Friday, January 21

Office property vacancies hit ‘all-time high’ – Sapoa

South Africa’s office vacancy rate hit a “record high” in late September, with about 15.4% of the country’s office space now vacant.

This is according to the latest Office Vacancy Survey (OVS) report for the third quarter of 2021, published by the industry body, SA Property Owners Association (Sapoa). The data is compiled by MSCI.

Of the nearly 18.9 million square meters (square meters) of office space in South Africa’s major metropolitan centers: Greater Johannesburg, Tshwane / Pretoria, Cape Town, Durban / eThekwini and Nelson Mandela Bay, more than 2, 91 million square meters are currently unoccupied.

That equates to more than the office space of the central Joburg and Cape Town shopping malls combined.


SA’s meager GDP growth in recent years, and the country effectively entering recession even before the Covid-19 pandemic, has been raised by listed property counters such as Growthpoint as a major contributor to the deterioration of the office real estate market. .

The work-from-home (WFH) trend driven by the pandemic has added to the woes of office owners both locally and globally.


Sapoa’s latest report reveals that this is the worst the office property sector has ever been in terms of vacancies, with the previous record vacancy rate of 15% recorded in March this year, equaling a 2003 record. .

“In the third quarter of 2021, South Africa’s office vacancy rate had reached a new all-time high of 15.4% … Overall office vacancy rate increased 40 basis points [basis points], after equaling the previous historical maximum of 15% registered in March 2003 ”, says the OVS report.

Real quantum of empty space

The report highlights that an important difference compared to 2003 is the actual amount of vacant office space currently available (2.9 million square meters now versus 1.6 million then).

“The construction boom from 2007 to 2017 saw the addition of more than 6 million square meters of office space to the total stock. So while the current vacancy rate is now the same as it was in 2003, there are 1.3 million more square meters of vacancies, ”the report states.

“As the overall size of the market increases, naturally it takes a higher level of absolute acceptance to return to a certain vacancy rate that requires the creation of sustainable jobs….

“While a reversal of the current trend seems unlikely in the short term, significant post-pandemic economic and employment growth is required if the office sector is to transform into a more agile and strong version of itself in the future. next decade, “the report adds. .

CBDs are the most affected

It is concerning that four of the five largest CBD or office nodes in the country have office vacancies higher than the national average, with Durban’s CBD at 21.3%, Sandton at 18.7%, CBD from Joburg with 18.3% and Cape Town CBD with 16.2%.

The financial center of Sandton, SA and home to the largest concentration of headquarters and commercial offices, has made headlines for having the most vacant space in terms of square footage.

Of Sandton’s approximately 1.94 million square meters of office space, just shy of 363,000 square meters2 It is vacant according to the OVS report.

That equates to more than three times the space occupied by Discovery at its massive new Sandton headquarters.

Sandton, Discovery, Growthpoint, offices

112 000m from discovery2 The head office is the largest office building in Sandton. Image: supplied

“At the nodal level, Sandton has the most space available and represents the majority of Prime [P]- and Grade A space currently available for rent. Midrand, Highveld Technopark and Durban CBD are also among the nodes where a large amount of Grade A vacant space could affect rental growth, ”the report states.

“Given the pressure on office rentals and the rise of the WFH, we expect tenants to increasingly switch to smaller, better-quality boxes as the cycle progresses,” he adds.

“This could be positive for grade P and A office vacancies, but it could have a lower income performance as owners could face the double-edged sword of vacancy and [rent] reversion.”

While the Durban CBD has the highest office vacancy rate in the country in percentage terms, its actual vacant space is currently just over 168,000 square meters.2.

The embassy building in Durban’s central business district, owned by the Delta Property Fund. Image: supplied

Durban’s central business district (782,309 m2 of office space]is SA’s fourth largest office node, after the Sandton, Joburg and Cape Town CBDs.

The Joburg CBD has more than 1.75 million square meters of office space, with 321,2662 currently vacant.

Cape Town’s CBD is 1,037,052 m2 of offices, with 167 667m2 of this vacant space according to the OVS report.

Pretoria CBD is the best performing office node in the country, with an office vacancy rate of just 6.7%.

This is in large part because the city is the administrative capital of South Africa and benefits from the large number of national government department headquarters based there. However, the Tshwane metropolitan area (including key office nodes like Centurion, Menlyn, and Arcadia) has an office vacancy rate of 11.3%.

Despite also having double-digit office vacancies, the city of Tshwane still boasts of having the lowest office vacancy rate of any metro in SA.

Read: What SA’s Top Office Owners Aren’t Saying …

Nelson Mandela Bay (including the city of Gqeberha, formerly Port Elizabeth) in the Eastern Cape has the most job openings among major metropolitan areas, at 20%. However, it is home to a comparatively small office real estate market, with around 144 billion2 from space.

Greater Joburg (which includes Ekurhuleni and office nodes such as Rosebank, Midrand, Bryanston, Braamfontein, Randburg, and Waterfall in the OVS report) has an overall office vacancy rate of 17.5%.

This means that of the more than 10.37 million square meters of office space at Joburg, more than 1.8 million are currently vacant.

For context, that equates to about 10 empty Fourways shopping malls.

The eThekwini metro (which includes Durban CBD and other office nodes such as Umhlanga / La Lucia Ridge, Westville / Westway and Berea / Musgrave) has an overall office vacancy rate of 15.5%. This means that of the 1.7 million square meters of metro offices, 262,8402 remains vacant.

The node of key decentralized offices of the city of Umhlanga / La Lucia Ridge (with more than 500,000m2 office space), around Old Mutual’s Gateway Theater of Shopping, has a lower office vacancy rate of 8.5%. This helped reduce the metro’s overall vacancy rate, despite the vacancy rate of more than 21% in Durban’s financial district.

The Cape Town metro has an overall office availability rate of 13.5%. The OVS report reveals that of the 2.65 million square meters of office space in the Cape Town metropolitan area, 356 734 million2 is vacant.

While Bellville’s key office node has a comparatively low vacancy rate of 6.2%, Century City (adjacent to Hyprop’s Canal Walk Shopping Center) has the highest office vacancy in the Cape Town metropolitan area, with a 21.6%.

Commenting on the OVS report, Sapoa CEO Neil Gopal tells Moneyweb that the problems in the office real estate market are due to a multitude of factors.

Among the factors he cites are:

  • Lack of economic growth
  • High unemployment
  • The impact of restrictive locks
  • The impact on investor confidence in general, given the consequences of the recent unrest; and
  • Constant uncertainty around various government laws.

“The increasing rate at which our local municipalities are becoming dysfunctional is having a direct impact on our assets. Unsustainable rate increases, lack of electricity supply due to ongoing load reduction, lack of water supply, corruption, etc., are not helping the situation, ”says Gopal.

The OVS report notes that “many large occupants [corporates] they have now publicly stated that over time they will reduce their physical real estate footprint. ”

“Combined with weak demand, as well as low job growth and business confidence, there is a realistic probability that the office vacancy rate will further weaken in the short to medium term,” he adds.


Listen to Suren Naidoo’s interview with Broll Property Group CEO Malcolm Horne and organizational psychologist Dr. Natasha Winkler-Titus (or read the transcript):

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