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Solid growth in SA office rentals
Date published 26 November 2008
Despite the worldwide economic downturn, Sandton and Claremont offices are holding their own in occupancy rentals.
According to the global index of fastest-growing office occupancy costs, Johannesburg was ranked number 34 in the 173 markets surveyed by the Broll Property Market Report 2008/2009 in association with CB Richard Ellis.
In Sandton, office rentals grew 17.7% over the past 12 months, with average monthly rentals of R125/m2, while Claremont in Cape Town had a growth of 4.5% and boasted average rentals of R115/m2. Both cities typically had office leases of five years.
The report stated that in the first quarter of 2008, more than 90% of office markets worldwide showed flat or rising rentals. The average rate of growth for office occupancy costs among the 173 markets surveyed was 11.3%, which was more than double last year's world inflation rate.
Ken Gerber, director at Broll Property Group said South Africa had seen unprecedented economic growth over the past few years, hence the rise in demand for offices. He added that compared with the rest of the world, South African office rentals were still cheap. As an example, he said prime office rentals in Sandton equate to about R1 764/m2 ($175/m2), with London at R17,811/m2 ($1 767/m2) and New York midtown at R11 219/m2 ($1 113/m2).
Most of the new A-grade developments are comparable to offices around the world in terms of design, quality and facilities, he said. Gerber added that 34 was not a bad figure at all for South Africa and 2009 would be intersting because rental growth was expected to be flat around most of the globe while South Africa as still likely to show some positive rental growth.
Kathy Divaris of Divaris Property Brokers in Cape Town said rentals in Claremont currently ranged from R75/m2 for B-grade offices to R130/m2 for AA-grade offices. She added that the revamp of roads which would take taxis and bus traffic off the main road would add enormous value to the area and attract more tenants for office rentals.
Author: Denise Mhlanga - Citizen
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