City recorded highest number of empty offices in the country
The eThekwini metro holds the country’s highest office vacancy rate, with the Durban inner-city continuing to be the main driver of rising vacancies
Latest figures from the South African Property Owners Association (Sapoa) show eThekwini’s office vacancy rate to be 14.1% after the first three months of this year – an increase on the previous quarter’s 12.1%.
During the last three months of 2017, eThekwini held the second highest office vacancy rate in the country, with Durban CBD’s 18.5% rate the main contributor. However, from January to April this year, the inner-city’s vacancy rate of 21.1% pushed the region to record the highest vacancy rate.
According to the latest figures, The City of Johannesburg posted the second highest vacancy rate among the main metros at 12.5%, while the national rate for the first quarter of 2018 was 11.5% – slightly lower than the 12-year high of 11.8% recorded in mid-2017.
“Notwithstanding the slight improvement off its vacancy rate high, office sector recovery remains fragile with the latest economic growth and employment data still suggesting a low growth environment,” the Sapoa report says. “Given the trend of economic growth and structural growth constraints, it is becoming increasingly hard to imagine the national office vacancy rate returning to mid-single digits within the next three years.”
However, Sapoa believes renewed business optimism amid the changing political landscape could unlock capital investment in the sector, which could drive employment growth and demand for office space.
According to the report, 94% of the country’s development activity continues to be concentrated in Gauteng office nodes. At 26.3%, Sandton has the most development activity under way, followed by Rosebank and Waterfall at 19% and 7.9% respectively.
Behind these nodes is Durban’s Umhlanga/La Lucia with 9.6% and the Cape Town CBD at 6.8%.
Looking at vacancy rates by node and comparing these to the amount of development, the report also lists the nodes most likely to come under near-term rental pressure. The Umhlanga/La Lucia node is in fourth position.
“It’s important to form a view of demand alongside the supply picture. While some nodes may have a high level of development relative to others, these might be mostly pre-let, which will not impact as negatively on rentals.”
In the Umhlanga/La Lucia node, completed developments have a vacancy rate of 7.9% while developments under construction face possibly vacancy levels of 2.8%.
Despite having the highest office vacancy rates, Chas Everitt International commercial manager Denis Davidson says Durban is experiencing high demand for office space, heightened developer interest and a strong development pipeline “set to transform the market”.
The city’s total office stock equates to about 1.6 million m², and this is expected to grow by about 9% to just over 1.7 million m² over the next 18 to 24 months, Davidson says, adding Umhlanga will receive the biggest percentage of the development pipeline. “Umhlanga will be home to four developments which are attracting multinational and blue chip clients.
The upper quadrant of Ridgeside (part of Umhlanga Ridge) is expanding to include two new developments, specifically a KPMG building and one yet to be named in Ncondo Place. Both will be available for occupancy this year and next year, respectively.”
Davidson says Parkside is also attracting high developer interest.
In total, Durban’s office stock will increase by 27000m² by the end of this year and by next year, developments will almost quadruple in number as a further 108 000m² of office stock is added to the market.