Inner city renewal views

Posted On Friday, 22 February 2002 14:01 Published by eProp Commercial Property News
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Taffy AdlerNew breed of developer is raring to go in Johannesburg

Been to the Johannesburg CBD lately? If you live in the northern suburbs, the answer's probably no. But a trip these days may hold a surprise.

The traffic flows because of the exodus to the north; the streets are clean. You still have to keep your car windows closed and doors locked, but crime is coming down and the retail trade is vibrant. What's more, demand for property is steady: there's been a 20%-30% drop in B-grade vacancies, says property economist Francois Viruly. Contrary to the perception of Johannesburg's big property institutions, all may not be lost with their inner-city portfolios.

In fact, a new generation of developers is reaping healthy returns in the inner city and appealing to the older institutions not to sit on their portfolios. But a shift is needed where older firms sell to the new players, or alter their properties to capture new residential and business markets.

The shift will need confidence from the banking sector, which has red-lined swathes of the inner city, leading to what one investor calls 'market failure'.

The institutions are so disillusioned by the inner city that many are not managing their portfolios. The investor - Paul Jackson of the Johannesburg Housing Co - says he tried to buy a property from an owner who had forgotten it was his.

A seminar in Johannesburg earlier this month brought together the property establishment and a new generation of owners and city managers. 'The dinosaurs spoke to the gazelles,' to quote one participant, and their meeting exposed divergent views of the city's future.

The iGoli 2002 regeneration plan has focused on the inner city, investing resources, devising development strategies and funding projects like the Metro Mall, Mary Fitzgerald Square and the Mandela Bridge, which will bring visitors straight into the Newtown cultural precinct.

Despite all this, the private sector is pessimistic, having watched property values decline in the past decade, with low occupancy rates and rentals. The losses have led to growing calls for tax write-offs and subsidies. 'I can see ideal and idealism, but I cannot see any reason to recommend city properties to my clients to invest in, develop or refurbish because I cannot see a return,' said one consultant. Most owners would sell if they could, he said.

Roger Corlett, director of property management at Liberty Properties, said: 'We don't believe the CBD will change at all without incentives for owners and developers.' There were still perceptions that the city was unsafe and grimy, he said. And it rated fourth in the country for service levels and letting rates.

Another businessman said projects like Gautrain (the planned shuttle train between Johannesburg and Pretoria) and Blue IQ (a range of projects including a technological hub and developments like Constitutional Hill, home of the new Constitutional Court), may be too ambitious. 'It's too advanced; we need to get the basics right,' said a participant.

Though the city and business improvement districts have reduced crime and cleaned up the city appreciably, property institutions want more.

'The office precincts must be demarcated and protected, even if it means controlled access, like the Waterfront in Cape Town,' said Nedcor's Derek van den Bergh. 'Shopkeepers must be able to trade in peace. There is a place for hawkers and taxis, but not in the business sectors. You cannot allow unrestricted, unrestrained, free-for-all activity,' he said.

But for the gazelles, Johannesburg's gold now lies in the new activity. The city economy is quintessentially African, where transport is largely by taxi and economic activity divided almost equally between the formal and informal sectors.

Taffy Adler of the Johannesburg Housing Co is a leading gazelle. His company has invested R150m in the inner city in the past five years. 'Our properties show less than 5% vacancy or arrears,' he says. The inner city is becoming more residential : 'This provides a cleansing effect. The environment is clean, safe and vibrant. '

A new development in Fordsburg is three times oversubscribed. Adler says his client base includes artisans, hairdressers, magistrates and civil servants, all of whom want to stay in the city because it's convenient and cuts transport costs.

And there's also demand for commercial property from small entrepreneurs letting space in the city. The Metro Mall - a shopping complex just off the Queen Elizabeth Bridge - is fully let to businesses who recognise a market in the 150 000 commuters who daily pass through an adjacent bus and taxi rank. 'It's a question of mind-set. The institutions shouldn't sit. If they want to make money, the opportunities are there,' says Adler.

Johannesburg CBD is unlikely to yield the returns it did when it was the epicentre of the economy. But a new market has been created and with the political will to rejuvenate the city, inner-city property is not a doomed business. As Wits University's Alan Mabin says: 'It's time the gazelles start to lead the discussion.'

Last modified on Monday, 19 May 2014 12:44

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