Slow economy limits demand for office space

THE SUBDUED economic climate continues to affect the office leasing market, with limited demand for new offices in the third quarter of the year, according to Dave Russell, a director of Baker Street Properties.

He said most nodes were not showing improvements in vacancies and new business growth that should translate to demand for offices was still limited.

“The third quarter Sapoa (South African Property Owners Association) office vacancy survey confirms that Cape Town’s CBD secondary buildings in particular are contributing to rising vacancies, with B grade reaching 13.7 percent and C grade 26.9 percent. The overall vacancy for all grades in the CBD is now 14.7 percent.

The new stock scheduled to come on stream in the next few months would further add to escalating vacancies.

“In the southern suburbs vacancies were reduced, with Claremont moving from 21.5 percent to 11.3 percent as a result of a large take up of office space by a call centre.

“In the Rondebosch/Newlands node there was a slight reduction to 5.3 percent from 5.9 percent in the previous quarter and in the northern suburbs node of Bellville, vacancies increased from 8 percent to 9.6 percent.

“As new developments were completed in Century City and the V&A Waterfront, there has been a marginal increase in vacancies in each of these nodes to 5.9 percent and 3.7 percent.”

He said during the past quarter the 18 000m² Allan Gray building had been completed in the V&A Waterfront, and Bowman Gilfillan occupied 10 000m² of new office space at 22 Bree Street in the Cape Town CBD. In Century City, the 5 800m² Park Lane precinct had reached completion and a further 7 000m² would be completed by the last quarter of the year, when the Business Centre and No 3 Bridgeways come on stream.

Overall Cape Town vacancies this quarter increased to 10.4 percent from 9.8 percent in the second quarter.

The bulk of these vacancies were in the secondary office market, where some space had been vacant for long periods and showed little chance of being leased, as some landlords continued to pitch their rentals above market expectations.

Russell said: “The economy remains subdued with a minimum of new jobs being created. This is expected to keep office demand low, driven mainly by corporate consolidations and a marginal take up of quality office space. This will leave secondary buildings with large vacancies, particularly in the CBD.”

Call 021 461 1660 or see www.baker-street.co.za.