Amid turbulent times for the property market in general, the commercial sector of the market – while not unscathed – has held its own over the past year and retained its investor appeal, particularly among cash investors seeking the right yields, says Dr Andrew Golding, CE of the Pam Golding Property group.
Dr Golding was speaking at an event marking the expansion of Pam Golding Commercial's (PGC) Gauteng region, which recently acquired an additional nine brokers via a major commercial firm which was in the process of restructuring. PGC Gauteng now has 12 experienced commercial brokers, headed up by GM David Reid, who has over 20 years' involvement in the development and management of commercial property in South Africa.
The company has extended its reach in the country's central or inland regions, covering areas of Gauteng which include Johannesburg, Pretoria, Midrand, Centurion, East and West Rand, as well as the Vaal Triangle and Nelspruit in Mpumalanga.
Says Dr Golding: "More than any other province Gauteng is a hub of infrastructural change mainly as a result of major projects now reaching completion including the Gautrain and Rea Vaya BRT (Bus Rapid Transport System), as well as unprecedented road and traffic upgrades.  As a consequence, whole commercial growth nodes are emerging, while the improved transport systems will see far greater movement and integration across regions as well as changes to traditional urban structures. These major infrastructural projects present positive opportunities for the commercial property sector and will have a profound effect on the way commercial and office tenants view lease renewals in the forthcoming year.
"The reason for this is simple – the status of locations is affected as new key nodes emerge, with proximity to public transport being a priority for businesses. If you consider the following example: a commercial tenant who occupies 4500sqm of office space with 200 employees in downtown Johannesburg CBD – within walking distance of customary bus and taxi ranks – finds that a brand new BRT station is due to open further away, which will attract far more commuter usage. That tenant will definitely want to move closer to the BRT station and is unlikely to renew his/her existing lease. As a result landlords need to take cognisance of such trends as they may be faced with depleted occupancies, and the converse will occur in new hubs around the Gautrain and BRT stations," says Dr Golding.
Comments David Reid, GM of PGC Gauteng: "The renewal of Johannesburg CBD is resulting in increasing interest in office space in areas such as along Main Street from the magistrate's court to Gandhi Square, which has become akin to a financial district, with coffee shops, restaurants, cobbled walkways and an appealing ambience. This is coupled with more attractive rental rates of R80-R100 per square metre, when compared with some decentralised nodes such as Sandton or Rosebank, where rates range between R90 and R100 per sqm. Plein Street and Doornfontein are other areas which will be upgraded and will start attracting interest from investors in commercial property. Even some of the decentralised nodes show different demand profiles within them, such as the area close to the Stock Exchange or near the legal precinct, resulting in higher appeal.
"However generally vacancies are higher than before and according to the SAPOA/IPD Vacancy Report, the Johannesburg CBD reflects vacancies of 10.7 percent which shows an increase of 20 percent compared with the same period a year ago, while Sandton's vacancies of 7.2 percent are up by 28 percent. Sandton has the added impact of rapid expansion and development releasing space onto the market, thereby compounding the vacancy problem.
"This changing landscape certainly means that landlords need to be much more flexible regarding rental rates, escalations, length of the lease and tenant installation contributions. Due to economic constraints the business sector is re-evaluating the nature of its premises and space utilisation, simplifying them in order to be more economical and cost effective. In turn this will result in their looking to areas which offer both sound value for money as well as accessibility for staff," says Reid.
Gauteng is home to the largest supply of industrial space in the country, including high and low grade warehousing, hi-tech industrial space and standard factory units, and as with other property sectors the economy has taken its toll with vacancies up to 20 percent higher than last year. While a natural consequence of this downsizing, a nevertheless interesting trend is that the demand for standard factory units has increased dramatically.
Reid says while the industrial market, including warehousing and distribution operations, is showing considerable resilience in the current downturn, it's not uncommon to find traditionally large warehouses from around 4 000-10 000sqm becoming vacant. "We are already seeing increased industrial vacancies in areas such as the East and West Rand, Elandsfontein, Isando and Krugersdorp. However this situation presents opportunities for those seeking space as in traditionally older industrial areas prices for warehousing are as low as R12 a square metre, ranging to modern warehousing priced up to around R54 per square metre in newly developed industrial property close to off ramps and passing traffic."
He concludes: "Increasing vacancies make for challenging times for developers and investors, however the extraordinary infrastructural improvements that we are seeing around us in Gauteng, coupled with the ability of landlords to address constrictions in the rental market, offer the best means to survive this current trend."
Issued by Gaye de Villiers

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