Parktown, Braamfontein steadily fill office space

Posted On Tuesday, 04 February 2003 10:01 Published by Commercial Property News
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Affordable rent is remaking Johannesburg's older suburbs into fashionable business districts.

Affordable rent is remaking Johannesburg's older suburbs into fashionable business districts. Companies that migrated from the city to the plush northern suburbs a few years ago are steadily filling office space in Parktown and Braamfontein.

'There has definitely been a comeback,' says Nicole Mclauchlan, the marketing manager of Finlay and Associates, a firm specialising in property management. 'But it is a steady, constant growth and by no means a boom. A boom isn't good for us. It means there is an oversupply in the market and not enough demand.'

A spin-off from the great trek north, she says, is that rent has become more competitive in areas like Parktown. An oversupply of commercial and office properties in the northern suburbs has meant that offices have been standing vacant for the past two years, and rentals have dropped. 'I think that the playing fields have been levelled. But it will take at least three years to fill Johannesburg's existing available spaces.'

A recent office vacancy survey of Johannesburg's decentralised areas by the SA Property Owners Association (Sapoa), a commercial property industry association, found that sentiments towards Braamfontein and Parktown is improving.

'Much of the positive take-up in being seen in older business nodes - which are also located in close proximity to each other,' Sapoa says.

Gross asking rentals, defined as the full rental including operating costs and municipal costs, in Parktown range from about R35 a square metre in an older building to R60 a square metre in a newer building. In comparison, a firm can pay R70 a square metre for a reasonable building in Sandton, while gross asking rental for a smart executive-friendly building, may set firms back R90 a square metre or more, according to Mark Bradford, the director of commercial estate agency Bradford McCormack.

It seems that frugality, buffered by low rents, will pay off in the end. 'It all comes down to value for money,' says Bradford. 'This is especially when you consider that rent is the second biggest overhead for companies besides salaries. Companies are now looking at their bottom lines.'

Parktown, according to Sapoa's review, is one of the few business nodes in South Africa with a net take-up of office space and vacancies are dropping. There, vacancies have dropped from 20 percent one year ago to about 16 percent today. However, it is not seeing inflows of big business, but appears to be more attractive business base for smaller-sized businesses, says Mclauchlan.

'Parktown is brilliant for small businesses and a big part is because the rents are low. It has a sleepy, suburban feel. Parktown has such exquisite buildings, which are a pleasure to work in. The buildings have lovely gardens and landscaping,' she says.

A large part of Parktown's appeal is its centrality and accessibility. 'These areas on the periphery of the CBD are so central from the east, south, north, and west. Transport is quite easy and there is good infrastructure,' she says. And for those commuters braving the cramped M1 north every day to work, Parktown promises a congestion-free drive.

Its older buildings are ideal for firms with a large administrative component, Bradford says, as they can easily be designed as open plans. Relocation to the suburbs bordering the city also makes it easier for staff to travel home - and to work.

'Generally, a lot of a company's administrative staff comes from areas such as the West Rand, Soweto and the South. It is much easier to get from Parktown to Soweto than from Sandton to Soweto.

'It puts business closer to home for all staff. But there is a parking problem in areas like Parktown as the buildings are older and as there are often no parking sites available.'

While Bradford says that an area like Braamfontein will be 'never be the new Sandton', it does offer good office space and cheap rent. According to a Sapoa survey, Braamfontein's office vacancy rate of 11.93 percent is lower than Sandton's 15 percent and Rivonia's 19.11 percent.

Khotso Matau, a Braamfontein property broker for Colliers International, says that prospects are looking up for Braamfontein and developments such as the Nelson Mandela Bridge and Constitutional Hill will boost its image.

But Matau points out that it is largely Braamfontein's A-grade buildings that are drawing in tenants while B-grade and C-grade buildings, predominant in the area, are 'struggling'.

According to Sapoa, 75 percent of the decentralised office space in Johannesburg is A-grade. These buildings are currently defined as those not older than 15 years; equipped with high quality modern finishes; air conditioning; and on-site parking.

B-Grade Buildings are older but have had renovations and refurbishments; are air conditioned; and may or may not have on-site parking. The services and finishes of C-Grade buildings are older and these buildings may not have on-site parking. Sapoa researcher Joyce Pakosa says that these grading definitions are set to change.

'Even though rentals are low for B-grade buildings in Braamfontein, they are not attracting blue-chip companies because they don't have the quality space that these kind of companies are looking for,' says Matau.

B-grade offices are also standing empty in the CBD, Sandton, Rosebank and Houghton, according to Sapoa. Its survey on vacancy figures in the CBD for the quarter ended December 2002 delivered the gloomy news that the CBD has a nearly 25 percent vacancy rate, with B-grade buildings being the worst hit.

But Bradford seems fairly confident that offices will fill up in the city centre in the future. 'Firms are slowly coming back to the city. I think that the businesses that are in town now are generally the businesses that will stay there.

A lot of the big corporations that moved out of the city four to five years ago signed leases for the next 10 to 15 years. I believe it will be at least five years before the CBD will be in a position to attract the Ernst & Young firms back.'

Last modified on Sunday, 02 June 2013 01:40

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