More offices stand empty

OFFICE vacancies in a number of Johannesburg's popular business districts have surged to four-year highs, a sure sign of just how hard Corporate SA is being squeezed by the recession. The SAPOA Office Vacancy Survey for 3rd Quarter 2009 released earlier this week, shows that the amount of empty office space in some parts of Johannesburg increased more than threefold since end-2008.

In fact, vacancies in a number of nodes are now in double-digit territory. In Rivonia, for instance, the vacancy surged from 6.8% in December 2008 to 18.5% in September 2009 while Woodmead was up from 1.9% to 10.5% over the same time.

In the Cresta/Blackheath area, the vacancy was at 11.4% in September, up from a marginal 1.6% nine months earlier. In Melrose/Waverley, the vacancy jumped from 0.5% to 13.4% over the same time. The sharp increase in the latter no doubt comes on the back of the new office space that has in recent months come on stream at mixed-use precinct Melrose Arch.

Even in the Johannesburg CBD, the vacancy is now back to double-digit figures after dipping below 10% early last year. The same trend is evident in Braamfontein where the vacancy rose from 7.4% to 10.9% in the nine months to September.

Vacancies have also increased in a number of office nodes in Cape Town, Durban and Pretoria since December 2008, although the amount of empty space as a percentage of total lettable space in most nodes in these cities is still less than 10%.

According to the latest SAPOA Vacancy Survey, Melrose is currently South Africa's most expensive area in which to rent office space, with average prices at R175/sq m for new, state-of-the-art buildings. That is followed by the Waterfront area in Cape Town at an average R142.50/sq m, Bryanston/Epsom Downs in Johannesburg at R140/sq m, Sandton at R133/sq m and the Cape Town CBD at R130/sq m.

SA's cheapest areas in terms of A-grade office rentals include the Pretoria CBD at R48/sq m, Midrand at R65/sq m, the Johannesburg CBD at R65/sq m and Randburg at R75/sq m.

Figures released earlier his month by IPD SA confirm that the investment returns earned by office landlords are under pressure. The IPD SA Property Bi-Annual Indicator shows that offices were the worst performing sector of the commercial property market in first half 2009 with a total return of only 1.6%. That is down from a total return of 8.1% in first half 2008.

Industrial buildings and shopping centres significantly outperformed offices, both sectors returned 4.1% in first half 2009. IPD tracks the performance of offices, shopping centres and industrial property portfolios worth around R94bn.

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