The structural shift seen in the office market in recent years is not simply the result of pandemic-enforced work-from-home policies, but also reflects a broader recalibration of workforce priorities and lifestyles, alongside pressing environmental, social and governance (ESG) concerns, according to a recent report by Savills World Research.
Eri Mitsostergiou, director of Savills World Research, says that much of the world’s existing office stock needs to adapt to meet the evolving needs of businesses, individuals and cities. Those confident in the appeal of their well-located stock will still need to innovate to appeal to workers. At the other end of the spectrum, some will need to give their space a second life and repurpose it to optimise value.
Says Andrew Dewey, MD of Swindon Property, which is Savills’ commercial associate in sub-Sarahan Africa: “As is the case both locally and globally, woven through both these options is a strong need to meet high environmental standards – both to remain relevant with occupiers and meet growing regulatory requirements, at a time when economic viability is challenged.
“For both landlords and tenants, energy-efficient buildings typically have lower operating costs due to reduced energy consumption and maintenance requirements. Tenants benefit from lower utility bills, while property owners enjoy increased property value and reduced long-term operational expenses.
“As stated in the Savills report, to be successful in this environment, companies need their offices to act as a magnet to attract and retain talent, so creating spaces that resonate with employees’ needs is a strategic imperative. Younger generations of workers prioritise wellness, professional development and meaningful experiences, so companies with workspaces designed to prioritise flexibility, human scale and community can expect to see improvements in recruitment, retention, productivity and purpose.
“While there is a gradual return to the office for many organisations, the hybrid work model is expected to remain prevalent, creating fluctuations in office occupancy levels, and is expected to drive ongoing changes in tenant preferences, space utilisation and office design, with a continued focus on flexibility, technology integration, employee well-being and cost efficiency. As a result, landlords will need to adapt their offerings and amenities to meet the evolving needs of tenants in the hybrid work environment.”
Adds Dewey: “Given that interest rates are expected to gradually begin reducing towards the end of 2024, makes the opportunity for improved returns possible and therefore investing in your office space more viable. While there are favourable opportunities in the current market, it’s essential to conduct thorough due diligence, assess the risks and benefits, and make decisions based on a comprehensive analysis of the market, the building’s current and potential offerings and your financial situation, which is where consulting with real estate professionals can help you make sound investment decisions aligned with your goals. Our Occupier Services and Capital Markets division will assist the tenant or buyer to ensure all prevalent factors are taken into account. Signing a rental lease has its own risks but is more flexible in terms of exit or expansion.”
Positively, Dewey says there are a number of key hubs around the country where tenants and investors can find sound value, particularly evident in the entry-level categories below:
- Cape Town CBD offers a diverse range of office space at relatively competitive rental rates compared to other major cities in South Africa, varying from an entry-level of R120-R130 per sqm, R130-R150 for B-Grade buildings, R185-R260 for P-Grade (Premium Grade). Purchasing will see you pay an average of R8 000 to R13 000 per sqm for entry-level, mid-range stock R20 000 – R23 000, and to acquire Premium space in the newly-built developments like ‘The Rubik’ R32 500 per sqm excluding VAT.
- Tyger Valley, a commercial and business node situated along the N1 highway in Cape Town’s Northern Suburbs and enjoying easy access to major amenities, offers good value office space in modern developments and retail/mixed-use centres. Entry-level rentals range from R90-R120 per sqm, B-Grade from R120-R140, and P-Grade R140-R210. Regarding sales, entry-level to P-Grade sells anywhere from R13 000 – R25 000 per sqm.
- Century City, a mixed-use development located just outside Cape Town’s CBD, offers a wide range of office space options in a master-planned business park environment. With its modern infrastructure, appealing green spaces, shopping centres and attractive residential developments, Century City provides good value for businesses. Rental prices range from less sought-after B grade (traditionally older stock) ranging from R130-R160 per sqm to P-Grade from R200-R220, with new 2025 developments currently being marketed at R240 per sqm excluding VAT. With numerous sectional title commercial buildings in Century City, prices range from R16 000 to R24 000, with P-Grade trading from R27 000 to R32 000 per sqm excluding VAT.
- uMhlanga Ridge north of Durban is a rapidly growing commercial and business hub with modern office developments, shopping centres, hotels and residential complexes. With its strategic location, proximity to King Shaka International Airport and coastal lifestyle amenities, it provides good value for office space, offering entry-level office space to rent from R130-R160, B-Grade at R150, and P-Grade R180-R240 per sqm. Office space for sale is priced at an average of R20 000 per sqm for entry-level and B-Grade, and R25 000 to R35 000 per sqm excluding VAT for P-Grade.
- Rivonia is a well-established business node in Johannesburg comprising a mix of office buildings, retail centres, hotels and residential developments. With its convenient location, access to major roadways and proximity to Sandton, it provides good value for office space in Johannesburg’s northern suburbs. Entry-level and B-Grade office rentals vary from R70-R85 per sqm, and P-Grade R185-R260 per sqm. Sales prices offer sound value for money at R7 500 to R10 000 per sqm for entry-level and B-Grade office space, and R11 000 to R17 500 for P-Grade.
- Sandton CBD and surrounds remain one of the country’s most valuable commercial nodes, even amid recent rental drops. The post-Covid landscape has compelled landlords to rethink and reshape perceptions of the Sandton Central node. Many offices in this node have become more cost-effective, offering back-up power supplies and solar power solutions. Occupants can enjoy easily accessible work, dining and living environments within walking distance, enhancing the convenience of working and living in the area. Rental rates per square metre for Premium Grade offices range from R130-R200, while in comparison, commercial A and B-Grade offices range from R105 to R120 per sqm. The cost to purchase space in these high value-for-money areas ranges from R10 000 per sqm for B-Grade to as high as R48 700 for P-Grade, catering for both investors and owner-occupiers.
- Rosebank, a vibrant commercial and business district in Johannesburg, is known for its modern office developments, shopping malls, hotels and cultural attractions. With ongoing urban regeneration initiatives and proximity to Sandton, Rosebank offers good value for office space while still being centrally located. Its accessibility is bolstered by proximity to the Gautrain station and bus stops, as well as other public transport options. It also presents an attractive alternative with its P-Grade, Green Star-rated new office developments, complemented by a pedestrian-friendly environment and excellent amenities – a combination that continues to draw corporate occupiers seeking a vibrant live, work and play setting. Rentals vary from R120 per sqm for B-Grade, R160 for A-Grade to R230 per sqm excluding VAT for P-Grade. For investors and owner-occupiers, prices range from an entry-level of R21 000 per sqm to R51 000 per sqm for P-Grade.
Issued by: Gaye de Villiers on behalf of Swindon Property
