Old Mutual like any business, is in business to make profits. To what degree any business should express some sort of social conscience may be indicated by the community it does business in. In South Africa every company is under pressure to have (CSI) Corporate Social Investment programmes indicating a social conscience and a willingness to be part of social change.
Old Mutual Property, owners of Gateway Shopping Centre, announced on the 31st January “continues to look for innovative ways in which to make valuable contributions to sustainable community development and township upliftment.” This is referring, in particular, to the redevelopment of the Kagiso Mall in Mogale City.
This isn’t the first time Old Mutual Properties have done successful revamps of late. A few years back they were awarded the Golden Arrow Award for the revamp of the Riverside Mall in Nelspruit and awards were also won for the revamp of The Bluff Shopping Centre.
Kagiso is a township falling under the Mogale City municipality. The mall was an old 1980’s white elephant with poor occupancy rates. The shopping centre had become irrelevant to the community. Although the anchor tenant, Shoprite remained, a further 9200sqm of retail has been created, about 50 shops including late-night fast-food outlets.
Old Mutual Property’s Hein Smit believes this is “a sustainable contribution to the environment and township communities, which enables wider socio-economic upliftment.” He insists that the sustainability is all in the design which includes “utilising local skills and expertise in the development phase, re-usable building materials (which are donated to the local community if not used in the new development), rainwater harvesting, low energy lighting and improved insulation specifications.”
If one is looking for Old Mutual Property’s track record there is always the Phanghami Mall which took advantage of a more decentralised retail development area servicing 8 townships and various surrounding villages. Close to the Punda Maria gate of Kruger National Park it has a tourism component to the project. Aspects of community upliftment in the construction and management of the centre were considered vital to the scheme. R75 Million was invested.
Similarly Phumlani Mall in Tembisa on the East Rand was bought for R175 Million and revamped with the purpose of uplifting the community. With a reported tenant mix of 75% National chains one hopes there is something still in for local retail.
As commendable as these projects may be one has to consider them in the light of other projects on the go elsewhere. For example Old Mutual Properties has announced that it plans to invest a whopping R20 Billion in a “Town Centre” project focused on the Gautrain station in Midrand comprising 350 hectares of land. Old Mutual Property also has Rosebank’s The Zone in its quiver. This year the plan is to add an office tower in Rosebank to the budgeted tune of R340 Million.
Throw in R2 Billion rand to be spent on revitalising Menlyn this year it’s interesting to note that Old Mutual Property’s property portfolio is bordering on R35Billion 70% weighed on retail, 10% around offices with the balance in industrial premises. One doesn’t want to detract from the good work done in the name of Corporate Social Investment but we may to keep a little perspective before feeling all warm and fuzzy.
Some would say that we build for tomorrow not for today. For some time now Cape Town CBD has seen few new construction projects and given the latest office vacancy, figures that may be just as well.
Looking at the latest SA Property Owners Association (SAPOA) office vacancy survey for 2011 Capet Town’s six out of seven nodes face a trend of growing vacancies for the previous quarter. The survey shows the amount of vacant space is also rising in most decentralised office markets.
For combined Premier A and B grade offices:
Cape Town CBD is at 10.5% up from 9.7%.
In the Southern Suburbs: Claremont is at 13.7%; Rondebosch & Newlands 7.3%.
In Tygerberg, the Bellville vacancy average is 9.4% whereas a year ago it was 6%.
Office vacancy around the broader V&A Waterfront precinct is at 6.9 per cent.
Pinelands is at around 3.4%. Century City however has dropped over the previous year to 8.8% from 10.5%.
Here development activity has increased dramatically, with works on the Estuaries 2, Park Lane and the Bridgeways Precinct currently in progress.
There is some evidence that tenants have attempted to reduce their rental bill by securing cheaper space. This may have played a role in underpinning the demand for affordable CBD space.
Looking at smaller business owners, it may be that many people have gone back home to set up office in the garage – back to cottage-work environments away from the big city.
The point that vacancy rates are growing in Cape Town should not come as a shock. While weakening economic circumstances reduce the demand for space and increase vacancy rates, it is equally important to consider the effect that lagging development activity has on the market. Vacancy rates rise and fall because development activity is often poorly co-ordinated with demand.
Of course an obvious down side for property owners is that a rise in vacancy rates also has the potential to increase operating costs. In an environment of rising vacancy rates, property owners have little choice but to absorb operating costs that would normally be passed on to tenants. This issue has become particularly pertinent to South African property owners in general who have experienced a significant rise in electricity costs which would normally be passed on to tenants.
But the are some people that are looking ahead at the future of space in Cape Town with a steady confidence in the long term office market. In the Clock Tower precinct for example, Allan Gray is making its presence felt with a confidence inspiring project.
The new Allan Gray building is a R1 billion mixed use complex and claims to be one of Cape Town’s first Green buildings. The development is the biggest at the V&A Waterfront since the state-owned Public Investment Corporation (PIC) and Growthpoint Properties bought the iconic landmark for R9.7bn earlier in 2011.
Another office development worth mentioning is the new Portside building which will be the provincial headquarters of FirstRand’s three principle divisions: FNB, Wesbank and RMB. There will also be an additional 25 000m² of prime space up for grabs for leasing to corporate and retail tenants. The project on the corner of Buitengracht Street and Hans Strijdom Avenue is a partnership between First Rand and Old Mutual, it should see completion by 2014. This bodes well for the precinct buoying up confidence in the area.
Other projects in Cape Town in the near future would include the new 20 storey building on Bree Street that will host legal offices and present more office space to fill. Currently underway is the 18 storey The Mirage hotel and mixed use development that should be complete by 2013. Cape Town International Convention Centre, which includes new convention space, office space, apartments, as well as a hospital is also on the cards. By the time these projects mature the hope is that the world will be a friendlier place for landlords.
Worth noting is that there are also some up sides to the economic downturn effects. The vacancy trend has created some opportunities for tenants. Some companies have felt the confidence to shelve elaborate expansion plans and others who were facing relocation now have negotiating space. Landlords are far more willing to exercise a little creativity, offering concessions and making opportunities available that would not otherwise have been available in a low vacancy market.
So as long as Cape Town keeps its head down building for tomorrow’s prospective tenants and looking after the one’s it currently has, it should be able to weather this storm.
The Greek philosopher Aristotle wrote that change in all things is sweet. Scottish comedian Billy Chrystal said that change is just a lot of hard work! Witnessing the changes to the SandtonCBDskyline you may see something sweet here and there, but it’s mostly the result of a lot of hard work.
Much has been publicised about SandtonCity’s big R1.77bn first phase expansion. One can’t help draw attention to Sandton City’s retail space expansion to a total of 143 690m² upon completion of the first phase this month, taking the complex, which includes the Sandton hotel and office component, to 215 000sqm. But there is more happening in Sandton besideSandtonCity.
Part of what was once referred to as the wealthiest square mile inAfrica, the Village Walk, these days only attracts a steady stream of JSE visitors’ vehicles seeking a parking space. Management of the once thriving collection of eateries and fashionable boutiques seemed to lose any sense of vision in the early 2000s. The once fashionable in-spot of the 90’s, sadly, has discount posters in its windows and wispy tumble-weeds of litter blowing about its courseways.
Having started as a rumour earlier in the year, it’s now conventional wisdom that the Village Walk will be demolished and even that 60 year old Grand Dame the Balalaika Hotel will be torn down and resurrected on the corner ofMaude StreetandRivonia Road. Of course it was never a matter of competing with its two sistersSandtonCityandNelson Mandela Square, rather it will be a matter of complementing and supplementing those enormously successful retail and entertainment venues. The current Village Walk basement will be retained and two floors of retail and some office space will be layered above. The whole development will be in four phases over eight years. Only a couple of blocks from the Gautrain station the venue has exciting potential. An international hotel is also on the cards making up the rest of the 180 000sqm of the project’s space.
Investors are showing enthusiasm for the acquisition of land or buildings for redevelopment close to the Gautrain station and it is envisaged that the area surrounding the station will be the centre of sustainable growth in the value of commercial property. There are even plans afoot to build above the station itself!
115 West Street, right opposite the station, is the future site of the Alexander Forbes head office for its approximately 2200Johannesburgstaff. The refurbished, eight storey 36 950m² office building will be embracing some green building codes with all natural light and energy efficient lighting. Throw in super fast lifts and state-of-the-art auditoriums stuffed with all the latest technology, a gym, snazzy coffee shop and staff restaurant and you have a self contained little urban island. Nebank is putting up the R840 million funding for the development. This will become Zenprop’s Properties’ flagship of South African commercial properties. Alexander Forbes is expected to take occupation of the building on1 October 2012.
Characterised by a large number of owner occupied developments and with the majority of international banks, the JSE Securities Exchange, legal and management consultancies, Sandton, is widely acknowledged as the premier financial district inSouth Africa. There are currently over thirty development applications for the SandtonCBD, which includes zoning changes and renovations.
One such revamp is Southern Sun’s landmark Grayston Hotel. It’s closing its doors next month with a proposal having been lodged for the redevelopment of the building.
Other developments on the boil are 20 000sqm of sectional title office space on the corner of Katherine and West Streets – for occupation in 2013; 6 Sandown Valley Crescent, with a gross lettable area of 18 000sqm and a projected completion date of mid-2011; 16 000sqm at 1 Protea Place, with Cliffe Dekker Hofmeyr Attorneys as a tenant plus other smaller tenants; and Sandhurst Office Park, where 26 000sqm of office space becomes available in 2013.
Much of the demand for development seems to revolve around the financial sector. Developments planned over the next five years include: 9 000sqm at140 West Street; 35 000sqm for Standard Bank at11 Alice Lane; 150 000sqm on the site of the old Sandton municipal offices; and atFNBTowers, 25 000sqm of additional space.
One of the biggest changes to the Sandton skyline will be on the corner of West, Stella and Rivonia Roads. Insurance giant, Old Mutual, wants new headquarters inSouth Africa. Its answer is to build a multi-storey office precinct next to the Gautrain station. Old Mutual is to move their head office fromPresident Streetin Jo’burg’sCBDto where theChadrien Placebuilding stands, at the corner ofRivonia RoadandWest Street. The first 50 000 square meters will be ready for occupation by 2013, and the final product will be a 35 storey building.Chadrien Placeis currently an ageing Tudor-style block of 33 flats. On average units were valued at about R1,5m a couple of years ago. That all changed thanks to the Gautrain. Old Mutual is believed to have paid R400 million to a development consortium for theChadrien Placesite.
Finally on the auction front, one gets an idea of the demand in theCBD. During Auction Alliance’s September multiple auction event, two A-Grade office blocks in the heart of the SandtonCBD, offering a first rate development opportunity, were sold for R48.5 million. With A Gross Lettable Area of 2530sqm, this represents a bulk value of over R19,000/sqm.
There may be an economic down turn, but the future for Sandton looks set to change. For some it’s going to be sweet, for others, a lot of hard work.
Learn More about Sandton visit www.eprop.co.za