Office vacancies keep rising in some key nodes.

Posted On Wednesday, 30 October 2002 10:01 Published by
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However, Sapoa figures show that this is mainly attributable to oversupply.

OFFICE vacancies continue to rise in some key nodes across the country, but investors can take comfort from an analysis that shows the trend is more a result of supply than demand factors.

SA Property Owners' Association (Sapoa) figures show demand has remained healthy, growing strongly in some areas; the high number of vacancies is mainly a result of a supply outstripping demand. This is more so in popular decentralised office nodes that have been deluged with speculative development.

Property economist Francois Viruly says the figures suggest that the Cape Town and Johannesburg office markets are still suffering the effect of oversupply.

The Sapoa figures show vacancies in Sandton and surrounding areas rising in the three months ended September to 16,6% from 15%; Rosebank's are up to 17,5% from 15,7%. Sandton's vacant A grade space is up to 152160m² from 122000m² in September last year.

Viruly says there is evidence that building activity particularly speculative development is declining in oversupplied areas.

The area under development in Johannesburg's decentralised areas declined to 150000m² in September from 450000m² a year earlier.

Viruly says it is important to ascertain whether vacancies are driven by supply or demand. An oversupplied situation is often rectified by market forces, such as a decline in building activity resulting in demand catching up with supply.

'However, vacancies caused by a decline in demand can have more serious long-term implications which are difficult to redress,' says Viruly.

This is especially true if the decline in demand is caused by perceptions of urban degeneration, he says. Buildings that stand empty for long periods suffer physical and economic obsolescence, which has a domino effect on the urban environment, and this in turn causes a further decline in demand.

There is growing evidence that the A grade components of SA's central business district office markets are stabilising. 'The challenge for city authorities will now be to attract new users to these buildings and to avoid a mere shift of tenants from one building to another,' he says.

The deterioration in market conditions at the lower end of the property market could, if not handled well, affect the success of revitalisation programmes.

Policymakers must focus on spatial development frameworks that emphasise the synergies between property market components, he says.

Publisher: Business Day
Source: Business Day

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