REPORT OFFICE MARKET - Broll Property Group
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OFFICE MARKET REPORT Sandton CBD, Gauteng June 2018
Sandton CBD Office Market Report
June 2018
BROLL INSIGHT
Accessibility Amenities
Sandton CBD is easily accessible via Grayston Drive off the M1 and The node offers a wide variety of amenities that include, but are not
via main arterials such as William Nicol Drive and Rivonia Road. Even limited to, hospitality, conference facilities, convenience services and
though the node is prone to traffic congestion during peak times, some retail amenities such as the super-regional Sandton City.
of this congestion may be alleviated in the future as a result of the
continued improvement in infrastructure and the synchronisation of Area’s Security
robots along with the well-established public transport system which is The Sandton Central Management District monitors aspects related
offered within the Sandton area, inclusive of the Gautrain Station and to safety, security and hygiene, with private security and boomed
bus feeder routes. controlled access to most office buildings in the area.
Aesthetic Appeal Availability of Space
P-grade and A-grade stock is modern and well-maintained with high- As at Q1:2018 the Sandton CBD recorded an overall vacancy rate of
end finishes. roughly 15.9%. A-grade stock recorded the highest vacancy rate for
the node at 19.7%, with P-grade vacancies being 6.3%. B-grade, which
Affordability makes up the least amount of total stock at 17.4%, recorded a vacancy
P-grade: R220 – R250/m²/month gross achieved rate of 34.2%.
A-grade: R150 – R200/m²/month gross achieved
B-grade: R100 – R150/m²/month gross achieved
HIGHLIGHTS
Trends
• Energy efficiency and modern design continue to be a trend in the amenities located within the building itself or in close proximity tend
Sandton office market with tenants showing increased interest in to be taken-up faster.
spaces with Green Star ratings.
• Landlord BEE accreditation has also proven to be an important part
• The end of 2016 saw the introduction of rent-free periods, of a tenant’s decision with regards to building choice; it is becoming
particularly with regards to B-grade stock. However, towards a material consideration when deciding on premises’ relocation.
the end of 2017 landlords of A-grade buildings began following • Demand for space within the Sandton CBD has been positive;
suit in order to secure strong tenants ahead of developments however, in terms of unit sizes in demand, there has been a
nearing completion toward the end of 2017 and during the course noticeable increase in tenants requiring smaller spaces, or looking at
of 2018. downsizing in an attempt to reduce overheads.
• Rental pressure is expected to continue for older buildings due to • Due to the abundance of available stock, deals are taking longer to
the decreased demand as well as the increase in new developments conclude as tenants are more cautious, comparing buildings on offer.
coming onto the market. Often tenants opt to remain in their current premises as a result of
• The ever-growing trend towards the live-work-play concept can be relocation costs; however, incentives offered by landlords of newer
seen in the Sandton node with the launching of Sandton Summit, buildings can lead to relocations taking place.
a mixed-use precinct combining residential, hospitality, offices and • Landlords are finding it hard to compete in an oversaturated
retail uses, parts of which have already been completed while others market.
are in the construction and/or planning phases.
Tenants
Take-up
Sandton is home to South Africa’s top investment banks, financial
• Take-up is slowly improving as consumer sentiment and consultants and legal firms. Tenants within the node include the likes
confidence improves. There has been a definite increase in activity; of the Johannesburg Stock Exchange, EY, Webber Wentzel, Norton Rose,
in particular, buildings that are more efficient and have substantial Discovery, Werksmans, Old Mutual and Bowmans among others.
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Sandton CBD Office Market Report
June 2018
MARKET OVERVIEW 115 West
Sandton is a mixed-use node, offering premier office space, retail The bulk of the existing stock coming onto the market in the form of
amenities as well as affluent medium-rise townhouses and high-rise A-grade and B-grade buildings started becoming available from the end
residential apartments. of 2017. This stock has become available primarily as a result of tenant
relocations to newer buildings within the Sandton node which offer
Ease of access via main arterials and a well-established public transport incentives. This has resulted in landlords of older buildings struggling
system, inclusive of the Gautrain along with bus feeder routes, are to maintain existing tenants in certain instances. Pressure on rentals, as
evident within the node. The Gautrain has a station adjacent to Sandton seen in recent months, is expected to continue particularly in A-grade
City, connecting the node to O.R. Tambo International Airport as well buildings due to the large amount of new stock coming onto the
as to the greater Johannesburg and Pretoria areas. The success of the market. Towards the end of 2017 certain landlords of A-grade buildings
Gautrain has had a significant effect on the Sandton CBD, with the began introducing incentives such as rent-free periods. Landlords will
majority of demand being for offices located within walking distance now need to be creative in attracting tenants or find alternative uses
of the station and Sandton City. Furthermore, the likes of the Gautrain for existing stock.
and other forms of public transport, along with the synchronisation of
robots, are likely to alleviate the traffic congestion within the Sandton P-grade offices in Sandton are marketed up to R250/m²/month,
area which is evident during peak times. achieving anything from R220/m²/month upward. The bulk of space,
A-grade, achieves rentals between R150/m²/month to R200/m²/
P-grade buildings make up approximately 47.2% of the office node month, depending on building features. Parking bays within the node
with several older buildings having been redeveloped in order to create achieve rentals of between R900/bay/month to R1,250/bay/month.
more A-grade spaces. 35.5% of the buildings are currently classified However, there has been a noticeable decline in the demand for parking
as A-grade, while B-grade buildings make up only 17.4% of total stock in recent years with the ratio of bays/m² having declined. This has been
with minimal demand evident for such space. Even though demand attributed to the public transport available within the node.
for space continues to be positive, the size of units in demand has
declined. The majority of demand is for P-grade offices with Green Star
ratings (energy efficiencies), although demand from smaller users for
sectional title offices has recently become evident. Furthermore, a move
towards flexible work space which includes hot desking and open-plan
work space has been noted. This trend is particularly evident with
international tenants and is now also being adopted by local businesses.
Grade Overview
Prime Grade A-Grade B-Grade
Space in demand (m²) 1,000 - 2,000 500 - 800 150 - 500
Lease escalation 8% 8% 8%
Lease operating cost escalation 8% - 9% 8% - 9% 8% - 9%
Gross asking rentals (R/m²/month) 220 - 250 150 - 200 100 - 150
Gross achieved rentals (R/m²/month) 220 - 250 150 - 200 100 - 150
Length of lease (years) 5 5 5
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Sandton CBD Office Market Report
June 2018
CONSTRUCTION ACTIVITY
A number of office developments are currently under construction, • The Leonardo - a mixed-use building with 55 floors comprising
while a refurbishment of roughly 20,000m² on 16 Fredman Drive is residential apartments and penthouses, a conference centre,
taking place, with space being converted into sectional title units and restaurants, offices (>15,000m²), and more. Once completed, it will
sold to investors and owner occupiers while also being available to let. be the tallest building in Sandton, exceeding 180 metres.
Completion is expected towards the end of 2018.
• Katherine Towers - a 21,000m² development situated along Katherine
Street will be Bidvest Bank’s new head office with additional space
There are several P-grade buildings under construction including, but
available to let.
not limited to:
• The MARC - a mixed-use development which comprises two
• 122 Pybus Road - a new development that comprises 14,000m² of
buildings made up of 62,000m² office space and 15,000m² retail
office space, located within walking distance of Sandton City and the
space. This development is situated on the corner of Maude Street
Gautrain Station. Completion is expected at the end of 2018.
and Rivonia Road, and is scheduled to be completed in stages with
total completion expected in early 2019.
CONCLUDING REMARKS
The Sandton node and surrounds continue to be South Africa’s premier office location and are expected to grow cautiously and steadily. The increase
in supply seen over the last few years is anticipated to slow down as a result of the oversupply of stock currently being experienced which has placed
increased pressure on rentals. This being said, developers have started thinking differently in order to find alternative uses for the remaining vacant
A-grade buildings, and new mixed-use developments such as Sandton Summit seem to be the trend going forward.
SANDTON CBD, GAUTENG LISTINGS
Click the building name or image to view the listing online.
140 WEST DISCOVERY PLACE 115 WEST
Gross Asking Rent Gross Asking Rent Gross Asking Rent
R 248 R 228 R 245
(R/m2/month) (R/m2/month) (R/m2/month)
Sizes of units Sizes of units Sizes of units
4,500 6,500 3,000
available (m2) available (m2) available (m2)
Lease Period Lease Period Lease Period
60 60 60
(months) (months) (months)
Availability Immediately Availability Immediately Availability Immediately
Click here for further listings in Sandton.
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Head of Commercial Broking -
Gauteng
Rodney Luntz
+27 11 441 4715
+27 82 413 0874
rluntz@broll.com
Area Specialist
Matthew Crawford
+27 11 441 4824
+27 83 460 8201
mcrawford@broll.com
Divisional Director - Research Disclaimer
Elaine Wilson Broll Property Group has taken every care in the preparation of this report. The sources of
information used are believed to be accurate and reliable, but no guarantee of accuracy
+27 11 441 4083 or completeness can be given. Neither Broll Property Group, nor any CBRE company, nor any
ewilson@broll.com director, representative or employee of Broll Property Group, accepts liability for any direct or
consequential loss arising from the use of this document or its content. The information and
opinions contained in this report are subject to change without notice. No part or parts of this
report may be stored in a retrieval system or reproduced or transmitted in any form or by any
means, electronic, mechanical, reprographic, recording or otherwise, now known or to be devised,
without prior consent from Broll Property Group. All stock and vacancy figures have been derived
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