The insurance replacement value for the Bank of Lisbon building that burned down, killing three firefighters in Joburg CBD, is estimated at a mammoth R 28 564 500.
But after the building failed a health and safety inspection, this could possibly have a severe effect on any potential insurance payout after the fire, said Linda Tshabalala, Head of Commercial Property at Lightstone.
Lightstone is a provider of comprehensive data, analytics and systems on property. Their data reveals that Bank of Lisbon was bought in 2005 for almost a tenth of its initial selling price. Tshabalala explains that after municipal valuations by the City of Joburg earlier this year, the value of the building was set at R 13 280 000.
The devastating fire last week validated fears that this incident may repeat itself in other non-compliant buildings in the Joburg city centre.
As early as 2005 talks had started to address urban decay and rejuvenate the CBD, and in 2015, Parks Tau, then Mayor of Johannesburg, allocated a total of R 5 billion to project Kopanang in an effort to redevelop 21 buildings mostly tenanted by government departments.
A probe is underway which will determine whether buildings should be demolished or restored. According to Tshabalala, leasing agents should take this move seriously as they may face government departments leaving their lease agreements earlier than initially agreed.
“Ironically though, construction and development companies may benefit as the opportunity to redevelop and re-energise the city centre presents itself,” Tshabalala said.
The Johannesburg CBD is labelled as an Urban Development Zone and is particularly attractive to investors because of its tax incentives.
“Lightstone transfer data shows that when older buildings are bought and revamped, even on a minor scale, could easily be sold for two or three times their purchase amount after a refurbishment.” One such example is 305 Fox Street.”
A recent Lightstone Commercial Property Report indicates that number 305 was bought for R1 million in 2013. After the municipal value roll in 2017 it was valued at R 2 768 000 following it’s refurbishment in the same year.
The building is now listed for R6.2 million and houses a coffee shop, restaurants and apartments proving a solid investment and social upliftment in the district, Tshabalala explained.
“This is a prime example of how a refurbishment is a very lucrative investment in the long run.”
Joburg Mayor Herman Mashaba, however, said the government doesn't have money to rejuvenate any of the hundreds of dilapidated buildings in the Joburg inner city. He said they needed the private sector to come into play and invest.