New precinct in the Inner City

Posted On Wednesday, 08 April 2009 02:00 Published by eProp Commercial Property News
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A less posh version of favourite social spaces like Melrose Arch, the 120 End Street development is within walking distance of 150 000 residents in Hillbrow, Berea, Joubert Park and the city centre.

Paul JacksonThough areas like Newtown will continue to be popular, this is likely to become the social hot spot of the city.

Government and the city will claim a victory for the tax incentive scheme, introduced in 2003, for regenerating defined "urban development zones". The developers will be able to claim 20% of their costs or RlOOm/year against their taxable income for five years.

Surprisingly, this doesn't excite developers as government imagined it might. "It's nice to have and we'll certainly claim it," says Afhco CEO Renney Plit, the lead developer in the consortium. "But it had no influence on our decision. We would have done the development without it."

City Property is vying with Afhco as the city's biggest converter of old offices to new residential accommodation, contributing to the 85 000 new units the city wants. "It didn't affect our decision to enter the conversion market in Joburg and Pretoria at all," says Plit. His company started conversions some years before the incentive.

"For the most part, the incentives are not material to private developers," says Cape Town developer and researcher Theodore Yach. Central Johannesburg Partnership director Anne Steffny goes further. "In some cases, the incentive is not worth the paper it's written on," she says. Paul Jackson, CEO of a trust that funds smaller inner-city investors, says it is not important.

Yet Steffny estimates that the private sector will have invested Rl0,5bn in inner Johannesburg regeneration projects from 2006 to 2010.

So what brings private investors into the city? Steffny says big local government incentives are improving the city's public spaces, transport, planning approvals, clearance for transferring property and service billing work.
Producing a tax incentive is an easy way out for government and provides short-term publicity and favourable responses.

"But the maxim in property is that tax incentives are never a motivator for investment," says Leapfrog estate agency executive director Kura Chihota. It's the hard grind of making things actually happen that clearly works.

The Johannesburg Development Agency (JDA) has spent a mere R570m on upgrading six key areas of the city: Newtown, Ellis Park, Braamfontein, the fashion district, the high court precinct and Hillbrow and Berea late last year. It's too early to see results from the Rl70m spent on the streets and pavements of the latter, but the R400m spent on the other five districts in eight years has coincided with Rl3bn in property transactions. This includes properties bought and sold but not upgraded.

JDA CEO Lael Bethlehem concedes that investment was "multicausal", but it's clear that when officialdom gets off its backside and does something, the private sector responds. Also, if it makes a hard decision and opens up an opportunity,it will produce big results.

In Cape Town, if government makes the politically sensitive and stagnating central precinct District Six available for development, "the investment will surpass all the money spent on the city since the regeneration process began", says Yach.

Last modified on Friday, 16 May 2014 10:15

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