Izak Petersen, Dipula Income Fund CEO, foresees a year that will bring hard work for the sector, with only select opportunities of good assets available to the market.
"I fear that electricity issues are going to frustrate and slow down business. Some property developments may have to be shelved due to a lack of electricity supply. However, you're likely to see innovative solutions to get around this challenge."
There will be relatively limited speculative development activity in the market.
Looking at positive drivers that may counter the slow economic growth and electricity supply challenges, he points to falling oil prices as a bright spot that will provide some cushion for rising inflation, but cautions that the weak Rand will have somewhat of a counter effect. "We believe that rates will remain unchanged in the short term, which bodes well for property."
Offices are likely to remain the weakest link for commercial property in 2015. "They already face oversupply issues with a lack of big users. Our tough economy also adds to the pressure on the sector due to the elasticity of demand and price sensitivity of its users, especially smaller and medium users. Most tenant-driven developments for big users will result in increased vacancies as they vacant existing space.
Looking to other commercial property sectors, he believes retail and industrial property should hold up better. "Although, we do not see either one shooting the lights out and retail turnovers are likely to be under pressure with consumers remaining under strain.
"Despite the challenges ahead, we still anticipate listed real estate to outperform bonds, cash and equities. We further expect to grow the Fund's net income well in excess of inflation and grow our portfolio organically by executing our sizeable development and acquisition pipeline of more than R1 billion," concludes Petersen.
For more information, go to www.dipula.co.za.
