JSE-listed landlords with exposure to offices are investing money refurbishing and revamping their buildings to attract and retain tenants.
Increased load-shedding, especially stage 6, is resulting in many companies returning to the office to take advantage of the backup power in office buildings.
Backup power and sustainability credentials are top requirements for occupiers looking to rent office space, especially in the current environment of rolling blackouts. Amenities such as cafes, pause areas, meeting rooms and telephone pods are important for tenants.
Growthpoint Properties, a bellwether of SA’s commercial property sector, spent R50m on refurbishing and structural revamps of its Gauteng headquarters, The Place, at 1 Sandton Drive in Sandton Central.
“The upgrade of this building is in response to the evolving needs of occupiers and the changing role of the office as a collaborative space enabling the enhancement of corporate culture and productivity,” said Paul Kollenberg, head of asset management for the office portfolio at Growthpoint.
Growthpoint is a JSE-listed real estate investment trust (Reit) which owns a diversified property portfolio across Africa, Australia, the UK and Eastern Europe. It also owns a 50% stake in the V&A Waterfront in Cape Town. At the end of June, its SA portfolio of 158 properties was valued at R26bn.
Kollenberg said generally, maintenance capex is 0.65% -1% of the value of the portfolio. Capital spend is dependent on locality and office product and potential returns on that particular investment.
“The Place is a professional offering, well located and close to amenities and we felt refurbishing the building would help attract tenants looking for offices in Sandton.”
Sandton, home to some premium-grade offices — many are considered top-drawer green buildings with energy and water-efficient features and alternative power sources — is battling high vacancies.
Growthpoint’s office vacancies in Sandton, which peaked at 30% at the height of the pandemic, have reduced to about 26%. Smaller tenants who gave up their space during the pandemic are back in the market, while demand is generally high for offices of 200m²-1,000m².
The Place, a premium building completed in 2007, has 36,000m2 of gross lettable area with 35% vacancies, or about 10,000m2 of space. Kollenberg said there has been a bit of churn, with some tenants downsizing and moving out to their other offices in Illovo.
Growthpoint occupies 4,800m2 of this space, almost the size of a rugby field. Bank of America and IG Markets are some of the tenants.
The refurbishment, which included space reconfiguration to create a seamless flow in the building, offers amenities such as meeting rooms, pause areas, a coffee shop and a car valet service, with a hairdresser, nail bar salon and dry-cleaning services coming soon.
“It’s no longer about just being in Sandton for tenants,” Kollenberg said, but about the location of offices close to the Gautrain station. These are more sought after than those on the outskirts of the central business district.
Rentals at The Place are R175/m2-R210/m2 depending on space rented and fit-outs. Premium-grade offices in Sandton command rentals of R180/m2-R250/m2.
Growthpoint will also introduce WorkAgility at The Place. This is an all-in-one, ready-to-occupy office concept for tenants looking for flexibility, with a fixed monthly cost.
First launched in Cape Town last year, Growthpoint said this concept will become available at its six buildings in Cape Town and Johannesburg with plans for further expansion.
Meanwhile, JSE-listed mid-sized cap Fairvest reported an increase in uptake of its office assets with vacancies decreasing to 13% during the 2022 financial year ended-September.
Though Fairvest intends selling its office assets to focus on becoming a retail-centred Reit, it continues to invest in its existing portfolio to attract tenants.
Fairvest recently completed the refurbishment of its 12,000m2 landmark offices at 220 Madiba Street in central Pretoria and an office building in Morningside in Johannesburg.
“The refurbishment secures the asset’s future relevance, appeal and competitiveness in an up-and-coming city node,” Fairvest COO Alon Kirkel said.
There was increased interest in and inquiries for space, he said, including from co-working and shared office tenants.
Kirkel said rentals in Pretoria are competitively priced at R80/m2-R150/m2 and attract business process outsourcing call-centre businesses and government tenants.
Meanwhile, for the six months to December, JSE-listed Texton Property Fund signed 24 new office leases for more than 6,000m2 of space. It recorded a 91.1% retention rate with 3.2% rental reversion on renewed space. The weighted average lease expiry was 2.82 years.
When large occupiers were downsizing space, Texton adopted the strategy to cater for small and medium enterprises (SMEs) and invested in its properties to mop up vacancies.
“The SME strategy has been successful and we expect increased load-shedding to encourage tenants to return to the office,” the company said.
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