More affordable space in city centre
Opportunities for residential redevelopment and letting of office space are increasing in Johannesburg city centre as more B- and C-grade office space comes to the market.
Viruly Consulting property economist Francois Viruly says A-grade space has decreased markedly in the past 10 years, with more B- and C-grade space emerging.
This, he says, suits prospective city centre tenants.
Commercial property association Sapoa says A-grade space refers to office buildings not older than 15 years or which have had major renovation, have high-quality modern finishes, air conditioning and onsite parking.
Grade B refers to older buildings with accommodation and finishes close to modern standards as a result of renovation, air conditioning and onsite parking.
Grade C refers to buildings with older-style finishes, services and building systems, and which may not have air conditioning or onsite parking.
Viruly says according to Sapoa, in the first quarter of 1996 the Johannesburg city centre had 1,2-million square metres square of A-grade space. At the same time there was 514,000m² of B-grade space and no C-grade space.
This has changed. By the first quarter of this year, A-grade office space has almost halved to 71,3200m².
B-grade space has increased to 632345m² and 288367m² of C-grade space now exists.
"Over 10 years, the majority of space has shifted from A-grade to B- and C-grade," says Viruly. The main reason for this is that property owners have not kept up building maintenance in the city centre. Consequently, more B- and C-grade space came into being.
Exaggerating this is the spate of new A-grade office space built in decentralised nodes outside the city.
Viruly says the B-grade space now offers opportunities for tenants who cannot afford A-grade.
"The improvements we will see in the office vacancy rates in the next few years will reflect that the office space of the city centre is more in line with the type of tenants the city will attract," he says.
"One of the problems in the past was that there was a lot of A-grade space that wasn't reflective of the needs of prospective tenants."
He says the C-grade space will become a target for alternative use, such as residential accommodation.
These are opportunities for city centre vacancies to start declining, he said.
According to Sapoa, A-grade vacancy rates in the city centre were 8,4% in the first quarter of this year.
Nine months ago vacancies were 13,8%.
B-grade vacancies are about 26,9% and C-grade are about 22%.
Article by: Nick Wilson - www.eprop.co.za