Office nodes growing due to decentralisation in Tshwane

Urban sprawl to the east and south of Pretoria, coupled with a trend towards decentralisation from the Pretoria CBD has resulted in the formation of nine basic office nodes in the Tshwane Municipality, says Jan Oelofse, leasing and sales broker for JHI Properties.

“These nodes are Arcadia, Brooklyn, Hatfield, Lynnwood/Menlopark, the old east - as it is known, Menlyn/Faerieglen, Pretoria’s eastern suburbs, the new east Centurion and Highveld Technopark developed in the south.

“While the office component in Pretoria’s CBD has been and in essence continues to be underpinned by government buildings and tenancies, the private sector has to a large extent moved to the deconcentration nodes - a trend which is being followed by some government departments,” says Oelofse.

He says there are a number of factors contributing to this growing trend, including poor public transport services, which in turn has encouraged private transport, which then impacts on road congestion.  “Due to old town planning conditions which restricted the provision of adequate parking in developments, Pretoria CBD has insufficient parking facilities. Ageing buildings, designed for office usage 20 to 30 or more years ago, are inefficient in relation to modern designs, while antiquated facilities including lighting, are costly to maintain and incompatible with modern technology.  Another factor is that office rentals in the CBD have been distorted by rental agreements entered into by government over the past five to six years.”

Oelofse says current asking rentals for office space in the Pretoria CBD vary between R45 per square metre for C grade space to R65 per square metre for B grade space, with installation cost contributions by landlords under certain conditions. “However, in the absence of new or competitive developments to satisfy the demand for space, government and the private sector are compelled to either accept the rentals offered or to move to deconcentration nodes, where they can find premises at acceptable rentals, in modern, economically designed buildings, with sufficient parking. New buildings generally provide for economic space planning, coupled with modern facilities designed to lower and contain operating costs - important considerations for rental tenants.”

He says the area of Arcadia caters mainly for fringe CBD offices and embassies, with most developments comprising residential conversions.  Home to numerous embassies, Hatfield’s main commercial activities and development centres around the Pretoria University.  Office developments are of a low density, office park nature with buildings of 1000-3500sqm on average, catering for 100sqm to 3500sqm tenants, with average rentals for A grade buildings R90-R95 per square metre.  The area of Hatfield is relatively stable with a reported vacancy rate of approximately six percent.  Industry data indicates a total of 104 476sqm of A grade space with a vacancy of 9386sqm. However, Oelofse says development opportunities are restricted.
“Popular due to its proximity to Pretoria CBD, Brooklyn and surrounds provide a total of approximately 162 000sqm of P (modern, luxury space) and A grade office space developed around a shopping mall. The demand for this area is reflected in the low vacancy rate of between two and three percent for P and A grade space, which fetch gross rentals in the order of R100 and R130 per square metre. The average tenant profile varies from small (100sqm) to medium (2000sqm) businesses, interspersed with government tenancies of which South African Revenue Services is a main office user.  Developments, which are restricted by the upmarket residential area surrounding Brooklyn, are of a low density nature to cater for the general demand,” he says.

Developed in established upmarket residential areas and following retail developments, the Lynnwood/Menlopark node is concentrated mainly along major arterial roads.  The developments are in the form of low density office parks with buildings catering for tenancies varying between 100-1000sqm on average. However, Oelofse says with the vast improvement of accessibility and traffic flow due to the major upgrading of the N1 highway and the on/off ramp at Lynnwood Road, the growth of this node has been boosted with the Lynnwood Bridge lifestyle and office park development being developed in phases.  This incorporates a City Lodge Hotel, 15 000sqm of offices and 13000sqm of retail space.  On completion, the development will measure some 73 000sqm and major office tenants, mainly corporates, include Adams & Adams, Aurocon and Atterbury.

Gross rentals for P grade office space in Lynnbridge vary between R140 and R155 per square metre, while rentals for A grade space average around the R100 per square metre mark.The latest reported industry figures indicates a total of approximately 232 600sqm of space, of which 11 3316sq (48.7 percent) comprises P and A grade space, with a vacancy rate of 6.5 percent. Oelofse points out that further growth is restricted by the residential areas and topography of the area.

Says Oelofse: “Developed around the Atterbury/N1 on/off ramps, the Menlyn/Faerie Glen retail and office development node was the first real decentralised node in Pretoria, offering the potential for significant growth around the Menlyn shopping centre as a pivotal anchor, very much in the mode of Sandton City.  This latent development potential has now been unlocked with major road infrastructural improvement.  The major upgrading of the N1 highway and the Atterbury Road on/off ramps coupled with the new Garsfontein on/off ramps to the N1 and the upgrading of the internal and arterial road infrastructure has greatly improved traffic flow and access to the node.”

New developments provide most modern office space:

Oelofse says that new developments provide the most modern office accommodation and facilities.  “Naturally, demand and supply control the expansion and development of office rental accommodation.  In addition, building costs and rentals to be achieved - converted into an acceptable return on investments - will dictate the pace of the development of new buildings.
“The major Menlyn Main mixed-use development, which is being developed with strong environmental controls in place, provides for 100 000sqm of residential/hotel, 44 000sq retail and 143 000sqm of office space.  The planned developments will be high profile modern buildings with generous parking facilities.  The building designs allow for the installation most modern facilities and infrastructure which will qualify it to obtain a minimum of a 4 star Green Star rating.” He says Nedbank, followed by Softline VIP, are the first two corporates to develop regional head offices in Menlyn Main, with further developments on the cards in the near future.

A further two new developments, providing for approximately 27 000sqm, are under construction in Menlyn and are scheduled for completion in the second half of the year (2012). According to recently published figures the total P and A grade office space in Menlyn amounts to 209 600sqm with rentals varying between R105 and R145 per square metre.  The new and planned developments will provide further 75 000sqm of P grade space at rentals in excess of R155 per square metre.

Says Oelofse: “This area offers an attractive location for corporates to establish headquarters and regional offices.  They take a long term strategic view, noting that the growth of the node coupled with accessibility, parking and modern facilities will provide them with a stable and economically viable asset. Corporates all ready committed to the area are include PricewaterhouseCoopers, Investec, Softline VIP and Nedbank, among others.”

He adds that the Centurion/Highveld Technopark development node has a combined office supply of mainly A and B grade office space amounting to approximately 817 892sqm, with a reported vacancy rate of 9.1 percent. “As this node was specifically established to cater for commercial growth, it is not subject to the growth restrictions experienced by the other nodes.  However, this area has experienced difficult marketing conditions, mainly due to accessibility restrictions. Positively, these problems have been greatly alleviated with the major upgrading of the N1 and John Vorster Drive on/off ramps, with an added advantage being the Highveld Park and Centurion Gautrain Stations that serve these areas,” says Oelofse.

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