“Industrial property was the great boom of 2006-07, leaving industrial rentals at the highest they have ever been,” says Eli Unterslak of Alliance Group.

Building material costs have risen sharply again in the second quarter of 2007 — industry experts said demand for commercial space was outstripping supply — and developers are having difficulty bringing new projects on stream.

Construction IndustryBuilding costs in the second quarter of 2007 rose by 29%. The index reflects the average building cost per square metre priced by building contractors.

It contains a combination of input costs and pricing which varies due to market conditions.

Retail property showed an increase in building costs of 39.5% in the second quarter — the latest available figures; office space by 26.2% and industrial space 13.9%.

Large construction companies are operating at full capacity with the World Cup stadiums, the Gautrain and the Coega development zone taking up all their activities. Some impact from higher interest rates is also filtering through and a shortage of materials is likely to continue for some years.

While the cost of materials is rising — cement is now being imported — contractors and service providers are increasing their rates at well above inflation levels and there is likely to be renewed pressure on building costs.

“With costs escalating at present rates, rentals for existing properties will be rising as they come up for renewal, said Craig Hallowes, the Association of Property Unit Trusts spokesperson. “We can’t bring a new office block on line in Sandton for under R120/m². Although I don’t think that we are yet at the point where rentals will be running at replacement cost, if the rent is currently R70/m² or R80/m², then I think that you can expect a 20% rise when renegotiation takes place. ”

In the past it would take about 12 months to construct an office block when property was available and rezoning took place quickly, but municipal councils have tightened up on rezoning applications.

In the case of retail developments, a larger number of sub-contractors are being used for items such as glass and aluminium and these specialists are in short supply.

In a twist to the rising building material costs, the Competition Commission has indicated that it will look at the building and construction sectors to assess if there are any anti-competitive practices — as well as bid-rigging, where rival companies decide beforehand which of them will win a tender.

 

Monday, 04 June 2007 02:00

Suburb to lose its seedy side

Lower Rosebank is to get a makeover in much the same way as the poorer parts of US cities such as New York, Washington and St Louis did.

Monday, 26 March 2007 02:00

Showroom opportunity

Evidence of the calibre of properties that Auction Alliance attracts to its monthly commercial renaissance multiple auctions is the Furniture City showroom in Randpark Extension 4.

First it was Rosebank, then Braamfontein, and now road diversions are to be introduced in Sandton from tomorrow to enable the Gautrain construction programme to go ahead.

Friday, 10 November 2006 02:00

Johannesburg Metro Editor

Gautrain winning consortium Bombela will pay a fine of R150m plus inflation if it does not have the first phase of the project completed in time for the 2010 Fifa World Cup.

Friday, 10 November 2006 02:00

Gautrain disruption due to begin

Johannesburg is to lose one of its main arterial roads next month when construction begins on the Gautrain’s Rosebank Station, situated between Jellicoe Avenue and Baker Street.

Tuesday, 15 August 2006 02:00

Property sector needs ’global brand’

There is overseas investor interest in SA’s commercial real estate market, and the adoption of the internationally accepted Real Estate Investment Trusts (Reits) structure by the local listed property sector could create opportunities to attract foreign investors.

Tuesday, 30 May 2006 02:00

Group Five avoids R54m penalty

CONSTRUCTION company Group Five says the court has dismissed an application by client Legacy Group to impose penalties of R54m for not completing the Michelangelo luxury apartment building in Sandton on time.

 

Aucor's commercial and industrial auction last Tuesday started off with the offer of a small retail centre in Benoni, and ended with the multimillion rand sale of a shopping complex in Sandton, while a short nostalgic interlude for auctioneer Eddie Winterstein featured in between.

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