The transformation is under way in Sandton and Rosebank, two of the Gautrain’s hubs. While development activity in the city was previously characterised by urban sprawl, developers this time are 50 going higher and denser.
That’s in line with the City of Johannesburg’s densification policy, which has been refined in the city’s recently released Joburg 2040 Growth & Development Strategy.
The City is encouraging the development of a more compact city, calling for developers to go as high as 40 storeys on key routes in Sandton and up to 20 storeys in Rosebank.
Developers, financial institutions and JSE-listed property players are taking up the challenge. In fact, 170 000 m of new commercial development is either under construction or in the planning phase for Sandton and Rosebank alone. That accounts for around 25% of the current development pipeline across all SA office nodes, according to Old Mutual Property.
In Sandton, sectional title residential complexes are starting to make way for new, high-rise commercial buildings in the area bordering Rivonia Road, West Street, Katherine Street and Pretoria Avenue.
Alexander Forbes’s new 36 000 m head office was recently completed on Rivonia Road opposite the Gautrain station. Next door, a 30 000 m office tower for Ernst & Young is under construction, and a stone’s throw away, Barrow Properties’ 10-storey Katherine & West is taking shape.
Barrow Properties, in partnership with JSE-listed Capital Property Fund, recently bought two other sites in the block bordering on Rivonia and Katherine, which allows for 60 000 m of bulk development.
According to Barrow Properties director Paul Barrow, the project will probably comprise 10-15 storeys above ground and another five to six levels below ground, for parking.
Barrow says there’s no doubt Gautraindriven development will change the skyline of Sandton and Rosebank. But he believes the transition will be a positive one, particularly if developers, property investors and local planning authorities work together to follow the “new urbanism” design approach. This promotes a mixed-use, pedestrian-friendly environment where people “live, work and play”.
Barrow Properties has already submitted plans to create additional road infrastructure, boulevards and piazzas to link Rivonia Road, West Street, Katherine Street and Pretoria Avenue. That will certainly ease traffic congestion in the area, says Barrow.
A few kilometres away along Oxford Road in Rosebank, others are following suit. Standard Bank is investing more than R2bn to build a new 65000m², state-of-the-art office complex on the corner of Oxford Road and Bolton Avenue, diagonally across from the Gautrain station. The development will become Rosebank’s tallest building on completion in May. Standard Bank Rosebank comprises two towers, respectively 11 and nine storeys high, on top of five basement parking levels.
Investec Property, in a joint venture, recently acquired the mothballed Galleria site at the junction of Cradock, Biermann and Bath Avenues opposite The Firs. The plan is to invest more than R1bn to turn the site into a mixed-use development comprising three or four 10-storey buildings, including up to 33500m² of office, retail and, possibly, also up-market residential space.
The question arises whether developers and property investors betting on Gautrain-linked development opportunities are not creating an oversupply of stock, given the still high office vacancies of 10%-plus in many of SA’s commercial hubs. Old Mutual Property investment analyst Niel Harmse says latest vacancy and rental growth data suggests this is not the case.
Despite the fact that the level of construction activity around the Gautrain nodes is double that of all other SA office nodes when measured as a percentage of existing supply (7,2% versus 3,8%), the vacancy rates in Gautrain nodes are lower than the rest of SA: 8,7% compared with 11%. In addition, 58% of all Gautrain-driven developments under way are let in advance, against only 40% in other nodes, reflecting strong demand for space in these areas.
Investors in Gautrain nodes are also seeing higher rental growth than their counterparts in the rest of SA: 3,4% in the fourth quarter versus a drop of 2,3% in other nodes (see graph). Harmse says of all the Gautrain nodes, only Centurion near Pretoria could be considered oversupplied. That’s because the area experienced a speculative development boom that has seen vacancies climb from around 10% to more than 15% over the past year.
Source: FM
