‘Green buildings can deliver unexpected savings’ Gains in the office sector will be driven by economic improvements

APART from the obvious environmental benefits, the advantages of sustainable building design, construction and operation are becoming increasingly evident in all areas of business, most notably the bottom line.

“Nedbank’s position as a South African leader in terms of green building finance and occupation has delivered immeasurable benefits for the bank and its stakeholders, many of which involve areas of sustainability other than the environment,” said Ken Reynolds, Gauteng regional executive for Nedbank Corporate Property Finance.

“Since September 2010, when Nedbank’s phase II head office building in Sandton was recognised by the Green Building Council of SA as the country’s first ‘as built’ Green Star rated building, we have steadily grown our involvement in, and commitment to, green buildings across SA, mainly because the numerous and significant benefits of green buildings have so quickly become apparent to us.”

Apart from the obvious positive environmental contribution green buildings could make in terms of energy efficiency, reduced carbon emissions and lower utilisation of scarce natural resources, Mr Reynolds said Nedbank had experienced many other, often less obvious, benefits that made the case for green buildings even more compelling.

“It’s becoming evident to us that, when it comes to the potential for economic returns that can be unlocked for any business through a green building commitment, we’re really just scratching the surface in SA,” he said.

“But even so, it is widely accepted that a property built or retrofitted using truly green design principles, has the potential to deliver reduced operating costs of about 30% per year.” IN LIGHT of l ow economic growth, how is the office sector of property performing?

Weak economic growth has seen the office market muddling along, with overall vacancies still high, particularly for older stock and secondary areas, with rental growth stagnating in large cities.

According to the Jones Lang Lasalle Johannesburg market review, increasing cost pressures in the current stagnant economic environment continue to burden the South African business community and the already overindebted consumers.

Jones Lang Lasalle head of research Ndibu Motaung says the gap between prime and secondary property is widening.

“Often defined by location,

It is disappointing that despite the abundance of talent, women on balance have been slow to break into corporate SA. I do believe this will change in time.

I have learnt so much from him. He taught me to trust my instincts, the benefits of gearing, that what is expensive today is cheap tomorrow, to keep my eye on the cash flow and always deal on a current balance sheet. He also instilled in me a strong sense of duty and the need to give back to society and the community in one way or another.

By working very hard. I love what I do. There is no doubt that my legal training has equipped me to discharge my duties as a director and handle myself in the boardroom. rentals for prime office, industrial and retail property in the country’s major metropolis have held firm. This is particularly true of

I do not think the duties are any different to those of a chairman of any other listed company. They include guiding the strategy and future direction of the company, ensuring the board is effective in implementing strategy and decisions, planning the agendas of board meetings, ensuring that the board receives timely and relevant information for board meetings, presiding at and running board meetings, doing the same for shareholder meetings, monitoring the performance and contribution of each board member, directing the nomination of directors and composition of the board and ensuring effective communication with stakeholders.

Because we are listed on the JSE with institutional investors we play according to the rules of that playing field. We regard our business as entrepreneur rather than family driven. We derive our rental income from residential, retail, office and industrial premises. We strive to constantly improve the quality of our properties and to provide good, clean, safe and affordable accommodation in well-located areas while still delivering growth in distributions for our shareholders. new facilities where tenants are able to benefit from utilisation efficiencies and subsequently able to absorb premium rentals,” Ms Motaung says.

Asked if the office sector is likely to see an improvement soon, she says the sector’s improvements will be driven by gains in the economy and large take-up of current office space.

But all is not gloom and doom for the office sector.

Despite lacklustre growth, prime nodes such as Sandton, Illovo, Rosebank in Johannesburg, the V&A Waterfront in Cape Town and Umhlanga near Durban are doing well.

“There is good take-up of newly committed office space. Developers are also waiting for econom-

I like to have regard to the views of my directors. I see little ic improvements before committing to more projects. Efficiencies are the key drivers of corporate office markets through office consolidation,” Ms Motaung says.

She says while market conditions could generally be described as being at the “bottom of the cycle, its resilience is remarkable, given the lacklustre state of the economy (both local and international) coupled with alarming increases in the actual costs of property occupation, most notably municipal charges and electricity”. With regard to growth in the office sector, Ms Motaung says improvement in the global economy and SA becoming a production-driven economy could help the market.

“However, the

protracted striking season is causing further damage to the country which will result in an uncompetitive market,” she says.

With new office developments around Gautrain stations now the flavour of the month, she says most cranes are concentrated around Sandton and Rosebank.

It is evident that Gautrain infrastructure is still driving location choice. Ms Motaung says the biggest threat facing the commercial property market is the increasing cost of occupancy. Occupiers are focused on affordability, while investors are focused on yield.

“It is the balance between these two factors that gives rise to achievable market rentals.

“Impose above-inflationary increases in municipal rates and services tariffs, together with the ever increasing range of ‘stealth taxes’, and the result has to be strong downward pressure on net rentals,” Ms Motaung says.

As tenants grapple with affordability, the margin for net rental increases diminishes.

Without net rental growth, development viability is arrested and investment in the sector becomes less appealing.

Increased commitment to development projects is providing occupiers a wider choice of office buildings options at contained rental levels, particularly in the prime areas.

According to the Jones Lang Lasalle Johannesburg market review, the demand in the Johan- nesburg office market continues to be driven by further consolidation of larger companies into new buildings, particularly in prime areas.

The increased commitment to nonspeculative development in the past year by blue chip corporate occupiers is further confirmation of demand for highquality and efficient office facilities in prime nodes.

Prime buildings in prime nodes continue to appeal to a number of tenants as more highquality buildings are added to the market.

This is further shown by the planned relocation by Webber Wentzel and petrochemical giant, Sasol to new buildings in Sandton due to corporate consolidation.