David Green, MD of commercial property brokers Pace Property Group, says the availability of quality office space is diminishing rapidly in Johannesburg’s northern areas of Bryanston, Fourways, Sunninghill and Lonehill. There will be a shortage of quality office space in the next year, he says.

At the same, time a residential property oversupply is looming in these areas.

"There have been scores of investor buyers (in the residential market) and there may not be sufficient numbers of tenants to satisfy the supply that we would expect to come on stream towards the second half of the year," says Green.

Green says that there is no sign of the residential property market slowing down in other popular residential nodes in Johannesburg.

Many sites in Fourways, Sunninghill and Lonehill, which were previously zoned for office developments, were rezoned for residential purposes — which has led to a shortage of zoned office sites.

Green says there has also been a substantial drop in office vacancies in these areas. He says Sunninghill has a total of 309000m² of office space available, of which only 8,7% is vacant. About a year ago, as much as 18% was vacant in the area.

Fourways has experienced a similar situation, with only 10,8% of the available 86000m² office space vacant. A year ago, 14% of office space there was vacant.

Although there have been reports from property commentators saying there are other areas in Johannesburg where there is still a major oversupply of offices, Green says it is important to keep in mind that much of the space available in certain of the office nodes is low grade, and will always remain vacant.

He says this vacant space cannot even be converted to residential units because it is not suitable. The vacant offices will remain "white elephants" even if the office property market starts booming again.

There is a shortage of A-grade office space in Johannesburg, and most of the new development will be tenant-driven and not done on a speculative basis. There are already new office buildings under construction in Johannesburg.

The Sandton central business district (CBD) has 1,174-million square metres of A- and B-grade office space and, Green says, another 50000m² is under construction there. "That is the largest amount of space being built in the country."

Fourways has 16000m² under construction.

The Cape Town CBD is also experiencing a similar trend with a shortage of offices because of large-scale conversions of office buildings to residential units.

Green says many of the remaining CBD buildings in Cape Town are being upgraded as office accommodation, and certain buildings are being turned into sectional-title office accommodation offered at a premium to market value due to their desirability on the part of smaller office users.

There is 13000m² of office space under construction in Cape Town’s CBD, while in Bellville about 9200m² is being built.

Property economist Francois Viruly, of Viruly Consulting, says that he would prefer to see the office property market in Johannesburg "moving upwards" first, before any more development takes place.

Viruly says that even if new office space is being filled, it is often as a result of companies shifting from one area to another part of Johannesburg, rather than new companies seeking premises.

"What we’ve done over the past decade fairly successfully is to cannibalise one node to create another," he says.

"We have to be very careful that we don’t carry on with that trend with a continuous oversupply in the market, with little scope for rental increases."

Green supports this view, saying history has shown that when new trends emerge in the property market, all players enter the race without taking into consideration what competitors are planning, often resulting in a situation of oversupply a few years down the line.

"Oversupply of a particular property commodity, be it commercial, industrial, retail or residential property, then takes approximately five years to normalise. If this is coupled with a rise in interest rates or a downturn in the economy, the effects are exacerbated."