a number of high rise residential flats, office blocks and street front retail stores in the vicinity of the property.
The nine storey building offers both office and retail space and the current tenants have a long term lease in place assuring a savvy investor of steady income streams.
According to a Broll Property Group report, the South African office rental market has remained stable and is seen as a tenant’s markets.
Sanett Uys, general manager of research and marketing at Broll says landlords are willing to look at favourable deals to retain tenants with new stock coming into the market being located close to Gautrain stations in Johannesburg.
Investors and developers looking to buy a prime redevelopment property opportunity in the Johannesburg CBD can look no further than the landmark Stuttafords building.
Retailer Stuttafords was established in Cape Town in 1857 and opened its first Johannesburg store on Pritchard Street in 1893. This property was designed by Cape Town architect Charles Freeman. At 10 storeys tall, this building was one of the first skyscrapers in the Johannesburg CBD.
The Stuttafords building is situated at the corner of Rissik and Pritchard Streets and is across the road from a busy retail centre with retail stores such as Jet and Edgars and the Johannesburg High Court.
A buyer can develop up to 143 residential apartments which are sought-after in this part of the inner city of Johannesburg, thanks to the city regeneration initiatives.
The property is anchor tenanted by fast-food retailer McDonalds until 2019. Only a portion of this 7 787 square metres property is occupied currently and it has ample parking, which is often a problem with many inner city buildings. – Denise Mhlanga