‘To ‘To let’ let’ signs signs swing­ing swing­ing

Eco­nomic Eco­nomic slow­down slow­down hits hits busi­ness busi­ness growth growth

Finweek English Edition - - Openers - JOAN MULLER joanm@fin­week.co.za

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.

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