Decline in office vacancies signals rise in rentals

07-03-2007

The vacancy rate of prime-quality decentralised office space was down to 3,7% in the last quarter of 2006, from its high of 12% in 2003. Even in CBDs, vacancies have declined from a national average of almost 20% a few years ago, to their current 11,7%.

Regionally, vacancies in all the decentralized nodes are quite low and indications are they will either decline further or start moving sideways as new developments hit the market. In December 2006 the vacancy rate in decentralised Johannesburg was 4,5%, in Pretoria it was 1,9%, in Durban 4,2%, and in Cape Town a mere 1,2%.

“In our view these vacancy rates are below their normalised or sustainable rates”, says Garth Johnson, editor of Rode’s Report on the South African Property Market.

He notes that there was a particularly strong growth in ‘demand’ in the decentralized nodes of Johannesburg (+7,7%); Pretoria (+5,3%) and Cape Town (+4,3%) during the last 12 months. Among the CBDs, Johannesburg (+4,7%) showed the largest take-up over the past year.

“The fact that committed new developments in all the major decentralized conurbations at the end of last year amounted to roughly 5% of the prime office stock a year earlier, clearly shows that developers are taking advantage of the opportunities created by the low vacancy situation and the strong growth in demand.”

PS: Growth in ‘demand’ = Take-up = Change in office stock (in m²) minus change in vacancy (in m²)