Office developers’ uncomfortable risk exposure

10-03-2008

Just as prime office rentals currently lead the pack in decentralized Johannesburg with 23% growth on the previous year, so too is this area leading the pack in committed new office developments.

According to the December 2007 Sapoa Office Vacancy Survey, 391 353m² of new office developments had been committed in Johannesburg’s decentralized nodes, which amounts to about 8% of the current prime-quality stock in the area.

Says Erwin Rode of Rode & Associates: “To give this figure some perspective, one can compare it with the Carlton Centre office tower, which is about 75 000m² which means that new office stock amounted to slightly more than five Carlton Centres.”

In relative terms though, Pretoria decentralized is currently the area with the most developments in the pipeline, with about 20% of its current primequality office stock or some 284 000m² committed new developments. ‘Prime quality’ is defined as grades A and B combined.

In Cape Town decentralized, 63 500m² is currently committed for new development; this accounts for only 7% of its current prime-quality stock. The country’s only healthy CBD, namely Cape Town, unsurprisingly has some 52 000m² of new office developments committed. The other major CBDs either had negligible or no new developments as at December 2007.

“Some 62% of decentralized developments were unlet at the time, illustrating just how speculative the office market is,” adds Rode. “In the light of the electricity crisis, which is bound to make decision-takers more conservative, one must conclude that some developers are rather seriously exposed.”