Office glut hits rentals

Johannesburg - An enormous countrywide oversupply of offices, with more than a million square metres of office space standing empty countrywide, is putting pressure on rentals.

At the same time a significant amount of new space is still coming onto the market.

The rental growth that some of the listed property companies achieved for new lease agreements and existing contracts renewed over the past year is currently below average.

From the recent results from most of the listed property companies it is evident that vacancies in office portfolios rose in the period under review. This is in contrast to a report from the South African Property Owners Association (Sapoa) for the second quarter, which indicated an improvement.

Against this background players might wonder whether the vacancy situation was indeed turning around.

Coronation property portfolio manager Anton de Goede expected the office sector to remain under pressure for at least another 12 months.

He said about 1.3m square metres of office space was currently standing vacant countrywide, representing 8.8% of all office space.

This, he said, was a significant proportion of space that needed to be absorbed, while 4% of the total office space was in the process of being constructed. This was moreover happening at a time when there were few new takers of office space.

Keillen Ndlovu, co-head of Stanlib, said it appeared that office vacancies had reached a turnaround point, but it would take rentals some time to recover, given the high vacancy rates.

- Sake24.com

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