Decentralised competition and CBD

Posted On Wednesday, 08 August 2001 03:01 Published by
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JOHANNESBURG's central business district (CBD) office market faces yet another disincentive as rentals in nearby decentralised areas such as Rosebank and Parktown decline.

JOHANNESBURG's central business district (CBD) office market faces yet another disincentive as rentals in nearby decentralised areas such as Rosebank and Parktown decline, narrowing the historical gap between the two nodes.
Latest vacancy figures from the SA Association of Property Owners (Sapoa) show vacancies are growing in the decentralised office nodes of Johannesburg, with areas closer to the CBD suffering the most.
The narrowing of the rental gap between the CBD and decentralised nodes could trigger another wave of movement out of the CBD as people take advantage of lower rentals in offices better than those they occupy now. The Sapoa figures reflect for the first time vacancies in the Johannesburg decentralised areas exceeding an average of 10%.
B-grade offices in these nodes are under pressure as a result of a narrowing gap between B-grade offices and new A-grade offices in areas like Sunninghill. New A-grade office space has come under pressure and rents have declined dramatically, narrowing the gap between A- and B-grade office rentals, and spurring B-grade tenants to move to A-grade premises.
Now tenants in Rosebank Bgrade offices pay rentals closer to those asked for at new A-grade offices in Sunninghill, says property economist Francois Viruly.
'If you found yourself in this situation, what would you do?'
The logical answer is that many tenants in B-grade offices in Rosebank or Parktown will move to Agrade offices in Sunninghill. Rising vacancies in Rosebank and Parktown will push rentals down, closing the gap between these areas and the CBD and enticing those in the CBD to move as well.
Vacancies in Sandton and surrounding areas have risen to 11,2% from 7,1% nine months ago, and rentals in the area average R68/m². Office space covering 119000m² stands vacant in Sandton.
In Sunninghill, A-grade office space goes at an average of R60/m², while in Woodmead rents average R57/m². Rosebank B-grade office space costs R50/m² and vacancies in the area have risen to 14,3% from 11,3% nine months ago.
Parktown vacancies have increased to 17,3% from 6,6% nine months ago. A-grade office rents in the area average R51/m².
Johannesburg CBD A-grade office vacancies are 20,1% against 19% nine months ago, while rents average R40/m².
Viruly says the Sapoa figures show the Johannesburg CBD stabilising, and he feels the situation cannot get worse.
Meanwhile, Cape Town's CBD seems to be slipping, with vacancies up to 15,2% from 10% nine months ago.
Viruly says new developments in the decentralised areas of Johannesburg are worrying. 'If I was a developer I would rather be in the residential property market than the commercial property market.'

Publisher: Business Day
Source: Business Day

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