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Demand for office space remains high in Bloemfontein
24 July 2012
It’s a tale of two cities for Bloemfontein, as its CBD and nearby Westdene have very different tenant populations and a sizeable rental differential. However, both offer a positive outlook for landlords, as demand for office space outweighs supply and rentals continue to increase.
Broll’s June 2012 Bloemfontein Office Market Report explains the city’s attractiveness as a corporate destination.
“The city is something of an oasis, as it is centrally located in the Free State and in South Africa,” says Portfolio Executive Johan Botha.
“This gives it a logistical advantage over others, causing its popularity to grow with national companies. It is the only truly major centre in the province and the sixth-largest city in SA, as well as its judicial capital.”
In the CBD, these advantages translate into a disproportionately large tenancy of government agencies, colleges and training centres (total occupancy by government agencies is about 12 000m²).
“The area remains in demand, and while parking is a challenge, public transport is plentiful,” says Botha.
Broll’s study finds that, although vacancy rates are high at 25%, rentals are currently holding steady at R75/m², having increased steadily since the end of 2009. There is only one erf available for development, an 11 000m² space earmarked for retail, offices and accommodation.
Westdene is centrally located on the outskirts of the Bloemfontein CBD, has good infrastructure and is surrounded by shopping centres, says Botha. “The area is ideal for business clustering, and is a favourite in the private sector and with national companies opening satellite offices. Public transport is freely available, although not as efficient as in the CBD.”
Accordingly, office parks and corporate buildings are in high demand, with tenants including leading consulting firms and healthcare groups, he adds. “Even old houses are being converted into office space.”
Botha adds that Westdene rentals have been increasing at a good rate since mid-2010. “Prices fluctuated in 2008/2009 because supply exceeded demand at times, but are again on the increase, and currently stand at R95/m².”
To cater for demand, a 43 000m² Second Avenue development is scheduled to start in 2013, he says. “This will establish an exciting new business district in an urban village setting with an atmosphere reminiscent of Melrose Arch in Johannesburg and offer ample parking.”
Other than this development, there is still more land available for development in the area. Botha says rental movements will depend on supply-side management, but the outlook remains good for landlords, with vacancy rates at 8%.
