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CBD's continuing challenges

Posted On Saturday, 01 January 2000 02:00 Published by
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But retaining tenants requires big commitment from owners

But retaining tenants requires big commitment from owners

THE exodus of companies from Johannesburg's city centre appears to have come to an end, with most of the big entities that planned to move out of the city to decentralised areas having already done so.

Hugh Basel, GM marketing of RMB Properties, says that a lot of the big players moving out of the city centre now own their own properties in outlying areas such as Sandton and Fourways.

"This raises the question as to where the megaprojects, such as Melrose Arch, are going to get their big tenants from, particularly as a lot of the banks have gone to Sandton."

Basel says Sandton is now starting to see the effects of oversupply, with more than 100000m² of space available in the Sandton central business district (CBD).

Although there is a big difference in the rents charged in the Johannesburg CBD, where an average A-grade rental is about R30/m² gross, and Sandton, where it costs R70/m² gross, he says he doubts that there will be a big move back to the CBD soon.

Roger Corlett, property MD of Liberty Properties, says that retaining commercial property tenants in the Johannesburg CBD takes a major commitment from property owners in time, money and determination.

He says no longer can a property owner administer only his properties in this area, but must also deal with the whole precinct surrounding a property to ensure it is safe and clean for the staff of tenants.

"To retain our existing tenants and attract interest from young black professionals those who wish to be located close to their markets and that either work in the CBD or commute through the area it is essential that both the properties and the area itself are not allowed to deteriorate any further."

Cape Town's status as the last major city centre district to hold its own appears to be slipping as the decentralised trend gains pace.

This is reflected in total vacancies in the node, which have breached the 10% level for the first time since 1996, according to the SA Property Owners Association's statistics.

Wayne Horwitz, JHI Real Estate regional broker manager, says that there are now about six A-grade buildings with vacant space, as compared with 12 months ago when there was a concern over a perceived lack of premier office space in the city.

He says problems include lack of parking in the city and obsolete space in some of the older blocks that do not meet the needs of the information age.

The Durban city centre is faring a little better.

Yacoob Latiff, regional manager of Old Mutual Properties in Durban, says expected take-up of office space totalling 35000m² in the Durban CBD will substantially reduce availability of A and Bgrade premises.

"Inquiries, mainly from various state departments, underscore the fact that Durban's CBD is holding its own as a desirable office location."

Latiff says initiatives by the Business Improvement District, and by property owners of revitalised buildings such as Durban Bay House, are strengthening the appeal in the face of pressure coming from decentralised office nodes and shopping centres.

"New city-centre office lettings and renewals, worth R28m, accounted for more than half the value of the deals we concluded last year," he says.

"The total space in CBD lettings amounted to more than 14000m², with rentals ranging up to R55/m² for prime offices."

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