Stable office rentals set to increase

Office rents in South Africa may soon rise in line with global figures after a stable performance in in the first quarter, according to Broll Property Group.

Sanett Uys, GM of research and marketing at the commercial property services group, which is part of the CB Richard Ellis Affiliate Network said the South African property market lags behind the EMEA market by 12 to 18 months.

Uys said that South Africa is currently a tenants' market. "Landlords are willing to look at favourable deals to retain tenants, but South Africa's rentals are on par with international trends. We face the same challenges. Unemployment is rising and companies are downsizing and consolidating to ensure their future. Obviously, that affects their property requirements."

CB Richard Ellis's first quarter Global Office MarketView revealed that global office rents increased 4.3% year-on-year in this period.

Not much development has taken place, except for a few decentralised nodes, Uys said. With new stock coming on the market, the growth rate of completed plans has improved significantly. New stock is largely to be found around Gautrain stations in Johannesburg.

The lack of development in the rest of the country is due to two major reasons, she said. Firstly, financial institutions are not financing new developments, and secondly, the demand for space is not there, meaning existing space must be taken up first.

"As a result, the construction industry is under pressure. Landlords are more likely to spend money on refurbishing existing buildings to secure and maintain rentals and tenants."

Broll said in the second and third quarters, the market will remain stable with the exception of one or two nodes where rentals will decrease slightly due to the increase in vacancies.

"The fundamentals of the industry are in place and the market is going through an exciting phase with the potential listing of various funds on the JSE. As an industry we all face the same obstacles. The most important of these remains the increase in operating costs, including increases in electricity and rates charges.

"The emphasis in the industry is to become cost-effective and 'green' and reduce properties' carbon footprint to ensure effective management.”

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