March 13 2023
This is a guest piece by Ashleigh Müller, Principal Commercial Property Broker and Managing Director of Ask Ash National Property Brokerage. It was first published in Asset Magazine.
Sandton is the most valuable commercial node in Africa for many reasons and, post Covid-19, its struggles have been exaggerated tremendously.
It’s sobering to think that SA’s economy was forced into a hard economic lockdown in 2020, close on three years ago to the day. In late March of that year, the country was placed into a state of disaster and citizens were instructed to work from home and isolate from one another, with the aim of saving as many lives as possible. For the first time in many office workers’ lives, they would no longer wake up early to be at “the office at 8am” where they would in cubicles or open-plan setups with their colleagues.
It was a huge shift for people who were used to the 8am to 6pm office slog. Work and home lives intertwined. You’d be at work while your domestic worker was making your home spic and span which was just one distraction. While South Africans could put up with this for two years, it was unrealistic that it could last forever and since lockdown restrictions were eased and then lifted altogether, staff have returned to offices in droves.
The premium office node of Sandton showed just how resilient it is with bankers, accountants, lawyers and other professionals and their support staff working in the nodes’ impressive skyscrapers once again. Major landlords such as Growthpoint Properties and Redefine Properties who have enjoyed a presence in Sandton for decades saw their office towers reoccupied and the concept of work-from-home being the preferred place of work was debunked.
In fact, most office workers chose to at least fit into a hybrid system which would see them in the office for at least three days a week.
Sandton is an impressive node in Johannesburg. Initially it centred around Sandton City, one of the country’s most highly valued shopping centres which was built in 1973 and has since transformed into a mall of a global top standard. A highly commercial node which was busiest during the week, full of office workers, with the mall pumping on weekends; in recent years, the node has flourished into a multi-use node with residential developments popping within the area and on its outskirts. The Leonardo tower, which is the largest building in Africa was opened, containing upscale apartments for professionals and high-rollers as was Sandton Gate, a mixed-use development built on the outskirts of the node.
Sandton offices are also becoming more affordable for tenants. There has been an oversupply of office space for more than a decade and Covid-19 exacerbated this issue. This prompted landlords to charge lower rentals.
Further, with current socio-economic challenges facing SA where jobs are scarce and growth is low, it’s unlikely that many landlords will invest in or develop new office blocks and skyscrapers in the next couple of years. P-grade offices in nodes such as Sandton are in demand but in low supply.
This is leading to increased demand for B-grade buildings and in fact, landlords are investing in this sector of offices. They are installing generators, other equipment and facilities. They’d rather spend money on these features than build new as the costs of construction have risen and continue to rise. It’s difficult to build new today as replacement costs compared with the costs of improving already built properties, are just too high.
The B-grade office block is becoming cooler. Landlords are offering favourable deals with low rentals, low escalations, one or two free months of rent and generous fitouts. This all makes for very appealing deals when it comes to Sandton office space.
Sandton itself has also become an area which is easier to live, work and play in. For example, flexible working arrangements have reduced traffic congestion. People are now starting work shifts in Sandton offices at different times of the day. They are shopping at Sandton City and visiting coffee shops and restaurants during lunch breaks, or before and after work.
The Gautrain has made travel to and from Sandton easier for people staying in Midrand and Pretoria. The Rea Vaya has also recently launched in SA’s premium business node.
Redefine Properties highlighted this trend at a recent investor presentations day.
Flexible working had taken out about 20% of traffic flow which has opened Sandton, prompting more people to embrace the node, said Redefine’s national office asset manager, Pieter Strydom.
He said the average travel times into Sandton reduced by about 40%.
So, what interesting offices does Sandton have to offer? There are the likes of 90 Rivonia which is just across the road from Sandton City and 115 West located in Sandown, both of which are owned by Redefine Properties have space available. Atholl Towers which was developed by ALW Properties, and which lies on Patricia Road, also has space to offer as does 148 on Katharine, owned by Growthpoint Properties.
There are also numerous co-working spaces available across Sandton including those owned by Workshop 17, WeWork, Regus and The Business Exchange. Given that there has been an oversupply of offices in Sandton in the past, we can expect to see offices converted into shared workspaces in 2023 and 2024.
Clever developers will also make more offices into multi-use spaces. For example we could see more car showrooms as well as specialised retail stores within office blocks.
Expect vacancies in Sandton to ease with pace in 2023. Yes, for years vacancies have been stubborn in SA’s office market overall, but as nodes like Sandton, Waterfall and Rosebank develop and the landlords which own offices within them offer more attractive things to tenants, new rentals are gaining momentum.
The South African Property Owners Association (Sapoa) reported in January this year, that at the end of 2022, the overall office vacancy rate was 16.1%, down 30% basis points quarter on quarter. P-grade Sandton offices have a vacancy rate of about 7% which has in the past been deemed to be a healthy average.
As resilient South Africans, working from home is not always easier. You might skip the traffic and potholes to work, however, other challenges such as working at home during hours of blackouts or with children in your household (or both) can get to a person. The hybrid office model and checking into the workplace outside of home a few times a week is not only being welcomed by the working South African, it is being asked for and appreciated. If you’re in the market for a new office space in the Sandton precinct, drop me a direct message and I can let you know about all of the worthwhile promotions that are currently on when it comes to free rent periods and landlord’s subsidising large amounts of your fit-out.
Ashleigh Müller is Principal Commercial Property Broker and Managing Director of Ask Ash National Property Brokerage. If you’re keen to continue the conversation (because Ashleigh sure is), please connect with her on LinkedIn: Ash Müller or look up Ask Ash on Google to read their reviews.