‘To ‘To let’ let’ signs signs swinging swinging
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COMPANIES ARE STARTING to make do with less office space and putting expansion plans on hold, judging by the up-tick in office vacancies in some of South Africa’s prime business nodes. Sapoa’s latest office vacancy survey shows the percentage of empty offices in Sandton jumped to 5,7% in fourth quarter 2008, up from 3,2% 12 months earlier.
Sandton is SA’s second biggest office node after the Johannesburg CBD, with a total office supply of 1,3 million sq m. That’s more than the office space in Midrand, Rosebank and Parktown combined and nearly double that of Cape Town’s CBD, SA’s third biggest business district. Midrand, north of Jo’burg, which counts among SA’s top five office nodes in terms of size, saw vacancies increase from 4,4% to 7,6% in the year to fourth quarter 2008.
The same trend is noticeable in a number of Cape Town suburbs. At the V&A Waterfront, ranked on a par with Johannesburg’s Melrose Arch as SA’s most expensive corporate address, office vacancies increased to 4,9% in fourth quarter 2008, up from a negligible 0,3% a year earlier.
The amount of office space to let at mixed-use node Century City doubled over the same time, from 8,5% to 16,7%, while Claremont recorded a massive jump from 2,6% to 13%. Most office nodes in Durban and Pretoria also showed a year-on-year increase in vacancies, with Pretoria’s eastern suburbs reporting the most noticeable 12-month growth, up from 2,1% to 4%.
Rising office vacancies are good news for tenants, as landlords could become more negotiable about rentals. However, they’re bad news for commercial property investors, who may find themselves squeezed from two sides: softer rentals and falling property values.
Tony Bales, of property brokerage Bales Delaporte, says commercial property owners are already seeing significant downward pressure on values, with JSE-listed property companies starting to report lower values in their financial statements.