Property companies with large exposure to office space under pressure

Property companies with large exposure to office space are set to come under more pressure. There are concerns that economic growth will not be strong enough this year to give a proper lift to the market. Even Growthpoint Properties, which owns mostly top-grade offices, could have problems.

“Though we like the quality of the portfolio, we are wary of the large office exposure, which will continue to come under pressure. We believe some of the other counters offer better growth for now,” financial services group Imara SP Reid said in a recent research report on Growthpoint’s results.

Growthpoint, the biggest SA-based listed property company, released figures for the six months to December. The company has grown rapidly since listing more than a decade ago. But it is likely to struggle to grow domestically, and with many property funds holding onto their retail assets it may have to consider buying office properties struggling with high vacancies.

Growthpoint’s office vacancies are at 8.4%, well below the national vacancy level of 11.1%. It recently acquired the entire portfolio of the Tiber Group, which includes offices tenanted by large companies such as Nestlé, PPC, AngloGold Ashanti, Norton Rose Fulbright, Merrill Lynch, Barclays and Absa Capital. But it has not been left with many office portfolios to buy in SA.