RANDBURG, once a deteriorating office node that had grown unpopular with tenants, is on the rise and is now considered a future property “hotspot”.

This emerged at last week’s fifth annual property investment conference, hosted by commercial property association Sapoa and Investment Property Databank, when Belinda Clur, head of research at Old Mutual Investment Group Property Investments, delivered a presentation on some of the country’s property “hotspots”.

Clur says Randburg has been undergoing a rejuvenation over the past three years. “Previously, it seemed to be a relatively depressed, older and unpopular office node next to Sandton. Sandton had developed into the next CBD and preferred office location,” she says.

One of the driving factors behind Sandton’s ascendancy was the decision by the JSE to move there from the Johannesburg central business district.

But Clur says that a driving force behind Randburg’s re-emergence as a major player in the office sector has been the growing shortage and cost of prime space in Sandton.

“As prime business space in Sandton became rare and expensive, tenants turned to secondary nodes such as Randburg.”

This in turn has led to an influx of office workers to the Randburg area and resulted in the need for middle-income housing.

The introduction of a stronger residential component in the area, which included the conversion of older offices into residential units, has assisted the rejuvenation of Randburg.

Another factor that has assisted Randburg’s turnaround has been the Brightwater Commons shopping centre, which was redeveloped from the old Randburg Waterfront. This has sparked other rejuvenation efforts in the Randburg area, says Clur.

Another reason for Randburg’s increasing popularity has been its location. “Randburg is well located between the growth nodes of the Sandton CBD, the Johannesburg CBD, which is seeing renewed rejuvenation and interest, as well as the Fourways node.

“It seems intuitive that this node will receive spillover benefits from all these hubs that surround it, further fuelling growth in the node. Randburg is also centrally located along the spine of current and future expected development across Gauteng.”

Clur says given the relative levels of property capitalisation rates, rentals and vacancies in the area, there seems “little doubt” that property values in Randburg can only increase in the future.

She says that according to data from Rode & Associates, in A+, A and B grade Randburg offices, vacancies were 15,5% towards the end of 2004. By June this year they had fallen to 5,4%.

Clur says between the end of 2005 and June this year, the rentals for A, B and C- grade offices had increased 3%, 8% and 43% respectively.

As far as property capitalisation rates are concerned, in June this year they were operating at between 10% and 13% across all office grades.

Between the beginning of 2005 and June this year, capitalisation rates had fallen between 0,4% and 1,2% across all office grades.

“Capitalisation rates have so far fallen by a lower rate than the growth we’ve seen in rentals and the reduction in vacancies.”