Will the building boom ever return?

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24-07-2024
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Moneyweb
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Activity in construction is nearing Covid-19 pandemic lows …

Now that Cartrack’s flashy new head office (which looks surprisingly like a Bond-villain lair) is complete in Rosebank, the only cranes left are those at the new Oxford Parks development along Oxford Road towards Illovo. Work meanders along at the site.

In Sandton, there is not a single crane in the CBD. The only cranes in place are northwards along the M1, where the development of Barlow Park continues.

Barlow Park itself is instructive. The Atterbury development was originally envisioned to be centred around offices (55 000m2) with some residential capacity (around 800 upon completion). This was hastily – and sensibly – reconfigured to a residentially-focused precinct.

Phase 1 will have more than double the number of residential units originally planned. This is no surprise.

Office vacancies in Sandton are sky-high and have been since before the Covid-19 pandemic.

Growthpoint, one of the biggest landlords (if not the single largest) in the node, reported vacancies at close to 20% at the end of March. These had been closer to 30% in prior periods and the only way it managed to reduce this number was by selling non-performing properties.

The semigration trend to the Cape (primarily Cape Town and the Garden Route) continues, but large corporates aren’t rushing in the same direction. Much of this is being made possible by flexible work-from-home arrangements. In fact, the last major corporate to relocate was Old Mutual, which moved to a new head office in Sandton (from Pinelands in Cape Town).

Overall, vacancies are slightly better in Q2 according to the South African Property Owners Association’s (Sapoa) at 14.2%. With precious little development of new office buildings in the country in recent years (aside from pockets such as the new Amazon head office at Black River Park in Cape Town), the total amount of office space is not exactly growing.

Conversions to residential (most of it in Sunninghill in Joburg, for example) has actually seen the amount of available space decline substantially – by roughly 20% – since 2020.