Redefine lambasts Joburg ‘ instability ’
JSE-listed landlord Redefine Properties says political instability in the City of Joburg is bad for business, with service delivery levels worsening while rates and taxes continue to climb.
This has been especially taxing for the property sector, which has had to shoulder rising operational costs in a constrained economic environment and increased load-shedding.
COO Leon Kok told Business Day that the changes in mayoral leadership were not good for service delivery, which continued to worsen as rates and taxes keep rising.
The city has had nine mayors since 2016, with the mayoral chain changing hands no less than five times since the last local government elections in 2021.
Kabelo Gwamanda of the minority party Al Jama-ah is the latest to be installed as mayor, replacing his colleague Thapelo Amad, who resigned in April after being in the position for less than 90 days.
Redefine owns a diversified portfolio of 259 retail, industrial and office properties in SA. About 73% of its properties are located in Gauteng, with the bulk of the portfolio situated in Johannesburg. “We are concerned about rising operating costs and failing infrastructure that don’t match service delivery – in the long term, we think this would negatively affect our operations,” said Kok.
Kok cited the collapse of parts of Hendrik Potgieter Road in the West Rand in December following heavy floods as an example of poor service delivery and failing infrastructure despite higher rates and taxes that landlords continue to pay.
He said there had been no communication on when the road would be repaired, adding that increased poor service delivery and failing infrastructure was very concerning.
“Though we haven’t seen a decline in footfall and retail sales at Kwena Square we are concerned about operating in an environment where infrastructure is failing and there is no urgency to fix the situation.” Redefine’s Kwena square is situated near the road.
Redefine is not alone in bemoaning poor service delivery and failing infrastructure. Many property landlords report fast-rising rates and taxes, which squeeze their margins, while service delivery levels were declining.
According to the SA Property Owners Association’s (Sapoa)
2022 Infrastructure Report, municipal charges make up the largest percentage of overall operating costs, accounting for 61%, and 25.7% of gross income by the end of June.
Rates remained the fastest growing of the municipal charges, accounting for 10.4% of total income in June 2022.
Redefine’s portfolio is valued at R94.1bn, of which SA accounts for R59.4bn and Poland R34.7bn. Its flagship SA shopping centres include Centurion Mall, East Rand Mall, Blue Route Mall and Wembley Square.
The company said upper Rosebank remains an area in demand, with large corporates’ interest continuing to provide development opportunities at the Oxford Park precinct.
“Larger corporates are reviewing their current office requirements and approaching landlords well before the end of their lease end date to tie up their office space at the current low market rentals. Where their current accommodation does not suit their needs, they are committing to future developments to coincide with the expiry of their lease agreements,” Redefine said.
For the six-month period ended-February, tenant retention rate by gross monthly rental rose to 96.6% from 95.2% with over 160,000m² of space let across the SA portfolio.
To deal with power cuts, the company will roll out 13MW in solar power in the rest of the 2023 financial year to provide reliable alternative energy to attract tenants.