Redefine Properties continues to benefit from a flight to quality as tenants seek A- and premium-grade office buildings.
As employees continue to return to offices, Redefine’s Sandton offices, which are mostly located close to the Gautrain station, and other businesses within the Sandton CBD are seeing high demand for space and reductions in vacancies. These include Alice Lane, 115 West Street, 90 Rivonia, 2 Pybus and 90 Grayston.
“Though it is a tenant’s market, we continue to experience good demand for our quality-rated office buildings,” said Redefine COO Leon Kok.
He said most companies want to complement their employee wellness efforts in environmentally friendly buildings. Others are consolidating multiple offices into a single location.
Redefine is a JSE-listed real estate investment trust (Reit) with a sectoral and geographically diversified property portfolio valued at R88.9bn in SA and Poland.
At the end of August, premium and A-grade office vacancies were 7.4% and 14.3%, respectively, with secondary buildings (B-and C-grades) recording 24.4%. The total portfolio vacancy rate reached 14.4%.
Despite the uptake of space, there has not been any rental growth due to a general oversupply of office space in the market, said Kok.
He said most of Redefine’s secondary buildings are located in the Johannesburg and Tshwane CBDs. Demand for space in these buildings is a function of economic growth that is currently very slow.
Redefine continues to refurbish and maintain all its office buildings to attract tenants. Selling office buildings in this environment is not easy, and not all buildings lend themselves to residential conversions, said Kok.
“Our approach to excess space will be more customised to each building. We could potentially look into building sections where we can accommodate data warehousing facilities in basement areas, enabling us to create non-gross lettable area (GLA) income.”
Redefine’s office portfolio of 101 office buildings is valued at R22bn. By value, premium grade makes up 51% of the total portfolio, with A- and secondary grade offices accounting for 37% and 12% respectively.
About 85% of the office portfolio by GLA is certified by Green Star SA, meaning they are mostly newer developments which often have green elements. These can include renewable energy, water efficiency or gathering installations, and energy-saving lighting.
Spear Reit reports that the return to the office momentum continues with many national and international companies showing interest in Cape Town offices.
“For the six months to end-August, office occupancies reached 84%. Recently, Spear let nearly 900m2 of office space in Century City and, post this deal, occupancies will reach 90%,” said CEO Quintin Rossi.
Rossi said the office market is experiencing recovery as seen in the number of new leases concluded.
Growthpoint Properties said while some larger tenants continue to downsize and consolidate, offices will remain critical for improved productivity, collaborative working environments, mentoring and attracting skills.
“Tenants are returning to the office, with some coming in three times a week, and with ongoing load-shedding, many smaller tenants are coming back into the market,” said Estienne de Klerk, CEO of Growthpoint Properties SA.
De Klerk said tenants are looking for buildings with amenities such as cafes and gyms to encourage staff to return. They also want flexibility as they are not sure how they will use space in the future.
“Overall, sentiment in the office market sector has improved and we are experiencing increased inquiries for space within our portfolio,” said De Klerk.
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