For most of us, the thought of investing long term raises concerns about which asset class is best suited to our needs and more importantly which investment vehicle will perform best in the short to medium term. Which investment is right for me? When will I start to benefit? Who should I talk to?
The current South African economic climate invites careful consideration and investigation when making investments of any kind. Thankfully, one area that has shown promise in its continued rate of capital growth and solid rate of returns is the commercial/Industrial property sector and more specifically directly owned property vs the JSE listed market. The versatile nature of 'bricks and mortar' commercial property as an investment has made it an attractive option in South Africa's major cities. Property may be purchased purely for investment purposes on a yield play, a development/re-development for short term gain or as a long-term hold with slow but steady value growth through minor adjustments and improvements
According to Alistair Anderson of the Business Day, as an average for 2017, commercial property performed at 12.3 percent return which was higher than the then current prime lending rate of 10 percent. Tax in the form of income, property and or capital gains can all contribute to the initial costs incurred after the purchase of commercial property, therefore it is imperative that a commercial property investment only be measured in the medium to long term on a forward yield basis. Andrew Dewey, Managing Director of Swindon Property is of the opinion that despite the sluggish nature of South Africa's economy, continued growth in commercial property is inevitable. "We are not looking at the market five years from now, it is the next ten to fifteen years that will determine the success of your investment".
There are ways to mitigate risk, knowing the best location and finding the ideal tenants are just two ways in which you can ensure the continued, and ideally increased, value of your property. Identifying properties where one can improve revenue stream through upgrading is also a great source of improving yields. Tapping into the resources of a reliable brokerage is the best way to take the guesswork out of your investment. Dewey says, "Connecting the right people with the perfect property, in the most suitable location, is vital when securing an investment property". He explains "If a buyer is purchasing to let, an experienced Broker will not only guide the buyer on market demands but also source dependable tenants, thereby structuring a deal to ensure the desired return is achieved".