SAPOA 2001-1 Market comments

Posted On Sunday, 01 July 2001 02:00 Published by eProp Commercial Property News
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The following is a short synopsis of some of the trends and factors influencing the property market in the CBDs of Gauteng and its decentralised suburbs. This summary should shed some light on the reasons for the rate of office vacancy. 
Panellists generally agree that the recent spate of speculative development has come to a close as evidence of some buildings that have long been completed it becomes increasingly apparent that the market is oversupplied. 

Sapoa CEO Neil Gopal· The marginal drop of vacancies in the CBD last quarter can be attributed in part to the Gauteng premier's taking occupation in the Goldfields building.
· CBD tenants are still essentially small business operators and owner-occupiers such as Old Mutual and banks such as FNB and Nedbank.
· A-grade rentals as at December 2000 stood between R19.00/ m2 and R38.00/ m2, and R15.00-R30.00/m2 for B-grade.
· The prime vacancy rate as at December 2000 was 20.42% out of a total stock of 1,723,806m2.

BRAAMFONTEIN
· The lack of A-grade space in Braamfontein is constraining the steady demand for good quality rental & purchase space in the node.
· There is a lot of moth-balling of C-grade buildings, however, there is a trend to re-furbish older buildings occupied by existing tenants.
· A-grade rentals as at December 2000 stood between R23.00/ m2 and R50.00/ m2, and R18.00-R31.00/m2 for B-grade.
· The prime vacancy rate as at December 2000 was 11.99% of 427,788m2 .
· The on-going re-location of Transnet to the Carlton will increase vacancies in the short term.

BEDFORDVIEW/ BRUMA
· Bedforview/ Bruma is growing as an office node, primarily because of its good access, competitive rentals and space available for development.
· Demand is fairly high, and is borne out by the low vacancies. More activity should arise from the increase in retail facilities in the area.
· A-grade rentals as at December 2000 stood between R42.00/ m2 and R65.00/ m2, and R25.00-R48.00/m2 for B-grade.
· The prime vacancy rate as at December 2000 was 5.50% of a total stock of 251,680m².

BRYANSTON
· There is a tremendous amount of supply in Bryanston; the total stock currently sits at 181,783m2.
· The 75000m2 development of Didata IT City over the next two years is expected to increase the stock to just over 250 000m2
· As a result, rentals are falling and the new supply should continue this trend, at least in the short-term.
· One expected spin-off from the Didata development is that smaller operators within the IT industry may follow-suit and stimulate demand in the node. And all largely depending on the performance of the IT industry within the next couple of years.
· A-grade rentals as at December 2000 were standing at between R52.00/ m2 and R65.00/ m2, and around R49.00/m2 for B-grade.
· The prime vacancy rate as at December 2000 was 5.53% of a total stock of 181,783 m2 .

CONSTANTIA KLOOF BASIN
· A small but vibrant local office market, there is high demand for smaller premises by small business, with rentals usually at around the R50.00/m² mark.
· At a the regional level, MTN's proposed new offices should bring more activity into the node.
· Development in the node, contrary to the prevailing market trend in the northern suburbs, is demand-led and essentially pre-let. Examples include the 700m² Croton building by Investec, Abland's Constantia View.
· A-grade rentals as at December 2000 were between R46.00/m2 and R51.00/ m² Some B-grade space is going for R60.00/m2, which is quite high by industry standards. This can be attributed in part to the type of building materials used.
· The prime vacancy rate as at December 2000 was 2.12% of a total stock of 54,870m2 or 1,165m2.

HOUGHTON/ KILLARNEY
· A well tenanted node with low vacancies and a fair amount of demand. The node generally locates small private firms such as lawyers and accountants. Much of the development is tenant-driven.
· A-grade rentals as at December 2000 were between R65.00/ m2 and R72.00/ m2.
· The prime vacancy rate as at December 2000 was 4.34% of 70,291m2

HYDE PARK/ DUNKELD
· Demand for space has slowed due to good take-up, especially along the Central Avenue Strip, which is now fully let. New developments are largely tenant-driven.
· A-grade rentals as at December 2000 stood between R60.00/ m2 and R62.00/ m².
· The prime vacancy rate as at December 2000 was 7.70% of 76,505m²

ILLOVO
· The Illovo Boulevard is a favoured location for financial service institutions such as Chase.
· Take-up has been very good, with rentals reaching the R80.00/ m2 mark. New developments are largely tenant-driven.
· A-grade rentals as at December 2000 stood between R50.00/ m² and R80.00/ m².
· The prime vacancy rate as at December 2000 was 15.06% of a total stock of 79,501m² or 11,973m²

MELROSE/ WAVERLEY
· Good access and the presence of blue chip tenants should transform Melrose Waverly into a financial services location in its own right.
· The Melrose Arch development is expected to attract international tenants, specifically because of its advanced IT backbone.
· Major tenants in the node include Ernst & Young in the Wanderers building and Arthur Andersen at Melrose Arch.
· A-grade rentals as at December 2000 stood at R62.00/ m2. At Melrose Arch, rentals were estimated at a premium R120.00/m2
· The prime vacancy rate as at December 2000 was 5.12% of a total stock of 19,518m2.

MIDRAND
· Midrand still suffers from spill-over commuter traffic between Sandton and Pretoria. Access within the node itself is generally good.
· Historically a light industrial node, Midrand has been seeing the development of stand-alone offices. This is in contrast to offices being just a component within an industrial development.
· A-grade rentals as at December 2000 were between R39.50/ m2 and R52.60/ m2, and R30.00-R43.50/m2 for B-grade.
· The prime vacancy rate as at December 2000 was 7.02% of a total stock of 232,699m2.
MILPARK
· Milpark is traditionally a media and film node, however there is a fair amount of multi-tenanted space along Empire road, including among others, ABSA and Auto and General.
· An interesting development is for traditionally non-property institutions to become involved in developments. RAU has developed McDonald's on the corner of DF Malan and Kingsway.
· There is an additional shopping complex development - Campus Square - that is to include offices.
· Not much rental movement in exists this node. A-grade rentals as at December 2000 were between R44.00/ m2 and R47.00/ m2, and R28.00-R45.00/m2 for B-grade.
· The prime vacancy rate as at December 2000 was 8.81% of a total stock of 92,650m2 .

PARKTOWN
· Lack of proactive property management has been blamed for the decline of many of the buildings in Parktown.
· On the other hand, the age of many of the assets make it difficult to make the necessary technological up-grades, e.g. re-wiring and partitioning.
· It is speculated that rentals may drop as some leases come to a close this quarter.
· A-grade rentals as at December 2000 were between R43.00/ m² and R60.00/ m², and R30.00-R50.00/m² for B-grade.
· The prime vacancy rate as at December 2000 was 9.57% of a total stock of 291,407m² or 27,878m².

RANDBURG
· The activity on the periphery of Sandton is having a positive effect on the node.
· There is a lot of C-grade stock present in the node, which some landlords are up-grading for existing tenants.
· A-grade rentals as at December 2000 were between R27.00/ m² and R50.57/ m², and R25.00-R45.00/m² for B-grade.
· The prime vacancy rate as at December 2000 was 12.43% of a total stock of 421,607m² .

RIVONIA
· The two-storey office blocks along this Rivonia Boulevard are proving to be quite popular, fetching rentals of approximately R 60.00 /m². Demand is moderate and slowly picking up.
· A-grade rentals as at December 2000 stood between R45.00/ m² and R65.00/ m², and R35.00-R48.00/m² for B-grade.
· The prime vacancy rate as at December 2000 was 9.90% of a total office stock of 260,056m².

ROSEBANK
· There is not a lot of new office development happening in the Rosebank node, mainly due to the lack of available sites. But some of the B-grade buildings will be undergoing refurbishment.
· Rosebank has developed into a favoured location the media, entertainment and advertising industry. Johnnic Publishing has occupied the old TML headquarters on Bath Avenue.
· A-grade rentals as at December 2000 stood between R55.00/ m² and R80.00/ m², and R40.00-R65.00/m² for B-grade.
· The prime vacancy rate as at December 2000 was 14.92% of a total office stock of 283,532m², or 42,299m².

SANDTON
· The Sandton CBD is still popular, with a lot of the financial services companies such as RMB, Nedcor and Investec electing to locate in close proximity to the JSE
· Some landlords are in up-grading their B-grade buildings for high calibre tenants; the Werksmens re-location from Parktown is one such example.
· There is still a lot of supply on the periphery of the CBD, thus new development tends to be tenant-driven.
· Rentals as at December 2000 stood between R45.00/ m² and R80.00/ m² for A-grade, and R35.00 - R50.00/ m² for B-grade.
· The vacancy rate as at December 2000 was 8.24% or 63,757m² of a total office stock of 838,062m².

SUNNINGHILL
· Traffic is still a major issue in Sunninghill. Commuter traffic headed for Sandton, Pretoria and Midrand is especially problematic at peak hours.
· Many developments, many of which were speculative, are pending completion, which should add to the already substantial office stock. As a result, vacancies are high

WOODMEAD
· The new African Life building is nearing completion and occupation should cause a substantial drop in vacancies during the coming quarter.
· Rentals for A-grade space are currently standing between R50.00/m² and R72.00/m².
· The vacancy rate as at December 2000 was 5.32% or 26,825m² of a total office stock of 503,942m².

ADDITIONAL ISSUESRegarding the question whether to include C-grade buildings in the survey.The contention is made that C-grade buildings do not meet the necessary demands for prestige associated with all the technological and architectural trimmings required by tenants.Even though the market is not always tenant-driven, the requirements of a tenant are always taken into consideration in the leasing of space. Therefore, the lack of demand for C-grade space essentially dictates Brokers and Property Managers unwillingness to deal with it.On the other hand, C-grade space does represent a significant proportion of existing stock, especially in older nodes such as Randburg and the CBD. This potentially serves to confuse the term 'Available Stock' in the survey by skewing the figures.As a panel, it is generally conceded that the purpose of the survey should essentially delimit the sampling and scope of the survey. In effect, because the survey is intended primarily to inform a 'standards-conscious' public (and industry) about trend movements in competitive office space in the market and because of the logistic and capacity constraints on the panel, it seems more prudent to leave out C-grade stock.However, because of the undeniable preponderance of this class of stock, and because of recent moves in the market to re-furbish and re-develop older buildings, it is agreed that panellists - especially in concerned nodes - will monitor such developments. This is with the view of adding up-graded stock to the appropriate classes of office space.Regarding the definition of 'pre-let' and 'vacant' under New DevelopmentsIn order to clear up misunderstanding when differentiating between tenant-driven developments, and those that reach completion before being let. The following is submitted.It is agreed that those developments that are tenant-driven will remain under the 'pre-let' column, while other developments will be classified under 'vacant'.This will also help to serve as an industry barometer of sorts, regarding speculative development.



Last modified on Tuesday, 10 June 2014 16:29

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