Chris Spillane
BHEKUMUZI Makhubo is the man who puts the boom into Johannesburg office construction.
The 25-year-old blasting contractor helps clear space with explosives for a raft of properties under construction in Sandton.
More than 257 300m2 of commercial property was planned there at the end of June, 73 percent more than a year earlier, according to data compiled by Jones Lang LaSalle.
“It’s a sign of more development,” Makhubo said last month at the site of new offices for Sanlam. “There is going to be more and more construction.”
The building boom is running ahead of demand. Developers are struggling to fill the buildings that have already been completed and the pace of the district’s expansion is keeping a lid on rents. The vacancy rate in Sandton was 12.7 percent in the second quarter, up from 4.5 percent a year earlier, Jones Lang LaSalle said in a report last month.
“There’s a bit of an oversupply,” Fran Teagle, a director for Broll, a unit of broker CBRE Group, said. “Leasing is slow at the moment and we don’t expect rentals to rise in the short term. There’s quite a lot of vacancy.”
The average monthly rent for prime office space in Sandton was about R201 a square metre in the second quarter, little changed from a year earlier, broker Jones Lang LaSalle estimates.
Sandton, once a single 20-story tower and a shopping mall, is also set to displace Johannesburg’s city centre to become South Africa’s largest commercial hub.
The stock market and other companies moved their operations to the suburb starting in the 1990s because of an increase in crime in the city’s historical central business district. Makhubo’s blasts almost daily shift rock for the newest office block within the square mile that houses the JSE and local headquarters for Citigroup and Deutsche Bank.
Developers were attracting tenants in Sandton by offering incentives such as rent-free periods and subsidising the cost of fitting out offices, Teagle said.
About 20 percent of office development in Sandton is speculative, according to Ndibu Motaung, the head of research at Chicago-based Jones Lang Lasalle.
Buildings under construction included a 34 500m2 office for law firm Webber Wentzel and 67 000m2 for petrochemical giant Sasol, Jones Lang Lasalle said.
Another eight towers are planned, including the new headquarters of medical insurance provider Discovery, over the next three years.
The big local construction firms – Murray & Roberts, Wilson Bayly Holmes-Ovcon and Aveng – are all either involved in, or bidding for, projects in the area.
A 25 percent unemployment rate, electricity shortages and strikes have limited economic growth. While the country avoided its second recession in five years with 0.6 percent annualised growth in the second quarter, gross domestic product is forecast to have expanded by the slowest pace this year since 2009. That has limited company investment.
Older buildings are being refurbished to keep pace with the new modern styles.
The Sandton City office tower, above Africa’s biggest shopping mall, has replaced its stark, concrete exterior with a new, glass facade.
That is the latest trend, according to Gray Todd, an associate at Lyt Architecture. “Forty or 50 years ago, Sandton was a farm,” Todd, an architect of 11 years, said last month.
“Now each new building is trying to outdo and stand out from the rest.”
Jake Hoddinott, a sales and development manager at developer Barrow Group, said the construction boom was not only about commercial properties, adding that homeowners looking to avoid Sandton’s increasingly congested roads were living closer to the financial hub.
More than 100 000 commuters travel into Sandton each day and that will rise by about 27 000 once current office developments are completed, according to estimates by Jones Lang Lasalle.
“The appetite is changing,” Hoddinott said last month. “There’ll be more traffic and pressure on existing infrastructure. That’ll likely drive people to use public transport. People don’t want to sit in traffic for hours each day.”
His company, Barrow, has built Katherine & West, a 10-storey mixed-used property 50m from the Gautrain station. The site has seven apartments, including a 734m2 penthouse that is on sale for more than R26 million.
Makhubo, who works for Domino Blasting, first came to Sandton six years ago after graduating from school.
“In 2020, I don’t even think I’ll be able to recognise the very same building that I’m working on,” he said. “Everything is changing.” – Bloomberg