Increased take-up of A-grade commercial space in Sandton has resulted in significant upgrade and refurbishment activity of older office buildings.

According to Grant Kirchmann, Commercial Leasing Consultant for Investec Property Group, meeting the demand for A-grade commercial space through the refurbishment of older offices achieves returns superior to new office developments.

“The refurbishment of commercial property realises high rentals with smaller capital investment and simultaneously provides the opportunity to realise additional bulk, improve parking ratios and extract additional value,” said Kirchmann.

He sites as examples, 70 Grayston Drive which was recently refurbished, the extensive refurbishment of Fredman Towers to a premier-grade office building, the two buildings refurbished for Discovery Health’s occupancy and Werksmans modernised 5th Street premises in Sandown.

According to Kirchmann there are a number of older office buildings suitable for upgrade in Sandton. “Properties with superior visibility and the ability to increase parking facilities are most viable,” explained Kirchmann.

Currently older offices in Sandton achieve rentals ranging from approximately R58,00 to R65 per square metre, with A-grade obtaining, on average, R75 to R80 per square metre, with some exceeding R90 per square metre.

“C-grade space realising a -7% return can reach a 12% to 13% return after refurbishment. This represents positive movement of 20%,” Kirchmann pointed out.

The shortage of land in Sandton further increases the demand for the refurbishment of older buildings

Furthermore Kirchmann identified refurbishments for single tenant requirements in stand-alone offices of  4,000m2 to 5,000m2 as an area of opportunity in meeting the demand for A-grade office space in Sandton.

“The initiatives of the Sandton Central precinct, which prevent crime and urban decay, further enhance investment in Sandton through ensuring the sustainability of the area and its property values,” concluded Kirchmann.

ENDS

Issued on behalf of:                              

Investec Property Group
Grant Kirchmann
Tel. 011 286 7000/ 083 303 9668