Saturday, July 21

Office sector recovery fragile

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City of Cape Town shows slight improvement, but Durban and Joburg post highest vacancy rates in the big metros

By Bonny Fourie
Although just under the 12-year high of 11.8% in mid-2017, the latest figures from the South African Property Owners Association (Sapoa) show the national vacancy rate to be 11.5%, which is 0.3% higher than the previous quarter.

In the City of Cape Town, however, the vacancy rate is only 6.9%, or a 0.1% improvement from the last quarter of 2017.

The highest vacancy rate for the January to March period among the country’s five largest metros was recorded by the eThekwini Municipality at 14.1%. The Durban inner-city continues to be the main driver of the overall vacancy level within the metro and ended the last quarter at 21.1%, the Sapoa report says. At 12.5%, the City of Johannesburg posted the second highest vacancy rate among the major metros.

“Notwithstanding the slight improvement off its recent vacancy rate high, the office sector recovery remains fragile with the latest economic growth and employment data still suggesting a low growth environment,” the report says.

“Given the current 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, therefore, the demand for office space. In Cape Town, a number of new office developments – or mixed-use developments incorporating office space – are already underway, or will soon be. 

Baker Street Properties’ Dave Russel says those in the city’s main commercial nodes will continue the focus on lifestyle and mixed-use properties. “In line with the City of Cape Town’s socio-economic development plan on densification, developers are focusing on mixed-use property solutions evident in new sectional title apartment, office and retail offerings.”

In a recent report, Russell says the new developments planned for 2018 include:

● Cape Town CBD: The Ducat Towers, 35 on Lower Long, 117 on Strand. 

● Woodstock: The Iron Works, WEX 1, The Aspeling. 

● Southern Suburbs: Werdmuller Centre, Draper on Main, Old Marshall House. ● Century City: Sable Park, Manhattan Corner, The Axis. 

● Northern Suburbs: Danena Office Park, Quarry Hill. According to Sapoa, 94% of the country’s development activity continues to be concentrated in Gauteng office nodes. 

At 26.3%, Sandton has the most development activity underway, followed by Rosebank and Waterfall at 19% and 7.9% respectively. Behind these nodes is Durban’s Umhlanga with 9.6% and Cape Town CBD at 6.8%.

The eighth highest development activity by node is Century City, with 3% of the national total. By looking at current vacancy rates by node and comparing these to the amount of new development, the report also lists the nodes most likely to come under near-term rental pressure.

Claremont, the CBD, and Central City are on the list in positions six, seven, and eight. This list is topped by Rosebank, Waterfall, Sandton, Umhlanga/La Lucia and Midrand. 

“On the other side of the pressure spectrum, popular nodes such as the V&A Waterfront, Rondebosch/Newlands and the Central Node – Pinelands and the Black River parkway precinct – all have a critical mass of large, longterm occupiers and limited opportunities for greenfield developments which should underpin short- to medium-term occupancy levels and rental growth.” 

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