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Jun 25, 2008:
While the SA economy is under pressure on a wide front, office rentals in the decentralised areas of Johannesburg are a ray of light.
Erwin Rode, property valuer and economist from Rode & Associates, says it appears as if these areas are paving the way for the expected upswing in the office property cycle.
Several office nodes in decentralised parts of Johannesburg had double-digit growth rates in the final quarter of last year. These include Rosebank with 29%, Randburg-Ferndale with 26%, Sandton's CBD with 24%, and Bryanston with 19%.
Rode & Associates' unpublished rental growth data for the first quarter of 2008 also indicates strong rental growth in these areas. "Most rental levels in these areas are however still under that which is necessary to make a new office development viable."
This is due to the fact that the rise in replacement costs (building costs plus the cost of land) has been exceeding rental growth for years. "Tenants have to therefore sign rental contracts at rental levels which make new developments viable." – Sake24
