Despite high inflation, rising interest rates and uncertainty in global markets, auctioneers believe the platform will continue to trade well in volatile times.
Assets including smaller logistics and warehousing facilities, mini-industrial units and small shopping centres will continue to be popular among buyers. In general, well-priced assets are snapped up as soon as they come onto the market.
“Though cautious, we are bullish about the sector’s prospects, and we see untapped opportunities,” High Street Auctions director Greg Dart told Business Day.
According to Lightstone active market data, about R110bn of commercial property transactions were concluded in 2022, with residential recording about R300bn. Dart said the auction sector accounts for a small fraction of these transactions thus presenting growth opportunities.
Despite interest-rate hikes, ongoing load-shedding and slow economic growth, High Street auctions performed well in 2022. The company intends growing its market share this year and beyond.
He said while the Western Cape and Gauteng regions saw a lot of activity and deals being closed, KwaZulu-Natal was a challenging market amid the region’s ongoing recovery from the July 2021 riots and floods in 2022.
Norman Raad, Broll auctions and sales CEO, said financial pressure due to rising interest rates will contribute to an active auction market as sellers including private owners, corporates and listed property funds offload noncore assets to pay debt or rebalance their portfolios.
“For investors this is a good time to buy — property has always been a good hedge against inflation and instability,” said Raad.
Quality stock generally achieves reserve prices on auction, particularly in the Western Cape where demand exceeds supply. Those that do not, however, are often not aligned to the market — that is what buyers are capable of paying in an open market, according to Raad.
Raad believes many listed property fund properties are overvalued, which results in them not achieving their book values which are far off the current market.
Greg Want, MD at Aucor Property, said for the past 10 years they have had success with listed property sector transactions, with about 20% of deals coming from this sector in 2022.
“We are starting to see more corporates coming to the auction platform, and this is reaffirming trust in the auction industry as well as the efficiency and transparency of the platform.”
For the past six years, Aucor has experienced consistent growth across all commercial property sectors. The industrial sector, which comprised about 40% of the company’s transactions in 2022, remains buoyant, helped by demand for big logistics and last mile logistics. Mini-industrial units catering for start-up businesses and mom-and-pop businesses also continue to be sought after assets at auctions, according to Want.
Many listed property fund properties are overvalued, which results in them not achieving their book values which are far off the current market.
— Norman Raad, Broll auctions and sales CEO
Brett Pozniak, a business development executive at Aucor, said there is an explosion of demand for mini and macro units catering for small businesses. In February, Aucor is selling a portfolio of multi-tenanted mini units owned by Sanlam in Strijdompark in Johannesburg.
Pozniak said Strijdompark is a well-established and thriving industrial node that has outperformed for the past 25 years. It is characterised by low vacancies and has easy accessibility to main roads and highways.
“Investors are attracted to mini-industrial units because this type of asset can be easily re-let when it becomes vacant due to high demand,” said Pozniak.
Auctioneers said people are starting to embrace auctions, with more research and engagement taking place via online platforms. However, many people still prefer to conclude their transactions in person by attending auctions.
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