Healthy take-up offsets oversupply of office space

15-02-2002

Although the growing oversupply and rising vacancies are smothering office rentals, especially in the decentralised Johannesburg office nodes, the current healthy take-up of office space does not warrant the big alarm bells that have gone off.

The latest Rode's Report on the State of the Property Market shows that in Johannesburg decentralised the take-up has been almost 83.000m² per quarter since the beginning of 1999. At this take-up rate, it will take almost six quarters for all the current vacant space to be occupied – provided no new office supply comes onto the market.

"As one would expect, the deterioration of the CBDs has had its impact on take-up levels with all the major CBDs experiencing negative take-up since the beginning of 1999," Rode’s Report editor Dirk De Vynck says.

Office vacancies in Johannesburg decentralised have shot up since quarter 2000:3, primarily the result of overenthusiastic development in response to the IT boom. De Vynck says vacancies are always temporary.

"As long as the demand for space grows and new office building declines, the vacancies are not too worrying. This should eventually cause vacancies to soften again, which is positive for office rentals," he says.

In Cape Town decentralised, demand and real rentals have also been growing at a healthy pace, but the rise in vacancies over the last three quarters could soon put a damper on this. A new building decline in 2001 seems to indicate that the Cape Town office market has also reached an oversupply situation.