Big companies including Discovery, Shell and Accenture are increasingly opting to appoint real estate professionals to find them suitable office space and manage their leases so they can focus on their core business.
When Discovery wanted to consolidate its operations in the Sandton building, the JSE-listed financial services group appointed real estate advisers to achieve its goals and reduce occupancy costs.
“As advisers, our scope in terms of tenant representation is broad, allowing us to conduct a more detailed analysis on the actual space requirements and financial aspect in line with the tenant’s needs,” Calvin Crick, MD for transaction services at Cushman & Wakefield | Broll, told Business Day.
Unlike traditional commercial broking where brokers or agents represent landlords to find suitable tenants, the tenants appoint professionals to help them make the right decisions on their space requirements.
Cushman & Wakefield | Broll is the delivery partner for New York Stock Exchange-listed Cushman & Wakefield in SA and in other parts of Sub-Saharan Africa. In 2021, the company had operations in more than 60 countries and recorded revenue of about $9.4bn from property, facilities and project management, leasing, capital markets, and valuation and other services.
In SA the Cushman & Wakefield | Broll partnership provides tenant representation services including advisory and transactions, account management, estate and facilities management, integrated data and finance management and workplace consulting among other services.
The company represents SA big corporates and multinationals from Europe, the Middle East and Africa (EMEA) region, as well as the US and Europe looking for office space in SA.
Cushman & Wakefield | Broll’s tenants include Absa, Accenture, Discovery, Ericsson, EY and Shell. It manages office leases for its clients, including rental payments along with the relationship with landlords.
Discovery, with whom the company has a 20-year relationship, worked on its consolidation project to move to the Sandton building for four years before the deal became public.
Point of contact
Crick said the advisers become the single point of contact for their clients; whether they want to renew their lease agreement, downsize their premises or look for new space.
“We advise our clients on how the space would work drawing on latest trends, data and requirements, and for the tenants, it’s about reducing occupational costs while occupying a conducive work environment.”
With the hybrid work model becoming popular for many companies there is a shift to workspaces as opposed to work stations, Crick said. For example, while the office will remain important for collaborative and networking purposes, not every employee needs to be in the office daily. Tenants will then have offices with different boardroom sizes, pause areas or plug-and-play areas for those people who don’t come into the office frequently.
Big corporates are still looking for office space and signing lease agreements of about five years, Crick said. However, they want the flexibility to be able to reduce or increase space as their business operations change.
The average office space being taken up ranges from 800m²-1,500m². Though rentals remain under pressure due to oversupply, quality premium buildings are attracting tenants countrywide.
Crick said these buildings offer amenities such as gyms, cafes and guaranteed backup power. In some cases, multinationals demand to see the green-building specifications and what landlords are doing to reduce carbon emissions in their buildings.
Flight to quality
He said the flight to quality in Sandton has seen Discovery, one of the 6-star green-rated buildings in the country, sublet about 8,000m² thanks to the amenities it offers and its central location. Landlords such as JSE-listed Redefine and Growthpoint are seeing good demand and leasing activity for their premium buildings in Sandton.
Waterfall City also has been a success story, attracting several multinationals which choose the precinct for their headquarters. Crick reckons Waterfall is probably the only area there will be new office buildings for the time being, built on speculation to meet growing demand.
Rentals for gross premium offices in Rosebank in Johannesburg, Waterfront in Cape Town and Umhlanga Ridge in KwaZulu-Natal are about R230/m², while in Waterfall City they range from R200/m²-R220/m². Rental escalations that have hovered around 6%-7% are starting to rise beyond 7%.
“There is huge potential for growth of tenant representation,” said Crick.
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