Plenty of lateral thinking going on in office rentals
Large offices turned into shared workspaces rented to one tenant, who then sublets to smaller operations
JSE-listed property companies, which have struggled to manage escalating vacancies in SA’s slowing economy, are finding new ways of filling space. For instance Growthpoint and Redefine have converted large offices into shared workspaces which they rent to tenants on multi-year leases.
These tenants then let space to small and medium businesses using flexible terms. This means a smaller business might rent for a day, month, six months or longer. (The sub-tenants share amenities provided by the main tenant.)
Redefine, Growthpoint and other established property funds tend to own more high-quality, well-located office buildings than small funds, which shared workspace operators find appealing.
These buildings tend to be in premium nodes such as Sandton and Rosebank in Gauteng which have had high vacancies because not enough large corporations have been willing to meet the rentals charged. There are also not enough growing businesses which can afford to rent in these nodes given weak economic conditions. Sandton’s office vacancy rate is nearly 20% while Rosebank’s is close to 10%.
Redefine on Thursday announced it had let six floors of the newly built Rosebank Link tower to WeWork, a large US operator in shared workspace services. This is the New York-based group’s first foray into SA. It already operates in 400 locations across 100 cities. Rosebank Link has 15 storeys and a gross lettable area of about 18,000m² of office space, as well as 817m² of retail on its ground floor.
Similarly, Growthpoint owns half of Workshop 17 which has branded shared workspace offerings at the V&A Waterfront, Cape Town’s CBD, Sandton, Rosebank and Paarl.
Growthpoint’s group CEO, Norbert Sasse, said this conversion strategy would work well for certain buildings which had enough amenities in place already and were in popular locations.