Figures covering the three months to June show a significant drop in office vacancies recorded for the Melrose-Waverley area from 27,9% in March to 17% at the end of June. This reflects improved leasing activity at the R1,2bn mixed-use development Melrose Arch.

According to development managers Investec Properties, Melrose Arch is close to 100% occupancy.

The development got off the ground slowly, with vacancies in the Melrose-Waverley area rising from about 1,1% to 27,9% in March.

Melrose Arch's fortunes appear to have turned with the appointment of Investec Properties as its managers, with new tenants flocking in. The turnaround is an exception as the rise in office vacancies seems to be continuing in many nodes elsewhere in the country.

Sandton and the surrounding areas in the north of Johannesburg recorded an office vacancy rate of 15% in June, with 166000m² of offices unoccupied, up from 13,4% in March and 12,8% in December.

The increase in Sandton's vacancies was entirely from A grade buildings, which recorded vacancies of 14,9% in June against 12,7% three months earlier.

Sandton's B grade buildings recorded a decline in vacancies to 14,4% from 17%.

Rosebank, also in the north of Johannesburg, recorded vacancies of 15,7% against 13,5% three months earlier. Rosebank's A grade space was also hit, while B grade offices recorded a sideways movement in leasing.

Property economist Francois Viruly says the rise in vacancies in the Rosebank and Sandton areas suggests that fundamentals in the two nodes have worsened in the past two years.

Viruly says vacancies in Rosebank and Sandton were 11,3% and 8,3% respectively two years ago.

Vacancy rates in Johannesburg's central business district (CBD) seem to be stabilising at 25%, he says.

'The problem with the CBD statistics is that they fail to differentiate between different parts of the CBD,' says Viruly.

He feels there are indications that city improvement districts are attracting tenants.

'However, the CBD will find it difficult to compete against oversupplied decentralised markets where lease terms remain attractive,' says Viruly.

There are indications that market fundamentals are better in cities which have not suffered from the overbuilding that has materialised in Johannesburg.

Cape Town's CBD recorded vacancies of 8,6% in June, down from 9% three months ago.

Durban's CBD saw a vacancy rate of 11,5%, down from 12,8%, while Pretoria's vacancy rate dropped to 15,3% from 16,9%.

Business Day