Sandton in better position to weather the storm
The United Nations as well as the World Bank have predicted that 2012 will be a very tough year. While the market was not surprised by the announcements, investors are desperately seeking a silver lining. Property investors in the retail as well as the commercial sector are under pressure and some good news is always welcome. But what does 2012 hold in store?
A recent index on office space compiled by Investment Property Databank (IPD) suggests that the industry might be in for another tough year. According to the index the average vacancy rate for office space reached 10,4% at the end of last year. The index shows a slow but steady increase in the vacancy rate for office space and industry commentators agree that this trend will probably not be reversing any time soon.
Areas like Sandton in Johannesburg however, have the advantage that it has a high number of A-grade office buildings. Owners of this type of office space, which is generally new and of high quality, find it easier to attract and retain tenants – especially when it is located in a prime area like Sandton.
According to the IPD index the average vacancy rate of A-grade office space is currently 8,5% while the average vacancy rate of prime office space is around 2%. The latter represents new, modern office buildings of excellent quality.
While the index does suggest that C-grade office space is having a more difficult time to attract tenants, these type of offices can be a great investment opportunity for individuals and companies with the means to upgrade these buildings – especially when the location is good.
Although property investors should brace themselves for a tough time in the market during 2012, there are still some opportunities for smart investors with an appetite for risk.