OLD Mutual Properties MD Ian Watt has criticised property services company Rode for what he says is an over-optimistic view on the prospects of the office property market in its first quarter property market report. He says vacancies are generally at an all-time high.

Watt's scathing attack was carried in a letter published in the latest Rode report. 'I am most perturbed by your recent report stating that the office market in SA is still strong,' says Watt. 'I suggest we stop fooling ourselves and start being realistic.'

He was responding to Rode's view that 'contrary to popular belief, our tracking of office demand in decentralised nodes shows that the office market is still fundamentally strong. Our analysis shows that the healthy take-up of office space does not warrant the big alarm bells that have gone off.'

The report cited a strong take-up trend in decentralised nodes, and said that demand was the most crucial indicator in determining the health of the office market. It mentioned a take-up of 83000m² a quarter in decentralised nodes of Johannesburg, shown in the SA Property Owners' Association figures since 1999. In view of this takeup, Rode said Johannesburg's decentralised vacancies of about 497000m² would be wiped out within six quarters.

Watt says: 'We obviously must be looking at different information ,' and that vacancies in the office market are at an all-time high. 'I find it hard to believe that we can expect 83000m² a quarter office take-up in decentralised Johannesburg.

'Who are these firms starting up, or is the next wave of decentralisation taking place? The growth you talk about seems to be a case of reshuffling the chairs.'

But Rode is sticking to its view that the market is fundamentally strong. 'We regard net take-up not the rearrangement of the Titanic deck chairs as the best indicator of a property market's inherent health,' says Rode's Dirk de Vynck.

Vacancies are the second best indicator, he says, and they result from over-enthusiastic developments by developers and banks rather than a lack of sustainable take-up. 'We see the oversupply situation in Johannesburg decentralised areas as a cyclical phenomenon and expect it to normalise in about two years.'

The forecast assumes a slowdown in new office developments and sustained economic growth.

StatsSA data shows that completion of office buildings on the Witwatersrand in the first two months of this year fell substantially compared to the same period last year, says De Vynck.

Meanwhile, Rode's view has been questioned broadly in the property industry. JHI Real Estate senior researcher Mark Schneider, says a quarter to quarter take-up trend could be misleading when used to make a future projection. He used an 11-year model, looking at the period between 1990 and 2000, and concluded that the office market is in a vicious cycle, with supply outstripping demand by an average of 60%. He says this situation will persist as long as a lax planning policy and speculative approach to development continues.