Although demand for commercial property rentals is lacklustre currently, some areas in Johannesburg have seen an increase in demand for office space.

As an example, he says in Illovo A-grade vacancy has decreased from 2.9 percent to 1.2 percent for the period June 2010 to June 2011. There has been a decrease in A-grade vacancies in Rivonia, Melrose, Rosebank, Sunninghill and Woodmead.

According to Rodney Luntz, managing director at the High St Property Co, there are pockets of areas in northern Johannesburg where the demand for office space has in fact increased over the past twelve months and subsequently this equates to lower vacancy rates in those particular areas.

As an example, he says in Illovo A-grade vacancy has decreased from 2.9 percent to 1.2 percent for the period June 2010 to June 2011.

There has been a decrease in A-grade vacancies in Rivonia, Melrose, Rosebank, Sunninghill and Woodmead.

Through interaction with both landlords and tenants we have noted that these areas tend to be prime nodes and tenants are taking advantage of the soft market to move into these areas at reduced rentals, says Luntz.

Sandton has experienced an increase in A-grade vacancies for the period June 2010 to June 2011 from 7.7 percent to 8.4 percent. 

Luntz explains that this is going to be exacerbated with the ongoing development currently taking place and planned for the Sandton CBD.

Research shows that there are over 30 development applications currently in for approval including zoning changes and renovations.  

Rosebank does look better than Sandton with a slight take up of vacancies. Vacancies in June 2010 for A-grade buildings were 17.9 percent compared to June 2011 vacancies which were at 16.6 percent.

“These vacancies are still way above the national average and with approximately 80 000 square metres of new space coming on stream we can only expect to see a negative impact on vacancies.”

Luntz says with increased vacancies comes pressure on rentals.

However, some locations have experienced robust rental growth such as Sandton CBD at 11 percent, Parktown at 10 percent, Bryanston at 7 percent, Illovo at 4 percent and Rivonia at 2 percent 

He says while Sandton vacancies went up slightly, rental growth increased.

“In this market it demonstrates the attractiveness of Sandton as an office node and the fact that that tenants who want to be in the area are prepared to pay.”

The node of Parktown also showed an increase in vacancies from 3 percent to 4.1 percent with rental growth of 10 percent.

Bryanston’s vacancies decreased from 8.6 percent to 7.2 percent which translated into rental growth of 7 percent.

Illovo recorded a slight decrease in vacancies with slight increase in rentals of 4 percent.

Rivonia’s vacancies decreased from 20.7 percent for A-grade stock to 13.8 percent and rentals grew by 2 percent. 

Rosebank in fact showed a decline in rental growth of -2 percent notwithstanding that it had a decline in vacancies.

As with the situation in Rivonia, such a high vacancy level will cap any increase in rentals and in Rosebank’s case even force rentals to go into minus territory.

He adds that with the market set to continue on this track, landlords need to exercise caution and manage their vacancies carefully as well as strategise on ways to grow the market.

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