An oversupply of office space in Mandela Bay is forcing developers to drop rentals by as much as 30%, a survey of the market shows.

Overall, the SA Property Owners’ Association (Sapoa) survey, published on Sunday, showed that the oversupply had resulted from a combination of companies upgrading to more upmarket offices and the economic downturn.

“We found that average asking rentals have come down by between 20% and 30% since the beginning of 2009,” said local Sapoa committee member Paul Nicholson.

"Other major cities were experiencing the same trend.

"But the percentage of office space available in the Bay was higher than in other major cities, standing at about 13%, he said.

Similar surveys showed that office vacancies in Johannesburg suburbs increased from 4,1% at the beginning of the year to 7,7%; Cape Town from 5,1% to 7,35%; Durban from 1,4% to 2,5%; and Pretoria from 2,8% to 3,9%.

No comparable figures were available for Port Elizabeth as the survey was the first of its kind.

However, local comparisons would be possible from next year when the second survey was conducted.

Nicholson said the higher local vacancy rate was due to a “surge” in new office developments since the beginning of 2007.

As the Port Elizabeth suburban office market was substantially smaller than the other major cities, vacancy percentage levels “tend to be distorted on the high side”.

The local survey found that major vacancies grew in newly completed A- grade office developments that were not pre-let and in B- grade and C-grade office space.

The lower-grade offices had been affected as a result of some businesses upgrading, but other factors were businesses downsizing or closing branches or operations due to the recession.

The survey found the highest suburban office vacancies in Newton Park, Walmer and Fairview.

The established Greenacres area had a much lower overall vacancy factor of 5,3% across all types of office space, but mainly in the C-grade.

A-grade office space vacancy in Greenacres “is at a very healthy” 3,1%.

Nicholson said the situation in the central business district could not be surveyed as figures “were not supplied in time for the survey”.

Source: The Herald