Don’t demolish Joburg’s old buildings, refurbish them and reap the rewards
A refurbished building in Johannesburg’s city centre has shot up in value from R1m to more than R6m in just five years‚ showing the potential for investors and development companies to help revitalise the city.
The spotlight is on old buildings in the city centre after last week’s fire at the Bank of Lisbon building‚ which was occupied by government departments‚ in which three firefighters lost their lives. Officials are now investigating how to resolve non-compliance and prevent similar disasters in future.
Property data experts Lightstone said on Wednesday that talks to address urban decay and rejuvenate the CBD began as early as 2005. In 2015‚ then mayor Parks Tau allocated a total of R5bn towards a project to redevelop 21 buildings‚ mostly tenanted by government departments.
The Bank of Lisbon building was bought in 2005 for almost a 10th of its initial selling price‚ Lightstone data shows. Linda Tshabalala‚ head of commercial property at Lightstone‚ said that after the municipal valuations by the City of Johannesburg earlier this year‚ the value of the building was set at about R13m. However‚ the insurance replacement value was estimated at more than R28m.
"After a health and safety inspection‚ it was found that the building was only 21% compliant‚" said Tshabalala. "This could possibly have a severe effect on any potential insurance payout after the fire‚ adding to the wave of devastation."
Government departments have now been ordered to evacuate the Johannesburg CBD while a probe determines whether buildings should be demolished or restored. According to Tshabalala‚ leasing agents should take this move seriously as they may see government departments leaving their lease agreements earlier than initially agreed.
"Ironically, though‚ construction and development companies may benefit‚ as the opportunity to redevelop and re-energise the city centre presents itself‚" he added.
The Johannesburg CBD is labelled an urban development zone (UDZ) and is particularly attractive to investors because of its tax incentives. "Lightstone transfer data shows that when older buildings are bought and revamped‚ even on a minor scale‚ they could easily be sold for two or three times their purchase amount after a refurbishment."
For example‚ the property at 305 Fox Street in Jeppestown was bought for R1m in 2013. After the municipal value roll in 2017‚ it was valued at about R2.76m. Following its refurbishment in the same year‚ it is now listed for R6.2m. The building now houses a coffee shop‚ restaurants and apartments — proving a solid investment that also creates social upliftment in the area.
"This is a prime example of how refurbishment is a very lucrative investment in the long run‚" said Tshabalala, who believes that inner-city buildings could be the potential solution to the need for low-cost housing in the city. "The current housing problem in SA attests to the urgent need to restore buildings and repurpose them as low-cost housing and other useful amenities."