Money& investing
Analysis and coverage of SA's top companies and investments - the guide to where your money should be office wasteland A dire level of office vacancies means a protracted recovery for former big daddy Redefine
The SA
ý If anyone needed proof that remote working is wiping out commercial property owners’ profits, they need look no further than results released this week by Redefine Properties, one of SA largest office landlords.
The tally of empty space in Redefine’s portfolio of more than 100 office buildings had risen to a record high of 14.6% by February, up from 12.3% a year earlier and 13.8% in August.
The vacancies in Redefine’s older, secondary buildings jumped to an unprecedented 24%.
Of course, rising vacancies in the office portfolio is not the only factor that contributed to the company’s 22% drop in distributable income for the six months to February (year on year).
Its R63bn SA real estate portfolio is well diversified among retail (39% by value), office (37%) and industrial/logistics buildings (20%), in addition to a R12.3bn exposure to Poland. And few real estate sectors have emerged unscathed from lockdowns and trading restrictions.
But the metrics in Redefine’s office portfolio are looking particularly grim. The office vacancy rate of 14.6% is now more than double the 7.1% reported for its industrial portfolio and nearly triple the 5.5% for shopping centres.
Rentals in the office portfolio have also been under more pressure than those in its retail and industrial portfolios.
For instance, rental rates achieved for office leases that came up for renewal in the sixmonth period were down an average 24.5%. That compares to industrial and retail renewal reversions of –4.4% and –13.6% respectively.
Redefine CEO Andrew König says the office market is under significantly more pressure than other sectors.
Some of the company’s older office buildings in less-than-prime locations are standing completely empty. However, he says the bulk (88%) of Redefine’s office portfolio is made up of newer A- and premium-grade buildings in prime business nodes such as Sandton and Rosebank in Joburg, and
Cape Town’s foreshore and city centre, which are proving relative