Residential Emerges as the Leading Property Sector in Inner City Real Estate

Despite the reputations of our inner cities as run-down and dangerous; regenerative property projects in these areas continue to capture the attention of the media, investors and tenants alike. Some local initiatives have even received international acclaim for their innovative use of neglected spaces to create thriving pockets in areas where many once feared to tread. If thoughtfully planned and developed, disused inner city buildings have unlimited potential to not only generate profits, but to enrich the lives of urban dwellers by becoming centres of commerce, culture, and community.

Helping investors realise this potential has been at the centre of TUHF Limited’s vision for over 16 years. Sharing this passion with others was a key takeaway at the heart of the TUHF Inner City Property Conference, held annually to bring together the best and brightest in the fields of urban regeneration, property investment, urban planning, and other intersecting fields. Among the speakers at this year’s conference was Professor Francois Viruly, a property economist with over twenty years of experience in advising public and private entities, and Associate Professor and Director of the Urban Real Estate Research Unit at the University of Cape Town (UCT).

Professor Viruly’s talk outlined the state of the inner city property market as a whole, as well as the trends that affect the ways our inner city spaces are being used today.

The year’s Top Trend: Co-Living
In a period characterised by stubbornly high unemployment, a lack of safe, affordable housing opportunities, and a slow retail sector, Professor Viruly’s most exciting ideas for real transformation hinged on a trend that has already proven popular in major metros across South Africa and internationally. A way of solving these social issues, he argues, may be found in the formation of integrated neighbourhoods featuring buildings designed for spatial economy, variety, and convenience.

Co-living – intentional communities that provide shared affordable living spaces and facilities to people with similar interests and values – emerged as the year’s top trend, ranked in pole position as a prospect for both investors and developers alike.

And it’s no surprise that tenants are eager to experience the convenience of mixed use spaces for themselves. When housing, public services, transportation options and work opportunities are nearer to the places where we live and raise our families, the knock-on effect can create astounding changes in local economies. Smaller living spaces become practical, rentals and transport are more affordable, and much-needed spending power goes back into the pockets of residents, who go on to use it to support local businesses.

Additionally, retailers operating in these same buildings get much more of the vital foot-traffic they need to thrive, and investors enjoy the rise in property values that inevitably follows when a good mix of variable and fixed tenants is established.

Prospects for the future look good as the market stabilises
Professor Viruly shared further research conducted by the Urban Real Estate Research Unit (UCT) which showed a promising downward trend in CBD office vacancy rates in most major South African metros, although a depressed economy also means that increases in rents have in addition slowed somewhat (to its lowest rate since 2015).

“Where rental increases of up to 8% were possible in the past, it’s essential in today’s economy for property owners to keep their operational costs in check. Today’s average rental increases are sitting at only around 4%,” Viruly points out. “This applies to all sectors, from retail and industrial to office and residential.”

Economic Stimulation by Night
Drawing on notable examples like Amsterdam, Viruly suggests that without a vibrant night-time economy such as 24 hour hair dressers and retail shops, regenerative efforts can only go so far. Developing such an economy, he argues, will be vital in drawing in tenants and creating sustainable and diverse business-friendly neighbourhoods. Already, some of South Africa’s most exciting dining and nightlife opportunities exist in our urban areas, and this trend is set to only continue, with lower rents and mixed working and living spaces proving attractive to innovative businesses ready to cash in on a young middle-class audience with rising disposable income.

What is holding property entrepreneurs back?
The opportunities for exponentially faster and grander growth in our inner cities are tantalising, but several hurdles remain for South Africa’s entrepreneur class as it gets a handle on this often-overlooked property segment. Professor Viruly’s talk threw several of these into sharp focus.

A legacy of Apartheid land policies means that many in South Africa have little inter-generational knowledge in the areas of buying, selling and managing property, and though programmes and incentives exist to help them break into the sector through funding, education and mentorship, these remain a rarity that TUHF Limited has pioneered and hopes to see much more of in the coming years.

Legal and municipal red-tape presents another frustration for would-be investors – the release of land for development is a slow process and involves fulfilling multiple procurement requirements, not to mention dealing with zoning and time delays, and inefficient municipal billing systems.

If these can be successfully navigated by aspiring entrepreneurs with the grit to succeed, however, the sky is the limit.

“TUHF Limited is and has always been about unearthing this potential, and that applies to both the properties we finance and the people we support,” concludes CEO and Co-founder of TUHF Limited, Paul Jackson.


About TUHF Limited:
Founded in 2003, TUHF Limited’s funding, training and support enables property entrepreneurs to purchase, refurbish or convert derelict inner city buildings into safe, decent and affordable well-located mixed-use rental spaces.

To date TUHF has financed over 38 000 housing units close to economic opportunities.

64% of TUHF’s clients are marginalised entrepreneurs. Most of these entrepreneurs’ projects were made possible with the help of TUHF’s Intuthuko Equity Fund, a specialised fund founded in 2004 that helps first time property entrepreneurs who are also previously disadvantaged enter into the property market by supplementing their equity.

With an average loan book growth of 12% over the last five years and a national footprint servicing 128 suburbs in each of the eight metropolitan cities of South Africa, TUHF is truly affecting impact through scale.

For additional information, please contact:
Sayuri Naidoo
Marketing Manager: TUHF Limited