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May 24, 2007:
CONSTRUCTION of the first 11 office blocks of the 38000m² office development The Estuaries, at Cape Town’s mixed-use precinct Century City, is under way.
Rabie Property Group, overall developer of the project, says the low-rise office park will consist of 18 office blocks ranging in size from 1000m² to 4500m².
The offices, being developed by 10 developers or owner-occupiers, will represent a total investment of about R600m when completed in the third quarter of next year.
Rabie says the 11 buildings under construction include five for a listed property fund seeking to boost its Cape Town portfolio.
Rabie director Greg Deans says work on the remaining seven blocks is expected to start soon as developers are contractually obliged to complete all construction by September next year at the latest.
Deans says there is still strong demand for office space at Century City, which offers a range of opportunities and product to suit small users through to large corporations.
“In particular, we are seeing the emergence of a very strong owner-occupier market in the 1000m² to 2000m² range, which has traditionally been a rental market,” he says.
Deans says Rabie is in the advanced planning stages of a low-rise 18000m² office park to meet owner-occupier demand for freehold and sectional title offices. It expect to launch this in August.
Property economist Francois Viruly of Viruly Consulting says the Cape Town market is probably seeing some of the lowest office vacancies in the country.
“I certainly believe there is scope to increase A-grade offices in the market.” This is equally relevant to other parts of the country.
Viruly says vacancy rates in relatively new A-grade space and the older B-grade space are at record lows, with certain office nodes “seeing vacancy rates down to 2%”.
It was argued previously that as soon as the market starts experiencing low vacancies there is a move to oversupply the market with new office space. But now other factors could stop that happening.
“The important issue now is building costs are rising rapidly because of massive infrastructure expenditure by the public sector. The result of that is we may well see a number of (office) feasibility studies not being viable because of high building costs.”
Viruly says land owners have also taken the opportunity to put up land prices. “For projects to be viable they need to achieve rentals which are well in excess of those at the moment. New office space is entering the market at well above R120/m². Existing A-grade rentals will also start rising to reflect this.”
