May 7, 2007
By Neil Fraser
THE four years from 1996 to 2000 turned out to be a period of ongoing decline. Yet it was also a consolidation period for the inner city during which time various policies and strategies were develop off which increasingly positive investment would start to flow.
As one would expect during such a volatile period, media headlines captured the dichotomy of the times - Squalor and decay growing in inner city and Joburg's inner city - from bad to worse to Inner city decay can be reversed and Putting shine back in the City of Gold.
Politically, the first democratic council, serving from 1995 to 2000, concentrated to a large extent on restructuring the apartheid structures it had inherited. This did have the effect of extending the period of political paralysis that had characterised the previous regime in so far as urban management was concerned.
But the local authority's lack of urban management performance during this period was not the only aspect that contributed to ongoing decline. A number of CBD property owners were as culpable.
Last week I quoted from Richard Tomlinson's 1999 Economic Report that noted that, "The Johannesburg CBD is essentially owned and controlled by 20 major landowners, of which the most notable are Old Mutual, Anglo American, First National Bank, JCI, Sage, Sanlam and Standard Bank."
Soraya Goga, in Property Investors and Decentralisation, remarks that, "the existing CBD owners market also provided the capital for decentralised investment … CBD owners through investing in real estate in new locations in a period of economic decline, undermined their investments in the CBD … both the owners and the investment markets were not competitive but oligopolistic … the issue in Johannesburg is not so much that relocation occurred but the extent of relocation. Given that CBD owners could have dampened decentralised demand, relocation seems to have been excessive."
Goga argues that firstly, an excess of capital in search of investment and held by long-term financial institutions (insurance houses and pension funds) acted as a necessary condition in driving investment to decentralised areas; secondly, the oligopolistic industry structure of these institutions drove "false" competition within the market to exacerbate conditions of oversupply; lastly, that poor internal organisation and management within the investment institutions contributed to the oversupply across the metropolitan area.
Clearly the lack of commitment to the CBD was recognised by the council which probably considered that this placed no priority on improving service delivery.
Property owners
An examination of the major property owners in the CBD today reveals the extent to which the previous institutions disinvested. Southern Life, Sanlam, the Mines Pension Fund, Sage Properties, JHI, Liberty Life, Ampros, Investec and so forth are no longer present - some no longer exist - while a number of the banks have considerably shed their CBD property holdings.
There no longer is a "top 20" of major property holders but rather a small number of major investors who hold property worth more than a billion rand and then a growing number of others who hold a small number of properties, in each case the total value of which would be below a billion rand.
So the current property owners represent a very different breed, largely as individuals or consortiums. That's good for the inner city as such investors often pay a lot closer attention to urban issues than many of the larger institutions of yesteryear - it is their own money at stake. So the first major structural change in the inner city relates to ownership.
While, as I have said, this can be seen as a positive change, my one concern is that the private individuals and new corporations responsible for the larger private sector investment of the past five years (and that which is probably to come over the next five) is almost totally from the white sector.
Jennifer Robinson, in Johannesburg's Futures argues that, "apartheid's demise has not ended the experiences of segregation and inequality that have shaped the lives of most of the people living in Johannesburg. New developments seem as likely to reinforce old patterns as transform them, despite many hopes of initiating a new, integrated and compact city form across the country."
The inner city will not be truly transformed until the majority of property ownership is transformed.
Residential accommodation
The second noticeable structural change in the inner city relates to the geography of the provision of residential accommodation, be it upgrading or refurbishing of existing accommodation or conversion of office buildings to residential.
At least R2-billion has been invested in this market over the past five years, contributing at least 10 000 new or refurbished units, and another R3-billion has already been identified as known projects planned for the next few years. These are occurring in a number of areas.
Firstly, the Jeppe-Bree-Plein corridor through the inner city appears to be a major focus for the provision of middle-income residential, as does Braamfontein, although the latter also caters for the middle- to higher-income bracket.
Secondly, the middle to higher end of the market is also being catered for in an area generally west of Rissik Street and between Commissioner and Anderson streets. In this areas between 850 and 1 000 units are at one stage or another of development.
While the large Brickfields project in Newtown, with 742 units, is in the middle-income category, a substantial number of upper-income units is planned for the Central Place sites opposite the new AngloGold Ashanti headquarters and at the proposed "Majestic" site in the Market Theatre precinct.
In addition, 43 units have recently been developed and sold in the Quinn Street conversion from offices to residential and a large project, The Sidings, will be started shortly behind, or just west of the Quinn Street development; it will bring a further 440 units on to the market.
Hillbrow and Berea
Interestingly, the pace of refurbishments, conversions or upgrades in Hillbrow and Berea, the traditional high-density areas of the inner city, is not as active as I expected.
The Trust for Urban Housing Finance (TUHF) records loans into Berea of R50-million and Hillbrow of R40-million between June 2003 and March 2007 - certainly the need would appear to be many times those numbers although other financial institutions are also lending.
These areas contain some 420 multi-unit medium- to high-rise buildings of which 220 are sectional title. According to Ian Fife, a major property owner in the area, no real secondary market has developed in Hillbrow yet, with just the beginnings of one in Berea. Clearly the upside potential in these areas is huge but the council does need to act to regularise service delivery and by-law enforcement.
One concern that I have regarding this densifying of residential accommodation in built-up areas such as the Jeppe-Bree-Plein corridor is the lack of open space and social facilities. Inner city residents desperately need space to congregate, socialise and relax and the City has to react urgently to these needs or we will have a potential disaster on our hands.
Eastern edge
The third structural change is not really a change as much as a consolidation of an earlier change.
I mentioned last week that, instead of a clustering of activities that one finds in most major cities, the dominant developments of the 1970s were spread out and located at the four corners of the traditional CBD. Well, Absa has now announced and begun construction of another major extension to its campus (R1,1-billion), which is to the east of the traditional CBD.
This eastern sector now contains the growing Absa campus; Jewel City, which is currently also being extended; and, to its north, a mixed-use residential and industrial precinct that is starting to emerge from a really gritty area. So the node on the east of the traditional CBD initiated originally by the location of the Carlton Centre and the UBS, is strengthening considerably.
But another of the 1970s nodes outside the traditional CBD is also being strengthened, this time on the western edge, through some interesting developments. Absa has recently also purchased 11 Diagonal Street, a purchase that will change the use of that building from commercial letting to predominantly institutional.
First National Bank has bought the previous AA Life Building, also on Diagonal Street, and this will have the same result - the institutionalising of previous commercial space. FNB may also be considering redeveloping its open site between the old stock exchange building and its new parking garage on the previous First Card site.
Immediately to the north west of both of these buildings, Anglo Gold Ashanti's new corporate head office is to be completed by mid-year. To the south of these Diagonal Street developments, the Johannesburg Land Company's purchases of properties as well as the open land west of the magistrates' court for a major office park development, will result in a new dynamism for this south western quadrant.
All of this now supports the Standard Bank Superblock development which was the 1970s "breakaway" from the traditional CBD.
The CBD
So that leaves the traditional CBD itself. This is, in fact, the area that coincides with the historic CBD, which approximates the area created by consolidating the two original mining camps in 1887.
It was later, of course, the prime area for retail and attracted some major development in the late 1990s (Bank City, 1066 and so on) as well as new retail for Woolworths, Edgars and Game. But for the past few years nothing much has happened in the area.
Well all that is likely to change. The Gauteng provincial government precinct, if the architect's revised proposals are accepted by his client, will have a major effect on the southern part of this area. At least one major commercial project is being considered while the central part is being affected with a great deal of residential conversions and upgrading as previously mentioned down the Jeppe-Bree-Plein corridor.
The northern sector is the site for the massive Park Station development being planned by the City's transportation department. This, which includes major bus and taxi ranks, also envisages substantial residential and retail activity.
In my estimation it will be a multi-billion-rand development that will be an ideal vehicle for a private-public partnership. It is planned to be developed in six phases between now and 2015. To its north-east is the R100-million Gautrain station already under construction.
Given all the above it is probably not surprising to learn that within the inner city:
- Between 1996 and 2006, 9 655 property transfers amounting to some R6-billion took place, the greater proportion since 2001;
- Capital developments by both the public and private sectors amounted to between R6,5-billion and R7,5-billion (roughly 2001 to 2006), of which R2,5-billion to R3-billion was from the public sector;
- Known projects (of which some commenced in early 2007) already reflect investments over the next three to five years of R12-billion, of which R3-billion will be public sector, excluding the cost of the proposed Bus Rapid Transport System. Excluded also is public sector work that may flow from the City's 2010 office; and
- Known future projects include a further 4 000 to 5 000 residential units, new, converted or refurbished.
Isn't it great when a plan comes together?
Regards, Neil
Walking and bus tours by the Parktown and Westcliff Heritage Trust
The costs below are for members and non-members respectively. Bookings can be made at Computicket on 011 340 8000 or through the Computicket website.
For more information, phone 011 482 3349 in the mornings only.
Saturday, 12 May: Benoni – Son of my Sorrow is a bus tour. Meet at 11am at the Sunnyside Park Hotel in Parktown; the tour lasts about five-and-a-half hours and costs R160 and R180, including a picnic lunch.
Saturday, 19 May: Observatory Ridge is a walking tour. Meet at 2pm at St Francis Catholic Church, 43 Cavendish Road, Yeoville; the tour lasts about two-and-a-half hours and costs R50 and R70.
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