Office rentals in Rosebank competing with Parktown?
There is a kind of cannibalism going on at the moment in the highly contested office space rental market. Let's look at the historically "friendly neighbours" of Rosebank and Parktown. Well this friendship has truly been tested over the last 12 months or so, with a growing overlap in gross asking rentals blurring the lines between the suburbs.
Office space rentals in Rosebank usually range between an entry point of R105 per msq, to the P-Grade developments dotting the skyline, topping out at around R240 per msq. Average rentals for A Grade space would center around R140 - R150 per msq. These are decent offices in good locations, without the bells and whistles of their new and improved Green Star rated cousins.
Parktown office space has always had a strong market from those that need easy access to the highways, and close proximity to the CBD, without the congestion and regular disruptions. Office rentals have ranged from R75 per msq to around R115 per msq, apart from the scarce (I believe in fact only 1 new development) R145 per msq oddity.
So, although there was a limited overlap in office rentals between Parktown and Rosebank, it was nothing more than a squabble between neighbours. No need to cause a bloody nose at all. But these days, things have started to hot up. With Landlords competing in an unprecedented way, with tenant and broker incentives alike, the lines of office rentals are being blurred. There are more incentives floating around than one can keep track of - "Black Friday" specials, monthly broker incentives, no deposits or low deposits, rent free periods, low or no escalations on long term leases, and ofcourse the current coup de grace - lower gross rentals. It is now common place to see distressed office spaces in Rosebank going at an asking rate of between R85 to R95 per msq. This is undercutting Parktown office rentals, not even competing on a level playing ground.
Whichever way you look at the current stressed office rental market, it is no longer Landlords competing with Landlords, but rather suburbs competing with each other as well. Perhaps Rosebank and Parktown are leading the way, but there are many other "friendly neighbours" that are starting to fall out with each other. Commercial property rentals in Johannesburg are leading the way in competition like none othe ever seen.
Where will this all end up? Benefiting the tenants ofcourse, and perhaps setting a course for kickstarting a downtrodden economy. Let's keep fingers crossed.
Author: Grant Williams