Office vacancy still challenges the property market

The most recent SAPOA OVS survey as administered by IPD shows that as at Q2 2012, the aggregate national office vacancy rate maintains a modest upward trajectory having now increased over the past six quarters. The q-o-q change represents a further 12bpp increase and a new cycle high of 10.47%. The increase represents a 166 bpp growth on two years ago and a 43bpp increase on a year ago. The trend over the past two years still indicates that the rate of increase has been relatively modest, although the latest increase suggests that office vacancies could remain under pressure and there are no clear signs, economic or otherwise, that this will tapper off in the short term.

At a city level Pretoria and Port Elizabeth (not shown) are moving in a generally downward direction and although Pretoria has seen a fairly big jump, it still is the lowest of all the Metros. Joburg and Cape Town are relatively stable although Joburg is operating at less than 100bpp above that of Cape Town whereas this was substantially higher in the past. Although Cape Town's levels have hardly moved much around the 8% level over the past two years, it is now approaching the 10% mark and given that the survey excludes 'C' grade space this may be cause for concern. Durban's rate has come down marginally but remains the highest overall.

Prime space continues to perform substantially better than lower grade stock with "P" grade offices trending below 2% and "A" Grade below 9%. Negative take up appears to have impacted "B" grade offices the most judging from the trend; and from the fairly volatile trend, C grade space appears to be the subject of refurbishing strategies undertaken by landlords in pursuit of the Prime grade market.

We highly recommend that managers/funds with office assets consider listing their stock on eProp to improve their chances of letting and selling.

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