JSE-listed landlord Redefine Properties says despite SA’s office sector facing high vacancies and reduced demand, the company is not abandoning offices.
“We own prime office buildings in sought after localities and we benefit from flight to quality,” CEO Andrew König said.
König said the company traded out of noncore office assets long before the Covid-19 pandemic, leaving it with high-quality properties that were attractive to tenants.
Redefine is a real-estate investment trust (Reit) that owns retail, industrial, offices, logistics and self-storage in SA and Poland. At the end of August, its assets were valued at R96.8bn.
It has 87 office properties valued at R21.2bn. Of these, 54% are premium grade, considered top drawer, 41% are A-grade with 5% being secondary grade buildings.
Portfolio vacancies reduced from 14.4% to 11.4% below the SA Property Owners Association 15.5% for the third quarter of 2023. During the 12-month period ended August 31, Redefine’s premium-grade offices recorded 6% vacancies.
“In an environment where office prospects have been largely negative, we think this is a phenomenal achievement,” said COO Leon Kok.
On its office holdings Kok said: “We will continue to invest in well-located properties to ensure we attract demand within the office sector.”
Occupancy levels rose from 85.6% during the 2022 financial year to 88.6%. During the reporting period, the company signed 44 new lease deals from 43 previously.
According to the SA Property Owners Association (Sapoa) office vacancy report for the third quarter of 2023, at the end of September, 62% premium offices were fully let compared to 45% when the national office vacancy rate peaked in June 2022.
Premium office vacancies reduced from 14.5% at the start of 2022 to 9.5%.
The report shows that though average rents for premium offices differ across various localities, these rates have reduced significantly in the past year, which seems to have aided the vacancy rate.
Sapoa said the relatively small rental gap between premium and A-grade buildings should continue to support tenants’ flight to quality as many occupiers are still reducing the space they occupy.
Redefine’s offices in various nodes have lower vacancies compared to the Sapoa benchmark. In Rosebank and Bryanston, vacancies are in single digits — 3% and 7% compared to 12% and 20% recorded by Sapoa for the nodes. The Western Cape and Sandton offices have vacancies of 7% and 9%, respectively, compared to Sapoa’s 10% and 19% for the nodes.
During the reporting period, Redefine allocated R730m in capex towards its office portfolio. In October, the company announced the redevelopment of Black River Office Park to meet growing demand for quality office space in the Western Cape.
The office park’s central building is being refurbished to provide over 12,000m2 of premium grade office space over five floors.
“Businesses are seeking quality spaces in excellent locations that support business continuity and offer easy and convenient access to amenities,” said Scott Thorburn, national office asset manager at Redefine.
Update: November 6 2023
This article has been updated with new information throughout.
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