The ‘to let’ headache
OFFICE space in Cape Town’s CBD is currently available at bargain rates as building vacancies are at their highest in almost a decade.
According to the SA Property Owners Association (Sapoa) Office Vacancy Survey for the first quarter of this year, vacancies have reached 12 percent, a level not seen since 2003.
It’s become a tenant’s market, with renters able to determine long-term leases at good prices, the survey says.
Tenants can now expect to pay an average of R95 a square metre compared to paying R120 a square metre a few years ago for A-Grade office space in the CBD.
However, tenants are not biting as the lure of renting in newer buildings holds more appeal.
The age of buildings in the CBD is one of the biggest obstacles. Many of the buildings are old and drab and some are Heritage buildings that cannot be knocked down, says the survey.
But owners are holding on to their properties and weathering the storm, waiting for a better economic climate.
There are a number of buildings battling to get tenants – most of the vacancies are within buildings, rather than entire buildings being empty.
New buildings under construction already have tenants and there is an expectation that businesses will choose to rent space in new offices.
Dave Russel, chairman of Sapoa’s office vacancy panel, said the situation didn’t bode well for the immediate future. He predicts the situation will get worse over the next year. “We will see an increase in vacancies,” he said.
While the survey includes the entire CBD, owners of buildings more than 30 years old are struggling to get tenants.
There is an oversupply of older properties, but they still qualify as A-Grade buildings, the survey has found, with, on average, rentals going for R95 a square metre, compared to R150 a square metre at the Waterfront, which has a 2.7 percent vacancy rate.
In 2003, vacancies hit a record high of 12 percent. By 2008, just before the recession, it was 4 percent and has since slid back to 2003 levels.
“Until we see a significant decrease in vacancies, we will continue to experience flat rentals which are well off their peak in 2008, when the global economic recession set in. Good economic growth and a return of business confidence are required,” Russel said.