Johannesburg’s premium Rosebank offices are sought after for their brand new buildings situated in a desirable and growing city node.
Over the past few years, there has been a number of commercial and residential property developments.
The area is home to many corporates including Standard Bank and Pepsi Co. Notable Rosebank offices include The Fire Station, Rosebank Towers and The Link, among others.
Rosebank is home to the Gautrain station, and it is conveniently located close to the highway and major roads with lots of public transport. Developments are still ongoing making it a sought after location.
Many tenants are moving from neighbouring areas to Rosebank offices, says John Jack Galetti Corporate Real Estate CEO.
“We are seeing a great move to Rosebank as new buildings become available. Its mixed-use lifestyle makes it a desirable node for many corporates and businesses,” he says.
Office rentals and vacancy rates
Premium rentals in Rosebank offices are the most expensive at R234/m2, according to the Cresa office report.
In Sandton CBD and Melrose, rentals are R224/m2. Midrand and Fourways offer the lowest prices of R154/m2 and R167/m2 respectively.
Paula Hardy, senior broker services consultant at Colliers International Johannesburg, says Sandton has the highest vacancies, mostly in the A- and B-grade office buildings.
She says well-fitted offices in the greater Sandton node are priced between R120/m2-R160/m2. “Prime offices sit on the market for longer as rentals are north of R200/m2.”
Rosebank vacancy rates reached 11.2% in Q3 2020, lower than Illovo which recorded the highest vacancy rate of 22.4% during the period.
Jack says Illovo landlords will need to reprice downwards in order to attract new tenants into empty buildings.
According to Guy Voller, managing director at Cresa, Illovo is a centrally located and relatively small node. “The effect of a handful of medium-sized tenants relocating to nodes like Rosebank and Sandton is significant on the node.”
Voller says the ease of access to the Gautrain, amenities and other businesses has resulted in tenants moving away from Illovo.
Take Fricker Road for example, it was once a sought-after corporate lane in Illovo. It was home to the likes of Broll Property Group and Webber Wentzel who have since moved to the Sandton CBD. Vacancy rates increased by 4% year-on-year to a high of 22.4% by the third quarter of 2020. Rentals remain high at R214/m2. However, there have been new prime offices coming onto the market including Illovo Point.
Waterfall records the lowest vacancy rates of all prime nodes
The Cresa Q3 2020 shows that the Waterfall node recorded the lowest vacancy rate of 4.4%.
Voller says Waterfall is new hub for premium offices, and many developments have been tenant driven hence vacancies are low.
“Waterfall’s newer status and good accessibility attracts tenants moving from older buildings in nodes like Woodmead, Sandton and Sunninghill.”
Hardy points out that Midrand and Waterfall are very unique office nodes. For example, the western side of Midrand comprises primarily B-grade offices with rentals ranging from R85/m2 -R120/m2.
Waterfall on the other hand is still a growing node with asking rentals for current vacant premium offices charged at R219/m2.
State of office market
According to Jack, the office market is currently operating at approximately 60% occupancy with buildings starting to fill up.
“We are confident that we will still see a return back to the office in the next 18 months. This could be sooner if the Covid-19 vaccinations reach South Africa,” he says.
Currently, occupiers are looking at signing short-term leases or, as an alternative, acquire offices at reduced rates.
Leasing activity in sub-letting is quite high. Here, sub-lessors are able to offer deals with huge incentives to attract sub-lessees, points out Jack.
Hardy says the office leasing market is slow, and hopes demand will pick up during the first quarter of 2021.
“In 2021, many corporates will relook at downsizing to smaller spaces especially where headcount has been reduced. Generally, corporates and businesses will relook at their office strategies after having assessed the impact of working from home.”
A new way of working will evolve, and organisations will need to embrace technology as flexible working is set to become the new normal, says Hardy.
“In addition, future offices will be designed differently with less space and more collaboration,” she adds.