Commercial South African property investors are increasingly looking to offshore jurisdictions, particularly retail and industrial property in the United Kingdom (UK) and Poland, to diversify portfolios as South Africa faces ongoing challenging conditions.
Iqeraam Petersen, Transactor in the RMB Real Estate Investment Banking team said: “We’ve seen an increased focus on the convenience retail and large industrial warehouse property sectors as the ‘sweet spot’ in both the UK and Eastern Europe, particularly Poland.
“These jurisdictions and property sectors have shown to be resilient during tough times - as posed by the pandemic - as they cater to the changing consumer patterns, while offering long leases and predictable cash flows from financially strong tenants.”
Interest has come from across the investor universe: family offices, large property funds as well as financial institutions and pension funds.
Petersen noted that the UK and Poland present good buying opportunities because of short term headwinds such as the prospect of sharply higher energy prices in UK and the war in Poland’s neighbour Ukraine.
“Property prices have come down despite the positive long-term fundamentals in these countries and the respective property sectors long term prospects remains strong,” Petersen added.
“In the UK, we’ve seen consumer behaviour shifting away from large shopping centres towards online shopping, which has furthered the need for industrial warehousing which have easy access to major transport networks. These locations are however very hard to come by, making them good investment prospects.
Looking at the other side of the retail spectrum, the convenience retail space has been much more resilient and has even flourished. People appreciate the convenience of easily driving up to your local supermarket or DIY store for things they use every day.”
Poland offers a different investment case thanks to its proximity to richer, more developed countries.
“The Polish economy is not as mature and the retail space is not as well served as Western Europe. But with a highly educated but lowly indebted middle-class population, their growing disposable income is creating demand for quality retail spaces.”
Petersen noted that Poland’s position on the edge of Western Europe has created a unique commercial property investment case.
“There is more available land in Poland and it is much less expensive than land in neighbouring Western Europe. Distribution centres are well placed to service Europe: they are close to quality highway infrastructure and manufacturing hubs, thereby creating easy access to ship goods into neighbouring Germany and throughout Europe.”
Petersen added that South African property investors were skilled at assessing and managing offshore investments thanks to years of experience navigating changeable South African market conditions characterised by fourteen years of power outages and comparatively high inflation and interest rates.
“The energy crisis and other challenges in Europe and the UK at the moment means the property dynamics are starting to resemble those regularly experienced in South Africa.
“This has given SA investors an unexpected advantage as European and UK property investors are struggling to adapt to this new reality while South African investors are responding more easily as these are conditions we are familiar with,” said Petersen.
The Real Estate Investment team at RMB has concluded several offshore transactions this year and expects the number of transactions to pick up for the rest of 2022 and into next year.
Get the latest issue of FAnews