PRETORIA – Presistently high office vacancies, particularly in city central business districts (CBDs), continue to spur conversions to residential units.
The latest SA Property Owners’ Association (Sapoa) office vacancy report revealed that the national office vacancy rate declined by 0.4 percentage points to 11.1 percent in the second quarter of this year while the national inner-city vacancy rate declined by 0.1 percentage points to 12.8 percent.
It said the C-grade office segment registered the biggest improvement in vacancy rates, with a quarter-on-quarter improvement of 1.1 percentage points.
However, Sapoa said the improvement in the C-grade segment was partially driven by residential conversions, which were a common trend at this part of the cycle.
It said this trend over the past two cycles followed a surge in new development, which accelerated the reclassification of ageing B-grade stock to C-grade. “The subsequent supply overhang and recovery periods then sees increased levels of residential conversion as a result of lower demand for office space and lower selling prices per square metre, making conversions more feasible.”