While office occupancy levels have stabilised in SA’s major cities, it could be a year or more before progress is made in mopping up the significant vacancies that have plagued the sector for close to a decade.
There has been an oversupply of office space because of rampant development in the mid-2000s. New developments driven by premium tenants have left A-and B-grade buildings vacant.
But things are slowly turning for the better, according to experts. Confidence in the economy and property investment gained some momentum at the end of 2017, which continued in February when Cyril Ramaphosa replaced Jacob Zuma as president, South African Property Owners Association (Sapoa) CEO Neil Gopal said at a recent media lunch.
Sapoa’s latest national office vacancy report showed the rate was 11.2% at the end of December. This was unchanged on the quarter before, but off the high of 11.8% recorded in the second quarter of 2017.
"Asking rental growth has slowed further over the past quarter, indicative of the low-growth environment coupled with an excess supply in the market," Sapoa said.
Erwin Rode, CEO of property research and consultation firm Rode & Associates, said most new offices that had come online in recent months were built for multinationals and other large corporations. "The pain will not end until vacancies come down substantially and this could take another year or more.
"We tend to see most activity coming from demand by very big companies. This work is handled by the largest listed property groups in the country. This is while demand for space from medium-sized companies remains relatively low."
Growthpoint Properties, the largest SA-based listed real estate company, recently completed a R3bn building in Gauteng’s most valuable commercial node, Sandton.
This is being rented out to medical aid group Discovery and served to centralise the company’s operations.
Meanwhile, Growthpoint’s rival, Redefine, has moved into Redefine Towers, a premium office in Rosebank, Gauteng.
Redefine is also well into the construction of Rosebank Link, designed to house small professional firms.
Rosebank is one of the busiest nodes in terms of construction in SA alongside Hatfield in Pretoria and parts of Centurion. Barrow Properties recently completed its Oxford & Glenhove office development in Rosebank.
Growthpoint announced this week that it would begin excavation for its premium-grade office development 144 Oxford, also in Rosebank.
With respect to Pretoria and its surrounds, a number of medium to small office developments are being planned, including Redefine’s Loftus Park in Arcadia.
Rebosis Property Fund has plans to move its head office to Forest Hill in Centurion, where it is constructing an office park.
Rode says while some of SA’s largest corporations want buildings that enhance their brand and give them iconic status, numerous medium-sized firms and partnerships have not made inquiries about new office availability for quite a few months.
"Another long-term trend is that the number of square metres per employee has also been shrinking over the past two decades.
"Hot-desking is definitely growing in importance, where organisations have staff that are out on the road often and do not need permanent desks," Rode said.
Paul Kollenberg of Growthpoint Properties said a popular choice for small businesses was shared office space, such as that found at Open in Sandton, in which Growthpoint had a stake.
The Atrium launched shared office spaces last week.