October 16 2023
Investec Property Fund (IPF), the JSE-listed diversified landlord has completed its rebranding as Burstone Group.
The company which owns assets in SA and Western Europe with exposure to Australia, wants to be seen as a company with its own strong leadership team and strategies. The group was founded by Investec Bank executives and Investec still has a stake in Burstone.
Burstone’s European assets are worth around R23bn, while its South African exposure is worth R15bn. It has A$450m of equity under management in Australia. This is through an 18.7% investment in the Templewater Australia Property Fund and a 50:50 joint venture with Irongate Australia Fund Management.
Burstone’s CEO is Andrew Wooler. He said at a recent media lunch that Burstone’s strengths lay in it having invested in a diverse range of property classes. The company managed to get through the pandemic well and has impressively decreased its overall office vacancy rate to about 4% from around 7% by the end of September 2022. The fund’s office vacancy is at 6%, much stronger than the 10.3% that it was at the end of September 2022.
Value-added initiatives pay off for Burstone
Vacancies have declined from more than 10% in September 2022 to 6% as workers return to office
11 OCTOBER 2023 – 19:57
The Firs in Rosebank, Johannesburg, is one of the properties in Burstone’s portfolio. Picture: SUPPLIED
Burstone Group, the former Investec Property Fund, says its SA office portfolio is experiencing good leasing activity and reduced vacancies despite a challenging operating environment and load-shedding.
Office vacancies, which peaked at about 15% at the height of the Covid-19 pandemic in 2020, have been reducing as demand increases, the group said. Demand is being driven by small to big tenants, including call centre operators, marketing, insurance, financial and legal services, Burstone said.
By September 2022, vacancies declined to 10.3%, and fell further to 6%, the group said in a pre-closed period trading update for the six months to September 30.
Graham Hutchinson, MD for Burstone Group SA said the office property sector had experienced significant supply and demand imbalances even before the pandemic.
To that end, Burstone focused on proactive asset management initiatives about five years ago, providing exceptional client experience and value-added services, he said.
“Our strategy to focus on offering essential amenities, shared working and collaborative spaces is paying off as seen in vacancies reduction down to single digits,” Hutchinson added.
Office vacancies peaked at more than 50% during the first two months of the pandemic at The Firs in Rosebank and Sandown Valley buildings, he said, adding that those offices are now fully occupied.
Hutchinson said it is often hard to imagine what space could be like when viewing a white box. With that in mind Burstone created detailed showrooms — giving full renderings of what a space will look like when fully fitted — including tech hubs, board and meeting rooms.
He said the company offers incentives such as tenant-paid installations instead of rent-free periods, for example. Those are in low single digits as a percentage of lease value.
Rentals are starting to bottom out, but this will take time given the pressure in the sector. “Reducing the cost of occupation remains a key focus as this will help drive rental growth in our portfolio,” said Hutchinson.
CEO Andrew Wooler said a number of tenants who reduced space are now looking to expand. The flexible and hybrid working model has changed how people work, along with space requirements.
“The return to work [globally] is not about productivity but team collaboration to move businesses forward through sharing of new ideas and training, for example,” Wooler said.
Johannesburg, which houses the majority of Burstone’s office portfolio, has vacancies of around 7%, while office vacancies in Cape Town are 1%, and its Durban portfolio is fully let.
An array of tenants have shown interest in renting office space from Burstone, including call centre operators, advertising, insurance, financial and legal services, Burstone said at the lunch.
Value-added services are enticing tenants. Burstone has been focussed on a hands-on asset management approach to draw in tenants. In fact, Graham Hutchinson, MD for Burstone Group, said that office vacancies had peaked at more than 50% during the first two months of the pandemic at the company’s The Firs mixed-use centre in Rosebank and Sandown Valley offices. These offices are now fully occupied.
Burstone’s success in letting offices depended on three factors according to Wooler, the speed at which the company works with brokers, show days for office space and partnering with the tenant base.
alistair@propertyflash.co.za
