JOHANNESBURG - Developer interest in the Johannesburg office market remains healthy despite high vacancy rates plaguing the city.
Jones Lang LaSalle’s (JLL) commercial property reports for the third quarter released yesterday said Johannesburg recorded the highest vacancy rate in the country compared to other large metros for the second consecutive quarter. This despite the city's office vacancy rate improving to 12.6% from 13.3% in the previous quarter.
The report said Johannesburg's overall vacancy rate was largely driven by high inner-city vacancies, which sat at 18.5%, while decentralised nodes recorded a collective rate of 11.2%.
The national office vacancy rate is 11.2%, according to the SA Property Owners Association (Sapoa).
The office vacancy rate in Cape Town declined to 6.8% in the third quarter after rising marginally to 7.3% in the previous quarter, while in Durban it declined to 11.7% from 12.3%.
JLL said Johannesburg continued to enjoy a healthy developer interest, with 91%of the national office developments in 10 nodes within the city.
However, JLL said this was likely to change in the near future because most of the ongoing developments would come to a close and fewer speculative developments were being announced.
But JLL said Sandton, Waterfall and Rosebank accounted for 68.1% or 690 000m² of the ongoing national office developments and Sandton had become the corporate address for many law firms.
It said there would be an increase in the number of law practitioners operating in the node because Redefine Properties had recently announced a R476 million office block for advocates comprising nine floors over an area of 13 500m² that was expected to be completed in the second quarter of 2019.
JLL added that Johannesburg was experiencing a short-term oversupply of office stock, which was putting further downward pressure on rentals.
However, it forecast that this would be short-lived because Johannesburg remained the business hub of South Africa and most nodes in the city offered high-quality office accommodation that was highly sought-after.
JLL said the decline in vacancies in all the major asset types in Cape Town, including Grade C office accommodation, was indicative of overall confidence in the business climate of the city from large to small and medium-sized enterprises.
But it said the most impressive decline was in Grade P (premium) accommodation to 7.7% from 9.4% in the second quarter of this year, adding that all Grade P nodes in Cape Town recorded notable rental growth in the third quarter.
JLL said much of the GDP growth of 2.% in the second quarter of this year was driven by improved activity in the financial and business services sector of the economy, a key driver of office demand.
It seemed that Cape Town had gained from this, it said.
JLL said Durban may have joined Cape Town in improving office demand.