To a greater or lesser degree, said Rossi, these challenges were faced by all big groups - with this proviso that the property sector, always lagging the general economy by six to nine months, will probably not experience significantly improved conditions until the third quarter of 2010 or later.

The main challenges, he said, were almost all direct spin-offs of the global recession:  a contraction in consumer spending (which hit Redefine’s retail tenants particularly hard), a dire lack of bank credit (which slowed down development, refurbishment and general spending) and a cut in corporate and big organisation office space requirements (often following on layoffs in the staff and consolidations into existing premises).

Rossi adds "In 2010 greatly increased electricity costs may also retard the property sector’s recovery".

The difficult conditions, Rossi said, had proved beyond question, that Redefine’s eight asset managers are able to perform to world-class standards and greatly reduce the impact of recessionary times.  The year had also shown that the group’s realistic flexible stand-by-you approach to the all-important broker network is paying excellent dividends.

Emphasising the diversity and the spread of Redefine’s 3,6 million m² property portfolio (spread over 403 properties, recently revalued at R 18,2 billion), Rossi said that it has always been one of the better balanced portfolios in South Africa, but the recent acquisition of Apex-Hi’s R820 million assets had made it one of the most evenly distributed portfolios both geographically and sector-wise in the country:  55% of the gross lettable area is in Gauteng, 16% in the Western Cape and 14% in KwaZulu Natal.  Thirty eight percent of the GLA is in commercial properties, 33% in retail and 29% in industrial. 

Equally significant, said Rossi, is the fact that 59% of the let space is occupied by ‘A’ grade tenants (national, provincial and local government departments, parastatals, national retailers and listed companies), 13% has ‘B’ grade tenants (professional firms and medium size companies) and 28% have ‘other’ tenants.

The high percentage of ‘A’ grade tenants, said Rossi, ensures above average returns and it is Redefine’s policy to dispose of lower rental properties and to continue to increase the ‘A’ grade tenant proportion of the portfolio.

When Rossi was appointed in November 2009 he was mandated to reduce Redefine’s vacancy factor.  In the 2009 financial year this ran at an average of 8,5%, which Rossi considers a satisfactory level considering the tough conditions – but he is confident this can now be reduced.

Industrial space, he said, had been the most stable performer - here vacancies were kept to 6,5%.  In retail, the figure was 8,3% and on commercial 10,2%.  Rental increases in the past year averaged 7,35% and on new leases the average per m² rose from ±R55 to ±R65. 

Despite the difficult conditions, said Rossi, in the 2009 calendar year Redefine signed 397 leases with a total gross monthly revenue of over R30 million.  Of these 220 were new leases, the remainder being renewals. 

“This in itself was a good achievement,” said Rossi, “but what is particularly encouraging is that in the last quarter of 2009 enquiries for rental space rose to higher levels than we have seen for a long time, peaking at 125,000m² to 170,000m² and we have recently been able to achieve a conversion rate of 10% to 12% on these enquiries.”

Rossi stressed that Redefine’s successes in leasing are due to their broker-friendly stance, which recognises the key role brokers play in the property sector.

Also contributing to Redefine’s popularity, said Rossi, is their new website displaying photographs, full data and locality plans of all available space.  This is backed-up by a broker pack which includes offer to lease documents which can be downloaded online and submitted to Redefine. 

Capitalising on the ground gained so far, Redefine Properties will introduce a new broker loyalty programme in the next few weeks - details of this will be announced shortly.

Broker and tenant relationships, said Rossi, will be even more crucial in the year ahead because 29% of Redefine’s current leases will come up for renewal this year and his aim is to reduce vacancies by 50% before 2011. 

“I believe that the 50% reduction target is achievable in view of the successes we have had so far and the slow but steady increase in demand which, as I have already indicated, is likely to speed up rapidly in the second half of this year.”

Demand, said Rossi, will be boosted by the World Cup.  Although this will primarily benefit the hospitality and retail sectors, there will, he said, also be spin-offs for companies like Redefine which have properties in areas where new infrastructural development is creating active trading and commercial nodes.   For example, in Braamfontein the Gautrain line will make access to two large office complexes a great deal easier.

Although he is not in any way involved with the acquisition or development of new space, Rossi reminded trend watchers that the company had acquired 82 Maude Street in Sandton which will bring 8,200m² of ‘A’ grade office space to the portfolio.  Other important developments as mentioned in the annual report are all in the retail sector:  Horizon View in Roodepoort (20,325m²), Terminus in Klerksdorp (7,619m²) and Alberton Mall (5,458m²) in Alberton.  Some 3,500m² of new space is in the pipeline to be developed at CTX Freight Park and another 13,000m² is under discussion to be developed on a turnkey basis at Golf Air Park, both industrial projects in the Greater Cape Town area.

“The picture now emerging from current data is that Redefine has sowed the seeds for what will be a really bumper crop a year from now,” said Rossi.  “The far sightedness of the asset managers and the increased effort put into leasing are placing us in a position where it will become undeniable that Redefine is the quality performer in the South African listed property sector.”