Sustainable innovation and alternative uses key to SA prime office markets
Category Newsletter: 1 - Head Office
A golden triangle links South Africa’s prime office locations running from Umhlanga/La Lucia in KwaZulu-Natal across to the Sandton CBD in Gauteng and down to Century City in the Western Cape. While each precinct offers quality P- and A-grade space for high-end occupiers and investors, there is no doubt that economic realities, as well as over-supply, are driving landlords to further green innovation, rental incentives and new ways of thinking about space-usage. The latest Office Market reports released by Broll Property Group bring these three locations into sharp focus.
Sandton sits at the heart of Gauteng, the acknowledged power-house of the South African economy, and continues to reflect positive, albeit slower, demand for prime office space. Nevertheless, it is becoming increasingly hard for those seeking premium-grade space for their businesses to ignore the advantages offered in both the Century City and Umhlanga/La Lucia nodes, says Broll in its reports.
Century City has marketed its live-work-play ethos over two decades. Its comprehensive perimeter security fencing, eco-friendly landscape, smooth integration into the Cape Town transport system and wide-range of amenities have secured the attention of large corporate tenants in professional services, consulting, engineering, IT, marketing, financial services and the advertising and media sector. According to Broll's Century City Office Market report, vacancies currently sit at 8%, by contrast Umhlanga/La Lucia has an average vacancy rate of 5%, with Sandton at 16%.
The Umhlanga/La Lucia node presents a contrasting environment to both Century City and Sandton, its sea views being an immediate differentiator. There is enormous development in Umhlanga Ridgeside, New Town Centre as well as in neighbouring Cornubia and the Sibaya Precinct to the north, all of which open fresh opportunities for tenants and landlords alike. New office space coming onto the market is regarded as a good indicator of a node's growth. With a vast number of developments having recently come onto the market and many new office developments scheduled to be launched within Umhlanga/La Lucia in the next 12 - 24 months growth is definitely evident.
P-grade gross achieved rentals in all three regions present as follows:
Century City : R175 - R195/sqm/month
Sandton CBD : R220 - R250/sqm/month
Umhlanga/La Lucia : R170 - R200/sqm/month
The nodes all house common amenities which include hotels, conference centres, upmarket retail offerings and high-end restaurants. Security is paramount throughout.
From an investor perspective there's growth in all three nodes but growth in Century City and Umhlanga/La Lucia is tipping the scales, notes the Broll reports. An oversupply of office space in Sandton together with the emerging trend of clients seeking smaller office units has constrained this market somewhat. Sandton landlords are having to be flexible in their offerings and innovative in their thinking as they look at new ways of marketing vacant space. However, the demand for prime-grade Green Star office accommodation is still more pronounced in the Sandton CBD, hinting at continued interest in the area from high-end investors and occupiers.
From Broll's reports it is clearly evident that South Africa's "golden triangle" offers world-class office space and amenities. While Sandton has long topped the bill as a prime office destination, Century City and Umhlanga /La Lucia are riding high as evident in the high quality of new office space and associated amenities coming on line in these competing regions. However, Sandton's over-supply and the resulting pressure on rentals have sparked an innovation trend, says Broll, with the addition of quality mixed-used projects.
Author: Broll Property Group Research