New developments initiated now to meet the rapidly growing demand for office space will only come on stream, at the earliest, in two-and-a-half years’  time, at a high cost.

So points out Brian Azizollahoff, CEO of JSE listed property loan stock Redefine Income Fund, who explains that as existing office space is taken up, further development is required to meet the demand.

“The planning, obtaining of rezoning and other permissions, together with the actual construction of new office buildings results in an approximate two-and-a-half year development roll out, at best,” explained Azizollahoff.

“With construction costs escalating at approximately 30% per annum, development costs in the short to medium term could end up being about R15,000 per square metre, in contrast to a current cost of around R7,000 per square metre. As a result these buildings may demand rentals in excess of R120 per square metre,” he points out.

“Increased demand for commercial property is being experienced nationwide resulting from the steadily growing economy.  This has lead to the expansion of existing businesses and origination of new businesses and the effects are most evident in Gauteng, the financial heartland of South Africa,” explains Azizollahoff.

Furthermore limited development in the office sector over the last year or two years has also contributed to the shortage of prime office space.

Currently both Redefine’s Sandton and Bruma portfolios are fully occupied and vacancies in its Bryanston properties are at an all-time low.

Azizollahoff suggests that a more immediate and cost effective solution to filling this demand/supply gap is to recycle older buildings and upgrade lower-grade office buildings.  Rental can be contained since the developer does not require as large a revenue stream to achieve the same return on investment as a new development.

“This redevelopment can be achieved in a shorter timeframe at lower capital costs and, as a result, this is already creating an investment market for B-grade properties in prime office nodes,” said Azizollahoff.

Ends.

For further information, please contact:

Redefine Income Fund

Brian Azizollahoff   CEO
Tel.      011 283 0031
Cell      083 255 2351

Or

Marketing Concepts
Sandy Davey
Tel.      011 880 2213