Things are looking up for Gauteng’s commercial property market
Whilst the City of Cape Town’s commercial real estate industry has been garnering widespread attention thanks to its swift post-Covid recovery, property specialists have noted that the industry in the country’s economic hub, Gauteng, has been faring much better than expected.
“Gauteng can still be considered the financial hub in commercial property,” said Scott Thorburn, the national asset manager of Redefine Properties.
Thorburn said that office buildings (in Redefine’s portfolio) across sought-after locations in Gauteng that were not fully let pre-Covid, are now either fully let, or have minimal vacancies – showing a gradual but evident rental growth.
The decrease in vacancies and rise in occupancies in the province is encouraging for Gauteng’s rental growth. “It’s reasonable to assume that normal property fundamentals have returned to the Gauteng province as demand has increased,” said Thorburn.
As demand for office spaces has increased, businesses have increasingly been eyeing quality buildings in nodes like Bryanston, Sandton, Rosebank, Midrand, Greenstone and Struben’s Valley. “Tenants are seeking high-end buildings in prime locations with easy and convenient access to services and facilities,” said Thorburn.
Thorburn noted that, despite Cape Town’s booming commercial property market, rand per square metre property values, which are strongly influenced by rental rates, (largely) remain higher across Gauteng – however, this gap is closing.
“Fully occupied buildings in Sandton are fetching around R230 per square metre; an iconic P-Grade building in one of Cape Town’s sought-after nodes might struggle to get R190 per square metre,” Thorburn said.
Speaking on how Cape Town has found itself at the centre of a commercial property boom post-Covid, Thorburn said that the city “experienced a perfect storm on the back of new organisations opening for business, a recovering local Cape Town economy, return to office calls from businesses, increased load shedding leading to more people needing to work in the office and an influx of international call centre operations [and] relatively superior service delivery provided by the City of Cape Town.”
Despite facing a unique set of problems that keep impeding the sector’s expansion, such as a “lack of municipal effectiveness” (service delivery) and ever-increasing rates coupled with low economic growth, the industry in the province is far from being down and out.
This is largely from the intervention from property owners in city improvement districts (CIDs) pay a levy for supplementary and complimentary services set to enhance the physical and social environment of the area – boosting the commercial property market in these nodes.
“Cape Town’s office market is expected to expand with new developments, renovations, and increasing rental rates. “However, Gauteng should not be disregarded,” said Thorburn.
“If the province can realise economic growth, sort out service delivery issues, it is not unfathomable that the improvement in the commercial property fundamentals and the increase in returns in the province can be as dramatic as Cape Town’s has been in the past twelve months,” he added.
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