High office rentals could halt Cape CBD conversions

08-03-2006

A few years ago, the prognosis for office buildings in the CBD of Cape Town was so poor that many a converter developer could buy derelict office space for next to nothing. In practice, the price paid for such a building in fact has to reflect the market value of the land and little more, given the high cost of converting historic buildings into apartments.

But Erwin Rode, CEO of Rode & Associates, foresees that the pending boom in office rentals and values in the Cape Town CBD could soon make the conversion of office space into residential units unviable.

Developers are also faced with the problem that many of the old office buildings have insufficient parking facilities and they, therefore, cannot make the necessary provision for parking for residents should they still find an old building at a sufficiently low price. Having said that, residential buildings require a lower parking ratio than office buildings.

Derelict office space in other CBDs of South Africa is still available at much lower prices and the same problem would, therefore, not apply to them. However, these nodes face a different viability hurdle in that the potential prices the market would bear for flats are considerably lower.