Property fund Spear Reit is looking to cash in on the boom in Western Cape semigration and growing its portfolio in the province from R4.5bn now to R15bn.
The group, based in the Western Cape, said the province is an investment node of choice, and a migration destination for people and companies seeking a more attractive and economically viable location.
The JSE real estate investment trust (Reit) chief information officer, Kim Pfaff-Karg, said good quality properties in the province are tightly held. When these come on the market, they are snapped up.
“Investors are targeting the province as capital values have remained steadfast and cash flows have proved resilient, despite challenging market conditions,” said Pfaff-Karg.
Pfaff-Karg said the Western Cape real estate market maintained its resilience across property types while good governance enhances investment appetite for real estate assets.
Semigration, movement of people from one province or city to another, drives demand for property and new growth nodes being established, which bodes well for Spear’s portfolio and growth ambitions.
According to the BetterBond property brief for March, semigration will continue, leading to growing divergence between house prices in the Western Cape and the rest of the country.
BetterBond CEO Carl Coetzee said that due to superior services and good road infrastructure average house prices in the Western Cape were 28% higher than the national average in 2022, recording an average of R1.876m.
From 2012 to 2022, the value of approved residential building plans in the province reached R14bn, according to Stats SA.
“The growing importance of the residential property market in the Western Cape should not be underestimated — it has a strong structural dimension, which is attractive for investors and semigrants,” said Coetzee.
According to Stats SA, the Western Cape passed building plans valued at R37bn in 2022, accounting for a third of all building plans passed in 2022, as well as 40% of all buildings completed, valued at R27bn, in the same period.
A report by global commercial real estate services company Jones Lang LaSalle (JLL) titled, “SA Real Estate Investment Review and Outlook for 2022/23“, shows that nationwide the property sector garnered R16.7bn of direct investment, with the Western Cape and Gauteng markets driving transactions.
Though total property investment in 2022 fell short of 2021’s level, the Western Cape had a surge in investment activity, recording about R3.9bn.
“Despite the global macroeconomic and geopolitical challenges, SA’s commercial property market fared relatively well in 2022, with strong performance emanating from the Western Cape,” said Mieke Purnell, research manager at JLL.
Purnell said the industrial property sector recorded robust performance in 2022 with R6.1bn in transactions. Of these about R2bn were in the Western Cape. Gauteng recorded nearly R2.5bn.
Data from FNB’s commercial property broker survey for the first quarter of 2023 shows the industrial property sector had a stellar performance for some time, but economic and political uncertainty, as well as stock shortages, would affect near-term sales.
Though load-shedding and rising interest rates were cited as negative sales factors, brokers said investments continue to flow into the sector, with booming logistics activity driving demand for larger premises.
Spear’s industrial portfolio performed well as manufacturers and warehousing industries earmark Cape Town as a growth node for their businesses. Its well-located industrial assets have occupancies of nearly 96% and strong demand for multi-let industrial parks.
“Our strategy is to grow our portfolio with a bias towards industrial and convenience retail assets in the Western Cape,” said Pfaff-Karg.
To this end, Spear recently sold its office block in Century City and 15 on Orange hospitality asset as part of portfolio rebalancing and investment strategy. Proceeds will be used to reduce debt and fund the development pipeline, including the redevelopment and extension of Blackheath Park for Bravo Brands.
In 2022, it acquired The Island, a modern logistics industrial park in Cape Town’s sought-after Paarden Eiland to benefit from growth in the industrial property sector.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.