Boston, MA -- (SBWIRE) -- 07/26/2013 -- BMI's Q313 South Africa Real Estate report examines the commercial office, retail, industrial and construction segments throughout the country in the context of an industry in the midst of a protracted construction lull, following years of double-digit growth.

With a focus on the principal cities of Johannesburg, Cape Town and Durban, the report covers the rental market performance in terms of rates and yields over the past 24 months and examines how best to maximise returns in the commercial real estate market, while minimising investment risk and exploring the impact of the government-led infrastructure initiative on a market characterised by a tepid construction pipeline. With the construction sector still in a period of stagnant growth, we see few opportunities to lift the industry out of the quagmire. For real estate firms with a higher dependence on the construction side, the risks are greater than for those with a portfolio of leasable space, as the slowdown in the project pipeline will go some way to rectifying the imbalanced supply and demand dynamics.

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As such, the negative supply side outlook for the sector is starting to have a tangible effect on the real estate rental market, with our newly collected data covering market performance for full year 2012 doing little to inspire confidence.

Key Points

- In spite of President Zuma's concentrated effort on infrastructure investment with the announcement of a new US$462bn 15-year plan, we maintain our outlook for the medium term; with an expected average annual real growth of 4.3% between 2013 and 2017. Though growth is gradually picking up - indicating that the slump has finally reached a bottom - there are still numerous bottlenecks, both political and financial, preventing a strong return to any former glories.
- We expect the South African economy to post sluggish growth over the medium term.
- Following a return to growth in 2011, we estimate that over 2012 the residential and non-residential sector stalled. Although we believe that the country's non-residential sector will help the industry rebound in 2013, residential construction activity will remain muted for the foreseeable future. For 2013 we forecast growth supported primarily by the non-residential segment.

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