Neil Fraser
September 1, 2003
PERCEPTIONS of the city continue to change dramatically and literally a day doesn't go past without receiving an enquiry about investment possibilities or hearing of properties changing hands - latest is the Sanlam Centre in Von Wielligh Street.
So interesting to see the traditional institutions relinquishing their large property ownership in the inner city, giving way to a new breed of investors. Interesting because many of the traditional institutions bear more than a fair share of the responsibility for the inner city's decline and interesting too that they are disinvesting at a time when the market is turning.
An excellent analysis of the situation is to be found in Soraya Goga's section "Property Investors and Decentralisation" in the recent publication "Emerging Johannesburg".
She asks and answers the question as to why CBD owners invested in decentralised development in Johannesburg…thus undermining their own developments in the CBD, particularly when they could effectively control the market?
Pointing to the over-accumulation of capital in the economy; the locus of capital availability (ie the oligopolistic market of the long-term financial institutions); the "false competition" created by property divisions reacting to competitors' actions rather than to user demand; poor property management; the concentration of one investor in one suburban location requiring poaching of CBD tenancies to make the new location work and various other factors, she concludes that "…the decline of the Johannesburg CBD and the growth of its northern suburbs cannot be solely, or even accurately, explained by demand factors. Investors in office space did not flee the CBD simply because demand had fallen there and risen to the north. Institutional investors and large property owners made these decisions on other grounds."
Whilst many of the new investors are relatively small or made up of consortiums of small investors, one relatively recent major investor is growing impressively.
Last evening I attended ApexHi Properties 2003 Annual Results Presentation and was delighted at the positive sentiments expressed by CEO Gerald Leissner (and recorded in the company's 2003 Annual Report) with regard to South African CBDs generally and that of Johannesburg in particular.
The Annual Report for instance states that, in recognising its broader social responsibilities, "ApexHi participates in a number of initiatives which are closely aligned to its core business" and which include:
- Membership of the Johannesburg Inner City Business Coalition.
- The creation of a legal precinct around the High Court - ApexHi have already invested R23,7-million in the area around the High Court.
- The upgrading of Smal Street Mall and Eloff Street.
- The planned conversion of 40 000 square metres of office space into more than 500 residential apartments in the Johannesburg city centre.
- Support to the Johannesburg Housing Company.
- Active participation in the substantial upgrading taking place in Braamfontein and;
- "In partnership with government and NGO structures, ApexHi is in the process of finalising an innovative, branded product that will address commercial space needs of previously disadvantaged organisations and entrepreneurs"
In reviewing the company's excellent results, Gerald Leissner pointed out that investors who purchased units at R10 when ApexHi listed on the Johannesburg Stock Exchange as a property loan stock (PLS) company in March 2001, have realised a total return on investment of 88% to end of June 2003 - the company having delivered an income yield of 49% and capital growth of 39%.
The market value of their 209 properties is R2.1-billion providing lettable space of 1 593 392 square metres of which 68% is located in Gauteng. In talking about future prospects Gerald Leissner noted that "market rentals are stabilising - CBD revitalisation programmes are delivering results - increased enquiries for large pockets of space are being received!
Gerald served as non-Executive Chairman of the CJP from 1993 to 1997 and Deon Feinblum, appointed as an ApexHi Executive Director earlier this year, was seconded to the CJP for a short while in the mid-1990s.
Last Friday, I attended a very different but equally upbeat function when the Executive Mayor, Amos Masondo, invited Region 3 business to breakfast with him at the Sandton Convention Centre.
Region 3 covers an area of approximately 147 square kms in the north eastern-section of Metropolitan Johannesburg. It comprises in the main the areas of Sandton, Rosebank and most of Randburg. Accordingly, it is the home to the highest concentration of big business in Gauteng and is recognised as the economic powerhouse of the country. It contributes the second highest GGP of the metro - next only to the Inner City, Region 8, naturally!
The head of the City's Economic Development Unit (EDU), Lael Bethlehem, provided an excellent overview of Region 3, which she introduced with an intriguing slide based on research published by the Globalisation and World Cities Study Group and Network (GaWC).
The slide portrayed over 50 cities which the research has identified as having 'world city credentials' ordering them in three categories, Alpha, Beta and Gamma in terms of 'world city-ness values' ranging from 1 to 12. These values include the location of national financial institutions, legal firms, etc all of which Sandton is well equipped with.
Alpha World Cities (scoring 10 to 12) include London, Paris, New York, Tokyo, Chicago, Frankfurt, Hong Kong, Los Angeles, Milan and Singapore.
Beta World Cities (scoring 7 to 9) include San Francisco, Sydney, Toronto, Zurich, Brussels, Madrid, Mexico City, Sao Paulo, Moscow and Seoul.
Gamma World Cities include Atlanta, Barcelona, Berlin, Buenos Aires, Budapest, Copenhagen, Hamburg, Istanbul, Kuala Lumpur, Manila, Miami, Minneapolis, Munich and Shanghai all scoring 4 whilst scoring 5 are Bangkok, Beijing, Montreal, Rome, Stockholm and Warsaw. Then, scoring 6 are Amsterdam, Boston, Caracas, Dallas, Dusseldorf, Geneva, Houston, Jakarta, Melbourne, Osaka, Prague, Santiago, Taipei and Washington.
So why am I telling you this? Well, Joeys is also a 6! How cool is that? The only World City (in terms of the GaWC scoring) on the African continent!
