Despite the addition of 144 800 square metres to Sandton’s prime office space in 2014, developers are still gung-ho about pouring billions into the continent’s financial capital.
Latest figures from real estate company Jones Lang LaSalle (JLL) indicate that Sandton’s office space currently amounts to 1 504 555 square metres – making it the second largest supplier of office space after Johannesburg CBD.
More developments have been announced to expand the suburb’s development pipeline, despite on-going concerns about Sandton’s congestion, traffic and road infrastructure.
Old Mutual Emerging Markets is the latest company that plans to take up more space in Sandton with the development of its R1.3 billion new offices on Stella Road near the Gautrain station. The company plans to move its Johannesburg head office from its existing property on Grayston Drive. The company’s new 30 000 square metre building will be completed by the end of 2017.
Old Mutual’s building is part of a further 333 000 square metres that is currently in the development pipeline, with Discovery, Webber Wentzel and Sasol expected to occupy Sandton by 2017.
The retail sector has also piqued the interest of developers. MMI Group has undertaken a development, where the old Village Walk shopping centre stood on the Corner of Maude Street and Rivonia Road, to the tune of R2.5 billion.
Eris Property Group asset manager Wayne Warburton says the centre was demolished in August to reconfigure the existing site for the new development.
Warburton says the Village Walk project will be a mixed-use development with a retail component of up to 15 000 square metres covering two levels, office space covering 50 000 square metres and possibly residential apartments covering 8 000 square metres of the site.
“We are still deciding whether to develop high-end residential apartments and sell them off plan or lease them. With the stock that is coming online in Sandton, there is demand,” he says.
Warburton says plans are still fluid at this point, as the focus is “nailing down the tenant mix”. The development is earmarked for completion in 2018.
Another retail development in Sandton is the R300 million revamp of the Nelson Mandela Square announced by the Liberty Group. The redevelopment will upgrade the square’s current facilities entirely while maintaining its original design theme.
“This face-lift will ensure the tenant mix and aesthetics align to that of the recently refurbished and expanded Sandton City; while retaining the unique features of Nelson Mandela Square … Re-investing back into the Square will improve the experience of our shoppers and diners, increase tenant turnover, and ultimately benefit our investors,” says Stanlib fund manager Alex Phakathi. Stanlib’s Direct Property Investments arm manages the Liberty Property Portfolio.
US fashion brand Forever 21 and a bespoke Tashas restaurant will be among the tenants set to take up space in the refurbished square. “Other new restaurants and stores are set to open in the Square, but their identities cannot yet be revealed,” says Phakathi. The refurbishment work has started and is expected to be complete by the end of this year.
The developments in Sandton are expected to bolster the area’s status as the financial hub of Africa, but also put pressure on existing buildings. JLL says rentals remain under pressure as a result of occupiers being presented with a wider choice of quality buildings as developments roll out.
The average rental for P-grade office space declined to R196 (Q4: 2014) from R200 (Q4:2013), according to JLL’s estimates. P-grade offices are considered as top quality space, located in prime suburbs.
“Absorption of space, particularly in new speculative developments might prove challenging to landlords… What is encouraging for Sandton is that it remains a well sought after area. Therefore, it will recover quickly once the economy starts showing signs of improvement,” JLL notes.