The most expensive office space in SA

Companies wanting to lease the 16th storey penthouse suite of Cape Town's Convention Tower will have to fork out R200 per m2 for 1 200m2 of office space.

Located next to the Cape Town International Convention Centre, it will soon be the most expensive office space in the country.

"We expect a multinational conglomerate will take this space and have already had various enquiries, including several from the UK," said Darren Wilder, leasing director of Madison Property Fund Managers.

The penthouse will be available for occupation early next year.

Convention Tower, which is being developed by Madison Property Fund Managers for Redefine Income Fund, is 80% let.

Tenants include Accenture, Webber Wentzel Bowens, Tullows Oil and Habitaz, at rental levels up to R120/m2.

Wilder pointed out that A-grade vacancy levels had dropped dramatically to below 5% for the first time in decades.

"One can expect AAA-grade rental rates to exceed R130/m2 within two years," he added.

According to the Rode Report for the third quarter of 2006, the average market rental for grade A+ office rentals in the Granger Bay area of the Cape Town CBD was R115/m2.

In addition, average rentals around the V&A Portswood Ridge were R102/m2 and in the Sandton CBD, the average rental was R103/m2.

The highest market rental achieved in Johannesburg was at Melrose Arch, where office space was rented out, on average, for just over R122/m2.

These rentals are for gross leases and exclude VAT.

The Rode Report explained that declining vacancies and a strong economy had resulted in a number of new office developments coming on stream.

According to Sapoa figures released last year, in the Cape Town CBD there was about 31 000m2 of rentable area to come on to the market and 52% of the space was still not let.

In Johannesburg's decentralised areas, more than 250 000m2 of rental area was being developed and nearly 60% of it was unlet.

Around 50 000m2 of new office developments had been committed to in Cape Town's decentralised regions, with 57% of it still not let.

This suggests a number of these developments are speculative, said John Lottering of Rode & Associates.

Article by: Gaylyn Wingate-Pearse - www.moneyweb.co.za