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MARKET ANALYSIS OF BALFOUR PARK WITHIN THE CONTEXT OF THE LOUIS BOTHA CORRIDOR OF FREEDOM
Prepared by Viruly Consulting For CoJ
Suite 38 P Bag X26 Tokai 7966 021 671 4223 [email protected]
Whilst all care will be been taken in the preparation of documents and deliverables, Viruly Consulting (Pty) Limited does not assume responsibility for any error, omission or opinion expressed as well as decisions based on the information provided.
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TABLE OF CONTENTS
1 Objective and Approach of the Report 3 2 Introduction 4 2.1 Mega/Macro Market Trends 4 2.2 Movements that are shaping and will shape the future 6 2.3 The Metropolitan Analysis 7 2.4 The Socio Economic Considerations of the Study Area 10 2.4.1 Demographics 10 2.4.2 The Economic profile 12 3 The Highlands North/ Balfour Park and Property Market 13 3.1 The Residential Property Market 13 3.2 The Retail Property Market 15 3.3 The Office Property Market 18 3.4 The Industrial Property Market 19 4 Future Demand Forecasts 21 4.1 The Residential Sector 21 4.2 The Retail Sector 22 4.3 The Office and Industrial Sectors 22 5 Some Thoughts on Value Capture and Transport Infrastructure 22 6 SWOT Analysis 24 7 References and Annexure 25
GLOSSARY
CBD Central Business District CoJ City of Johannesburg GLA Gross Lettable Area LSM Living Standards Measure LEPA Local Economic and Property Assessment NMT Non-Motorised Transport RR Rode Report SAFLBADCP Strategic Area Framework Louis Botha Avenue Development Corridor Plan (shortened to CoJ SAF) SAPOA South African Property Owners Association SPTN Strategic Public Transport Network Stats SA Statistics South Africa STEEP Social, Technological, Economic, Environmental and Political SWOT Strength, Weaknesses, Opportunities, and Threats TOD Transport Oriented Developments
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1. OBJECTIVE AND APPROACH OF THE REPORT The primary objective of this project is to assess the economic and property market conditions in the study are namely the Balfour Park study area (Ward 74). Equal consideration is given to the potential impact that the Corridor of Freedom, running North - South along Louis Botha Avenue, (integrated transport/land use plan) could have on the future development potential of the study area. The analysis comprises two important steps. These are the Market Study and the Marketability Study. See Figure 1 bel
ANALYSIS STRUCTURE 1.PROPERTY MARKET STUDY Macro economy 1.1 MEGA/MACRO TRENDS Property Cycle STEEP Economic linkages Access 1.2 METROPOLITAN IDP/SDF All relevant documentation; other reports etc. Access 1.3 SUBURB LEVEL / STUDY AREA Catchment Area Analysis Demographics DATA (census) Economics SOCIO-ECONOMIC
Sociology of the area DATA Business survey PRIMARY Retail BUSINESS AND ECONOMIC BASE OF THE STUDY SURVEY Office AREA Industrial Residential DEMAND FOR SPACE Quantum
Type CONTEXTUAL ANALYSIS The players Building Plans SUPPLY OF SPACE passed and Quantum completed Type
MARKETS OUTCOME PROPERTY MARKET ANALYSIS Vacancies Take-up rates Rentals Property values sales Property values valuation roll 2. MARKETABLITY STUDY 3. SWOT ANALYSIS and RECCOMMENDATIONS
Figure 1. Methodology of Market Analysis
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The analysis follows a top-down approach which flows from mega trends, which affect the entire South African and Johannesburg property markets, to specific drivers that drive The property market in the study area;
The Mega/Macro trends analyses the South Africa and Gauteng’s Local, Economic and Property Assessment (LEPA) which is based on a Social, Technological, Economic, Environmental and Political (STEEP) trends’ approach. The Metropolitan analysis includes all relevant documentation including the RSDF of Region E of which the study area (Ward 74) is part of and also recent studies such as the Strategic Area Framework for the Louis Botha Avenue Development Corridor, Balfour Park being classified as Area 5. The Suburb Level/Study Area concentrates on all socio-economic aspects and property market analysis. This includes all data from the Census 2011 data bank; from demographics to type of dwelling and disposable annual income. • Data from business surveys and interviews with brokers supply a current understanding of the business and economic base of the study area. • This also includes analysis of the demand and supply of space and the market outcomes which are derived by analysing the SAPOA office vacancy rates and rentals from Rode Report. • The suburbs include Bramley, Glenhazel, Gresswold, Highlands North, and Highlands North Extensions 2, 3, 4, and 9, Kew, Savoy Estate and Waverley. • Further data was sourced or extrapolated from existing sources when necessary, for example the internet. The Marketability Study weighs all the relevant data and is also reliant on data collected from previous reports. In turn, this economic and property assessment informs a SWOT (Strength, Weaknesses, Opportunities, and Threats) analysis which attempts to identify market opportunities and threats taking cognisance of the existing strengths and weaknesses of the node.
2. INTRODUCTION 2.1 MEGA/MACRO MARKET TRENDS Property markets are influenced by long as well as short term dynamics. Long term dynamics are influenced by demographic and economic transitions, as well as technological changes. In the shorter to medium term construction and investment property cycles, including investment activity, are influenced by general economic cycles, although often with a slight lag. This is due predominantly to increased economic and capital market integration, as modern property cycles display a strong interdependence between property, finance, the macro economy, and socio-economic impacts. Investment activity is also closely associated with investor confidence at both a national and local level, including the quality of infrastructure and the strength of legal and market institutions. Although property
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markets are primarily driven by private sector investment decision making, the public sector influences these markets through infrastructural and policy interventions. An analysis of market fundamentals suggests that conditions are generally improving in the South African commercial property market. The market is however still adjusting from the property boom experienced between 2004 and 2008, which resulted in an oversupply of space particularly in the office market and higher end residential space. The rise in annual building costs exceeded 20% in 2005, while the subsequent slowdown in development activity since 2008 caused building cost increases to better reflect national inflation levels. In terms of building plans passed, the boom in non-residential space started after that in the residential market. More specifically, the low-cost housing boom began around 1995, while other residential units escalated in 1999/2000, and non-residential space only picked up around 2001/2002. Building plans passed began declining from mid 2007; however by 2011 development activity in the retail and industrial sectors appeared to have strengthened. This suggests that investors are possibly taking a view that fundamentals will improve by 2015/16 when properties presently being planned would enter the market.
MARKET MARKET EXPANSION CONTRACTIO N
Ret
urn RECOVERY
s & Sup
ply
Returns Supply & RECESSION RECESSION
2000-2002 2003-2005 2006-2008 2009-2010 2011 -
Time Figure 2. Stages of the South African property cycle
The property cycle of the Johannesburg/Gauteng commercial property market is illustrated in Graph 1. It illustrates the strong downturn that occurred in the property market in 2007, with the market showing a rebound in 2012.
The South African property cycle seems to experience long run construction cycles that are some twenty years in duration, with property investment cycles being some ten years in duration.
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% Sectoral Return Gauteng 40,0 35,0 30,0 25,0 20,0 15,0 10,0 5,0 0,0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
All retail Gauteng All office Gauteng All industrial Gauteng
Graph 1. Depicting Total returns across Gauteng (IPD)
The correct timing of public sector interventions in the built environment can have a profound impact on the success of such interventions. In a downturn of the economic and property cycles, the response of the private sector to public sector interventions can be weak. The above analysis suggests that the property cycle is presently moving upwards suggesting growing investor confidence.
2.2 MOVEMENTS THAT ARE SHAPING THE MARKET The Balfour Park study area is located just off the North-South main arterial Louis Botha Avenue and is being affected by numerous broad trends which include; A rapidly rising urban population with large metropolitan areas experiencing a growth of 2%-4% per annum; Some competition for land between residential and commercial uses. Higher densities in the residential market make it increasingly possible for this sector to compete against opportunities in the commercial property sector. A significant gap between the demand and supply of affordable housing units. Recent evidence suggests that the gap between supply and demand continues to place significant upward pressure on the value of property values, thereby reducing affordability. The decentralisation of commercial uses from the inner city. Large South African metropolitan areas are expected to take a ‘polycentric’ urban form with certain suburbs transforming themselves into vibrant mixed-use hubs. A growing focus on the development of urban infrastructure and transport oriented developments (TOD). There is also a growing understanding of how developments and value creation in the property sector can be used to fund infrastructural expenditure through ‘value capture’ mechanisms.
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Rapidly changing business models with resultant changes in locational requirements; this includes the potential growth of smaller urban manufactories. A focus on ‘green’ buildings and precincts. A macro economy which is registering relatively poor levels of economic growth and take-up of commercial space. A focus on the intervention which promote mixed income and mixed use opportunities.
2.3 THE METROPOLITAN ANALYSIS The study area is located in the Region E Administrative department of City of Johannesburg, and also categorised as local area 5 in the Louis Botha Avenue Development Corridor Plan (Strategic Area Framework CoJ). The Regional Spatial Development Plan distinguishes the Highlands North/Balfour Park node as a district node and the RSDF 2010/2011 provides guidelines for the development of a district node as follows; In support of Strategic Public Transport Network (SPTN) ensure that adequate provision is made for public transport in district nodes and that development is integrated with the public transport facilities. There Non-residential development occur within nodes (offices, retail, institutional) and must be strengthened and encouraged in order to give further legibility to the node so that the node is developed as a destination Residential densification in nodes will be supported in order to contribute to the development of vibrant nodes and if applicable to the development of the proposed public transport network Intensification of uses within district nodes is subject to the availability of services and infrastructure.
The RSDF reiterates these points and emphasizes that;
No further direct access to be permitted off Louis Botha Avenue. Develop and maintain the pedestrian linkage between Alexandra and the Johannesburg Central Business District. Implement the Kew/ Wynberg /Marlboro Industrial Area Development Framework (2009). Support residential densification (50-70du/ha) between Berkswell and the southern extent of Waverley Road (support the consolidation of erven). Support high density residential development (50 -70du/ha) on the western extent of the service road west of Louis Botha Drive from north of Berkswell Road to the Balfour Park/Highlands North Node. Support the redevelopment of the Capri Shopping Centre, in Savoy Estate, while containing the neighbourhood node to its existing parameters.
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Contain non-residential development to the first row of erven along both sides of Louis Botha Avenue north of Corlett Drive / Ninth Road. Support non-residential development to the first row of erven along the western extent of Louis Botha north of Sillwood Road.
The future success of the study area will invariably be associated with the effectiveness of the Louis Botha Corridor and its ability to ensure that households and businesses remain connected with employment opportunities and metropolitan social amenities. The critical issue is not only to ensure that the built environment supports employment creation within the catchment area, but also to improve the linkages or relationships between the study area and employment opportunities in the Johannesburg Metropolitan area.
An analysis of the Highlands North/Balfour Park Node suggests that from a policy perspective the overall emphasis is placed on the following;
The identification of the Highlands North/Balfour Park study area as an area to be re- designed to meet the demands of the socio-economic factors. The Louis Botha corridor is to be developed for mixed-use identification. The Louis Botha corridor to enhance the Kew, and industrial area of Wynberg. The prioritisation of public transport and non-motorised transport (NMT) to establish sustainable access and linkages to the area. The establishment of the Balfour Park study area as a destination place of metropolitan significance. The development of mixed- use developments at nodal locations. Greater densification along and on the peripheries of the study area Residential infill. Improvement of quality of public space. Encourage use for service-industrial development. Consider development of underutilised and accessible land. Support medium-density residential uses
The CoJ Strategic Area Framework for the Louis Botha Avenue Development Corridor Balfour Park (Local Area 5) highlights the key densification areas being E1 to E8; these are illustrated in the following diagram;
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CORRIDOR
CONNECTOR CONNECTOR SOCIAL CLUSTERS
Figure 3. Balfour Park Densification areas as per Strategic Area Framework for the Louis Botha Avenue Development Corridor
NAME HA TARGET DENSITY HOUSEHOLDS E1 6.28539 120 754 E2 1.514194 80 121 E3 11.26241 150 1689 E4 8.462643 220 1862 E5 8.730434 150 1310 E6 15.65475 140 2192 E7 16.19758 120 1944 E8 11.74062 120 1409
Figure 4. Key Densification Areas for Balfour Park (SAFLBADC)
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2.4 SOCIO-ECONOMIC CONSIDERATIONS OF THE STUDY AREA
2.4.1 Demographics Statistics from the City of Johannesburg (CoJ) suggest that the population of Johannesburg was approximately 3.8 million in 2012 and would increase to 4.1 million in 2015. Going forward Johannesburg’s population is expected to continue to grow steadily at 3.7% per annum.
Metropolitan demographic trends will not only result in a strong demand for lower income housing, but there is also growing evidence that housing deficits could become considerable in the social and affordable housing sectors. Due to its location and strong access to transportation along the proposed “Freedom Corridor” the study area offers opportunities to provide housing units to lower middle class households.
A demographic comparison of the City of Johannesburg versus Alexandra and the study area (Ward 74) was undertaken illustrate the relative demographic characteristics of study area. It also permits the comparison of the dynamics in surrounding nodes.
Table 1 Census 2011 Stats SA: CoJ, Alexandra and Ward 74 Data (from 1-6) Variable CoJ Alexandra Ward 74 Population size 4 434 827 179 624 25 779
Household size average 2.8 2.7 2.3
1.1 Population and Average Household Size Dwelling Type CoJ % Alexandra % Ward 74 % House or brick/concrete block structure on a separate stand or yard 764 002 53 36 684 58 5 318 52 or on a farm Traditional dwelling/hut/structure 5 626 0.5 244 0 43 0 made of trade mat
Flat or apartment in a block of flats 144 522 10 4 555 7 2 677 26
Cluster house in complex 46 227 3 391 1 421 4 Townhouse (semidetached house in a 63 295 4 226 0 529 5 complex) Semidetached house 33 931 2 824 1 19 0 House/flat/room in backyard 95 518 7 2 954 5 803 8 Informal dwelling (shack; in backyard) 124 075 9 5 754 9 16 0 Informal dwelling (shack; not in backyard; e.g. in an informal/squatter 125 747 9 9 622 15 15 0 settlement or on a farm) Room/flat let on a property or larger dwelling/servants quarters/granny 20 441 1 1 697 3 428 4 flat
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Caravan/tent 789 0.01 64 0 0 0 Other 10 683 1 724 1 53 1 Unspecified and not applicable 0 0
Total 1 434 856 63 737 10 322
1.2 Dwelling Type
Tenure Status CoJ % Alexandra % Ward 74 % Rented 590 652 41 15 015 24 3 342 33 Owned but not yet paid off 236 694 16 4 981 8 2 511 24 Occupied rent-free 227 609 16 18 797 29 1 713 17 Owned and fully paid off 340 802 24 23 397 37 2 314 22 Other 39 099 3 1 548 2 442 4 Total 1 434 856 63 737 100 10 322 100
1.3 Tenure status
Employment Status CoJ % Alexandra % Ward 74 % Employed 1 696 520 38 63 258 35 13 605 53 Unemployed 564 970 13 31 027 17 721 3 Disc/not economically active n/a 2 173 337 48 85 339 48 11 453 44 1.4 Employment Status
Household weighted Income Annual CoJ % Alexandra % Ward 74 % No income 240 335 16 15 986 25 905 9 R 1 - R 4800 43 829 3 2 310 4 102 1 R 4801 - R 9600 62 814 4 2 964 5 136 1 R 9601 - R 19 600 153 235 11 7 307 11 552 5 R 19 601 - R 38 200 240 770 17 14 180 22 1 571 16 R 38 201 - R 76 400 203 172 14 11 975 19 1 020 10 R 76 401 - R 153 800 151 045 11 6 314 10 1 105 11 R 153 801 - R 307 600 130 349 9 1 930 3 1 360 13 R 307 601 - R 614 400 110 125 8 544 1 1 594 15 R 614 001 - R 1 228 800 65 054 4 105 0 1 152 12 R 1 228 801 - R 2 457 600 23 054 2 66 0 566 5 R 2 457 601 or more 10 890 1 54 0 255 2 Unspecified 183 0 2 0 4 0 Total 1 434 855 100 63 737 100 10 322 100
1.5 Income across CoJ, Alexandra, and Ward 74
Highest Education (Matric and Post Matric) CoJ % Alex % W 74 % Matric 25 28 22 Higher Diploma Degrees B, Hons, M and PhD 1 1 29
1.6 Highest Education (Matric and Post Matric)
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The Balfour Park catchment area has a high percentage of number of individuals that hold postgraduate degrees, which translates to above average disposable incomes. In fact the 2011 Census states that over 15% earn annually between R307,601- R614,400 and 12% earn R 614,001-R 1,228,800. Compared to the city of Johannesburg as a whole the study area offers a relatively good balance of different income groups The study area has a high employment rate (53%) which correlates with higher education levels.
2.4.2 The Economic Profile The City of Johannesburg Economic Overview 2011 indicates that Johannesburg’s economy contributed approximately 17% to the national economy and 46.4% to Gauteng’s GDP. Also Region E is the most prominent economically with the Sandton-Alexandra node. Moreover, forecasts suggest that the provincial economy is not expected to outperform the national economy in the medium term. The medium term trajectory of the economy will rely on the provinces’ ability to focus on sectors that offer a comparative advantage , namely tourism, finance , business services, agro-processing , creative industries and oil and gas .
The City of Growth Strategy is based around the following objectives (Economic Growth strategy 2040); Building a globally competitive city through institutional regulatory changes, Providing the right basic service including ICT infrastructure, Leveraging trade and sector development functions to maximum advantage, Ensuring that growth is environmentally sustainable in the long term.
An analysis of the built environment in the study area suggests that the economic base of the study area is clustered around the following sectors; Medical Transport Financial services Auto sales and repair Formal / informal trading activity
Although the retail sector is dominated by the Balfour shopping centre, the study area also caters for a lower hierarchy of retailing which spans from street traders to smaller street front stores. The retailing environment has also adapted to the changing demographic profile of the study area. Towards Wynberg, the Auto sales sector provides an important cluster complemented by warehousing and light industrial uses.
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3. THE HIGHLANDS NORTH/BALFOUR PARK PROPERTY MARKET The Balfour Park property market has seen a transition in recent years and is presently catering for a lower income group than in the past. The built environment has managed to remain ‘connected ‘with socio-economic realities.
3.1 THE RESIDENTIAL PROPERTY SECTOR The performance of the residential property market in the study area is patchy, while certain suburbs such as Waverley have shown a relatively strong performance; others such as Gresswold have underperformed as illustrated in Table 2. Rentals of a three bedroomed house in the study area vary; with Waverley being the most expensive and Glenhazel and Gresswold being the least expensive. The variation in property values is lustrated in Tables 2 and 3 ; while self standing property values exceed R3 million in Waverly and decline to R1,3 million in Gresswold.
Average Sale Price of a 3-bedroomed house in study area 2015
Waverley R3 315 833
Savoy Est R2 875 000
Bramley R1 737 500
Kew R1 631 667
Highlands R1 379 800
Gresswold R1 298 000
Windeed Property Online Report and Property 24.com Table 2. Average Sale Price of a 3-bedroomed house in study area
Average Monthly Asking Rentals of a 3 bedroomed house in study area 2015 Waverley R28 500 Bramley R15 833 Highlands R15 800 Savoy Est R15 750 Gresswold R13 625 Glenhazel R13 500 Windeed Property Online Report and Property 24.com
Table 3. Average Rental of a 3-bedroomed house in study area
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2 779 082 3 000 000 2 500 000 1 901 538 1 650 000 2 000 000 1 226 058 1 211 379 1 099 111 1 019 273 1 500 000 1 000 000 500 000 0 R
CoJ Valuation Roll 2013
Graph 2. Residential Properties Market Prices Averages CoJ Valuation Roll 2013
The value of sectional title units declines from R837,273 in Glenhazel to a mere R319 387 in the case of Savoy Estate.
837 273 900 000 800 000 700 000 542 167 600 000 419 000 376 270 500 000 319 387 400 000 300 000 200 000 100 000 0 R Glenhazel Gresswold Highlands Kew Savoy Estate North
CoJ Valuation Roll 2013
Graph 3. Sectional Title Market Prices averages CoJ Valuation Roll 2013
Table 4 below shows recent sales (from 2012 -present) versus valuation roll 2013 market prices. Some sectional title units have had a normal to good percentage increase while some, like in Gresswold have been sold below the valuation market price indicating that these are not attractive and cannot be sold above the valuation market level. (for full list see Annexure at the end of the Report)
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% SOLD for either above or below Valuation Location Sectional Title Market Price -5,5 Gresswold Kathleen Close -14,8 Gresswold Leamington Court -13,6 Gresswold Michelangelo 19,2 Gresswold Richard Court 47,4 Gresswold Varonne 14 Gresswold Vaude 11,8 Highlands N Ext.4 Highlands Gardens 0,7 Savoy Estate Angeline Heights 28,2 Savoy Estate Glenville Court 45,6 Savoy Estate Savoy Gardens 46,7 Savoy Estate Tenerife CoJ Valuation Roll and Windeed Reports
Table 4. Sectional Titles Sales (from 2012) value sold versus Valuation Market Price
Figure 5 Louis Botha Avenue Figure 6 Sales of Apartments along Louis Botha Ave
Interviews with property brokers suggest that the concerns regarding urban decay are high, but that property yields remain relatively attractive. There is equal concern regarding the proliferation of illegal businesses operating from residential homes - especially along the stretch of Louis Botha from Balfour Park to Orange Grove. Although Glenhazel is underpinned by a strong community there are growing indications that the movement out of the suburb is accelerating.
3.2 THE RETAIL PROPERTY SECTOR
The study area provides a retailing environment which spans from the Balfour park shopping centre to, smaller stand alone stores, and informal traders. The catchment area for the Balfour Shopping centre extends into Alexandra while smaller retail premises rely on a catchment area largely defined along Louis Botha Avenue.
The Balfour Park shopping centre is a mere 3,9 km away from the Pan Africa Shopping Centre which caters for many LSM 1-4 (earning between R3,000 – R8,000 / month). Balfour Park caters for the more affluent earner in LSM 6-8. The monthly income of customers at the Balfour Shopping is estimated at between R8, 000 to R12, 000 per month. Having all the banks in a centre is very important as this cheaper for the consumer.
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Also some tenants and brokers had commented that Balfour Park Shopping centres lacks movie house and more doctors’ rooms. Business hours should be extended at Balfour Park shopping centre. Landlords leasing to small shops on Louis Botha (600 Louis Botha) have not been able to increase the rentals in order to keep the tenants. Corlett City is a major storage facility- the owners; Park Village properties stated that this facility has a niche and this is working well with storage facilities from 12, 15, and 36 up to 88 sqm. There are 30 ordinary storerooms and 18 bigger storerooms. They occupy Basement and Lower ground (the parking was converted to storage). Brokers have stated the building and erecting the fence on the middle island of the road has “cut off’ possible clients and therefore limiting the accessibility across the main Louis Botha Avenue. There is concern of the taxi problem as according to a broker how would this be addressed. Other landlords have expressed similar views as those in the South African Jewish Report where Marcelle Ravid explained: At no point nearby will passengers be able to disembark to do shopping, visit the vet, library, or community centre and return home. This will put all businesses in the area at a disadvantage and defeat the objective of a BRT system. One of the key factors behind the planning of the Bus Rapid Transit system is the proximity between stations. This makes access by foot comfortable for anyone living in the area. Tenants of Highland Gardens welcome the revamp of Balfour Park and hope that the area will be a long-term facelift. Balfour Park needs a revamp and maintenance to make it attractive so that the consumers close by can be re-attracted to the Mall.
Shopping Centre GLA Owner , Number of Shops
Pan Africa Shopping Centre 41 Watt Ave & 2nd st, 15 051 Pan Africa Development Company 63 shops Wynberg
Balfour Park Shopping Mall 36 592 Investec Property Group 115 over 86 shops Centre, Athol st & Johannesburg Rd
Norwood Mall 32 000 Pro Direct Investments 80 shops
Bramley Park (280 Corlett) Midway Mall 9 581 Galwain Group 28 Shops
Park Village Properties 48 Storage Facilities Corlett City (Berkswell St Benedict) 2 900 few stores
Spar (Anchor Tenant)(Louis Botha &Grenville Managed by South Rand Spar Distribution 1 913 Savoy Estate Centre
nd Darklight City Centre 125 2 street Wynberg 5 000 De Castro Investment CC 16 shops close to Pan Africa)
st rd Alexandra Plaza cnr 1 and 3 streets Wynberg 21 600 Community Property Company 58 shops
Table 5. Main Retail Centres in Study Area
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Corlett City
Figure 7. Corlett City
Retail growth is dependent on the growth of the residential catchment area growth as well as their income , thus growth in market size and market share are a function of the growth of the catchment area, and hence growth in the number of people that comprise the catchment area as well as their average income growth. With this in mind, the expected decrease in average household size would require substantially increased densities to augment the number of people that fall within the catchment area.
Figure 8. Pan Africa Shopping Centre
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3.3 THE OFFICE PROPERTY MARKET
The following Table 6 provides and indication of market activity in close proximity to the Balfour shopping centre.
Erf No Owner Land Extent G.B.A. Improvements Comments
F.A.R. 0.414 32 Balfour Park Mall 7.8881ha 2052 Refurbished 2014/2015 647m² GLA.
Main entrance off 1973 Autumn Storm Inv 333 0.6939ha Old OK Bazaars service road
Formerly Bimbos sold South east erven 644 Shelmar Court CC 0.2227ha for R 9 500 000 Includes 643 - 647
South West erven Includes City of Johannesburg 0.3217ha 640 McDonalds Leasehold 630, 632,634, 636, 642
1932 Balfour Court 0.2025ha S/T shops and offices North west corner
1970 Highlands Gardens 0.6939ha S/T residential flats Adjacent to Balfour Lightstone Table 6. Balfour Park Intersection Property at Louis Botha Intersection
The properties located at road intersections are considered to be prime location and are generally regarded as being currently under-developed and under-utilized and regarded as redevelopment stock.
The study node does not provide a significant office and industrial offering. Most of the office space is located in residential properties and caters for the needs of small tax and legal enterprises.
Average Rentals in Study Area per m2 Offices per sqm ( gross ) R 50 - R75 Retail per sqm R175 - R184
Table 7. Average rentals office and retail in study area
Office rentals in the node are positioned between the ‘A’ and ‘B’ grade Johannesburg CBD office market. Johannesburg “A” grade space is presently renting for R 97.50 with” B” grade space renting at R75.00 gross.
The market does not seem to have experienced significant competition from an office demand perspective, as discussed below there would be some scope to place a limited amount of office space in the node which would complement the proposed retails pace.
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3.4 THE INDUSTRIAL PROPERTY MARKET
The industrial space in close proximity to the study area is located in Kelvin / Bramley and Wynberg. Vacancies in this market are relatively low compared to the market, suggesting the space is competitively priced, see Table 8. There is also a growing opportunity to consider the role that “urban manufacturing” could play in the study area. This form of manufacturing is often undertaken by smaller entrepreneurs who require space to both create goods and retail merchandise. Typical examples include garages, warehousing required for internet sales, and printing works. This form of industrial use can play an important role in complementing the retail offering of a node.
Figure 9 and 10 Queen Street in Toronto, Canada- YNOT cycle works; also custom made From the frame to all the accessories. Source www.yongestreetmedia.ca.
Node 2013 2014
Gauteng Jhb and surrounding 3,9 % 3,1% Kelvin /Bramley/Wynberg 3,8% 0,9% Midrand 2,4% 5,7%
Table 8. SAPOA Industrial Vacancy Rates
The Rode Report suggests that industrial rentals close to the Balfour Park are significantly lower than the rentals asked for in Linbro Park and Central Witwatersrand and Johannesburg surrounds average. This is also illustrated in the table below which shows that property values are a mere R 391.00 (5,000 sqm site) at Bramley compared to R 727 on average for Gauteng and R 1,124.0 in the case of Linbro Park.
Averages Rand/m Averages Rand/m Stands Node Stands 1 000 m2 of 5 000 m2 Gauteng and Jhb Surroundings 771 727 Wynberg Proper 837 783 Kew/ Wynberg East 745 701 Bramley View/Lombardy West 425 391 Marlboro South (Alexandra) 341 319 Linbro Park 1,307 1,124
Table 9. Rode Report Industrial Stands Rentals 2014:4
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Figure 11 and 12 Industrial Space Available in 111, 9th Road Kew Industrial Central Kitchen and 133, 10th Rd Kew (Isca)
4 . FUTURE DEMAND FORECASTS
The important determinants of future demand would include the following;
The long term trajectory of the South African economy, The success in developing an effective transit system serving the study area, The effective management of the urban environment, Ensuring the urban interventions effectively reflect the reigning socio-economic environment, The rise in the number of households living in the study area, The affordability of housing, Investor perceptions of the study area in terms of the residential, retail, and industrial sectors.
4.1 THE RESIDENTIAL SECTOR
As discussed in this report approximately 11,000 households presently reside in the study are (namely some 33,000 individuals). Census data suggests that following income and housing categorization;
INCOME ( per annum) Type of Housing % Households R38,201- R153,800 Social Housing / FLISP 58.7% R153,801-R614,400 FLISP / Affordable Housing 29.2% R614,400 > Bonded Market 12.1%
Table 10. Percentage of Households within identified income bands The figures represented in table 10 provide an indication of the number of households that fall within the identified income bands and associated housing for Johannesburg. Therefore,
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excluding income groups that would benefit from RDP housing, some 58.7% of households would fall in the Social Housing / FLISP market. If therefore one assumes that densities are increased in the study area to 200 /du/ha the total number of dwelling units would rise from 11,000 du to 23,000 dwelling units , an increase of 12,000 dwelling units . Based on the demographic profile suggested above this would result in the number of units rising as follows;
Social Housing /FLISP 7,044 FLISP Affordable 3,504 Rest Bonded Market 1,452 No of UNITS 12,000
Table 11.Number of units per market
This suggests that approximately 12,000 housing units could be developed in the study area.
4.2 THE RETAIL SECTOR
An increase in housing density and increasing the number of households in the study area would increase the potential of the retail offering. While there is little indication that the level of retailing is inadequate an increase of 12,000 households , would increase the annual buying power of the node by some 3 billion based on an average household income of R 250,000 per annum ( this takes the escalation of present income into account) taking an average trading density of R 40,000 into consideration and taking note that some 40% of the buying power (consumption goods only), these households could justify an increase in retailing space of some 22,500m2, which would be equivalent to a large neighbourhood shopping centre or equivalent street front shops .
4.3 THE OFFICE AND INDUSTRIAL SECTORS
While the study node is not presently identified with office sector, improving accessibility and improving the urban environment has the potential to increase demand. I would be reasonable to suggest that the node could see a take –up of between 20,000 to 30,000 m2 of office space. This for instance being equivalent to the office space presently offered in Houghton/ Killarney. The node would need to capture rentals that are twice to three times higher than present levels to ensure the viability of new developments. Consideration could be given to the strengthening of the auto parts economic cluster that presently exist in the study area; understanding this cluster has the potential to increase the demand for space in the “urban manufacturing “sphere of the industrial property market. This usage could be effectively combined with the proposed retail space and potentially take- up of 15,000-20,000 sqm of space in the medium term.
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5. SOME THOUGHTS ON VALUE CAPTURE AND TRANSPORT INFRASTRUCTURE
There is a growing understanding that the provision of public infrastructure has an important role to play in stimulating economic growth and development and therefore indirectly the performance of the real estate sector. Transport corridors offer the potential to connect different parts of metropolitan area and alter the spatial form of economic activity.
A report by Urban Land Mark (2012) emphasises that economically transit access spurs demand for new development, enhancing the marketability of transit oriented locations. Emphasis is also placed on the observation that harnessing this enhanced market value is particularly powerful in low-income communities and areas that otherwise lack market access.
Quoting from the report (ULM, 2012) “Municipalities can use transit-oriented development to establish mixed use, mixed income communities in a city and improve resident’s quality of life. The mix of jobs and housing in an area helps to reduce transport and opportunity costs for poor people, thereby raising living standards “.
An attempt to capture value from transit-oriented developments should be based on an understanding of two important factors – namely the creation of value and the capture of the value created.
In understanding value creation, it is important to distinguish between financial value and the meeting of other objectives which can include higher levels of densification and the urban regeneration of a particular area. The creation of value can occur by making an area more accessible to households and enterprises. Moreover, a successful transport intervention has the potential to strengthen retail catchment areas which in turn provide opportunities for the retails sector.
Value capture include mechanisms include tools used by the public sector, often local authorities, to capture the value which infrastructural expenditure creates for the private sector. This may include the collection of rates and taxes, but new mechanisms are being developed which ensure that value is captured through public/ private partnerships.
As discussed in (ULM, 2012), there are certain important conditions that should be considered in ensuring that transit oriented developments optimise their financial and social benefits;
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1. Policy objectives must be clear: Avoid trying to achieve too many objectives. Certain secondary objectives can reduce the possibility to enhance value. This also implies that the type of interchange / node chosen can have important implications for market outcomes.
2. Value capture mechanisms are only likely to be successful if the market conditions are conducive to creation of value. This also implies understanding the economic and property market setting in which a transport infrastructure project is undertaken. Equal attention should be given to the state of the local economy and local property markets.
3. The successful use of value capture mechanisms requires that strong legal and administrative systems such as revenue collection, valuation rolls, credit ratings and sound fiscal management to be in place. This means understanding the strength of public, private and community institutions and the relationships that exist between the private and public sectors.
4. Value should be extracted based on sound public sector finance principles. Alignment with municipal, provincial, and national legislation.
6. SWOT ANALYSIS
The following SWOT analysis (Strength, Weaknesses, Opportunities, and Threats) provides an indication of the way that appropriate interventions could address the opportunities and threats associated with the Balfour Park study area. The market dynamics discussed above largely provide the threats and opportunities in the matrix. The challenge in the Swot analysis is to ensure that; Strengths are used to secure opportunities Strengths are used to overcome threats Opportunities are used to overcome weaknesses Weaknesses and threats are minimised
Below find Table 11 with the Strengths, Weaknesses, Opportunities and Threats.
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SWOT ANALYSIS • Affordable housing market environment (many are buying flats to live in not for investment) • Economic hub already exists • Social amenities in close proximity STRENGTHS • Close to employment opportunities • Relatively low densities (in study area – not in Alex) • East-West linkages are good • Mixed income potential • Strong owner (Investec) • Middle class abandoning the node • Strong competition in retail (Alex Plaza 3.8km away and Norwood and WEAKNESSES Corlett City) • A suburb in transition with associated risks • Poor impressions of investors and tenants • Undertake a PPP • Value capture opportunities OPPORTUNITIES • Strengthen growing middle class opportunity • Mixed use/mixed income • Urban decay • Extensive trajectory is maintained THREATS • Middle class leaving the node • Does not maintain itself as a commercial node
Table 11. SWOT Analysis for the Study Area
7. REFERENCES AND ANNEXURE
(CSIR Report for DPSA :Geographic accessibility study of social facility and government service points for the metropolitan cities of Johannesburg and eThekwini 2011/12 Region E RSDF 2010/2011 City of Johannesburg City of Johannesburg Valuation Roll 2013 City of Johannesburg Economic Growth strategy 2040 City of Johannesburg Economic Overview 2013 Strategic Area Framework for the Louis Botha Avenue Development Corridor Urban LandMark 2012 Improving Access to the City through Value Capture An overview of capturing and allocating value created through the development of transport infrastructure in South Africa; Robert McGaffin and Lucille Gavera. SAPOA Industrial Vacancies Report Rode Report Industrial Vacancies South African Jewish Report : http://www.sajr.co.za/news-and-articles/2014/11/19/louis- botha-rea-vaya-pros-and-cons Photos by A Karam and F Viruly, Google Earth.
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Brokers and Valuer Information
Broker Company Contact details Brian Park Village Properties 082 310 9340/011 786 5718 Brad De Huizemark 082 929 5184 Jack Urban Link 076 050 3177 Emmanuel Rosjo 011 434 1564 Cleaver Nkomo HB Property Management 060 469 4341 Alexandra Plaza Property Paslow Kekana 011 440 8412 Manager Assistant Moira Tucker Spar Group Property 031 719 1846 GB Ewing and Associates Graham Ewing (Valuer) 011 440 7792/3 Valuations Meryl Bessesar Centre Manager (011) 786 0538 Balfour Park Shopping Centre
ANNEXURE Full Table 4 Market Valuation Price vs Windeed Sales (2012- present) on page 15 of the report
2013 Val Windeed market Sales Unit Name of Building Sectional price Percentage Price Year Location no Title
460 000 23,9 570 000 2012 SAVOY ESTATE 11 ANGELINE HEIGHTS
240 000 -5,4 227 000 2015 SAVOY ESTATE 1 ANGELINE HEIGHTS
410 000 29,3 530 000 2014 SAVOY ESTATE 4 ANGELINE HEIGHTS
410 000 -44,9 226 000 2013 SAVOY ESTATE 12 ANGELINE HEIGHTS 0,7
310 000 51,6 470 000 2011 SAVOY ESTATE 23 GLENVILLE COURT
440 000 2,3 450 000 2011 SAVOY ESTATE 12 GLENVILLE COURT
330 000 16,7 385 000 2012 SAVOY ESTATE 8 GLENVILLE COURT
330 000 42,4 470 000 2011 SAVOY ESTATE 15 GLENVILLE COURT
28,2 HIGHLANDS NORTH 390 000 102,6 790 000 2014 EXT.4 31 HIGHLANDS GARDENS HIGHLANDS NORTH 390000 -74,4 100 000 2014 EXT.4 35 HIGHLANDS GARDENS HIGHLANDS NORTH 390 000 -23,1 300 000 2011 EXT.4 42 HIGHLANDS GARDENS HIGHLANDS NORTH 580 000 20,7 700 000 2013 EXT.4 3 HIGHLANDS GARDENS HIGHLANDS NORTH 600000 31,7 790 000 2014 EXT.4 10 HIGHLANDS GARDENS HIGHLANDS NORTH 620 000 37,9 855 000 2014 EXT.4 29 HIGHLANDS GARDENS HIGHLANDS NORTH 620 000 29,8 805 000 2014 EXT.4 24 HIGHLANDS GARDENS
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HIGHLANDS NORTH 620 000 -30,6 430 000 2014 EXT.4 25 HIGHLANDS GARDENS 11,8
520 000 26,9 660 000 2014 GRESSWOLD 19 KATHLEEN CLOSE
580 000 -6,9 540 000 2014 GRESSWOLD 3 KATHLEEN CLOSE
580 000 8,6 630 000 2013 GRESSWOLD 5 KATHLEEN CLOSE
580 000 3,4 600 000 2013 GRESSWOLD 8 KATHLEEN CLOSE
580000 5,2 610 000 2014 GRESSWOLD 28 KATHLEEN CLOSE
580 000 -8,6 530 000 2013 GRESSWOLD 29 KATHLEEN CLOSE
590 000 -39,5 357 000 2012 GRESSWOLD 12 KATHLEEN CLOSE
590 000 -28,0 425 000 2013 GRESSWOLD 24 KATHLEEN CLOSE
590 000 -11,0 525 000 2014 GRESSWOLD 36 KATHLEEN CLOSE -5,5
540 000 1,9 550 000 2014 GRESSWOLD 1 LEAMINGTON COURT
540 000 11,1 600 000 2014 GRESSWOLD 2 LEAMINGTON COURT
520 000 -1,9 510 000 2015 GRESSWOLD 7 LEAMINGTON COURT
520 000 3,8 540 000 2012 GRESSWOLD 11 LEAMINGTON COURT
520000 -26,9 380 000 2015 GRESSWOLD 22 LEAMINGTON COURT
580 000 -76,7 135 000 2015 GRESSWOLD 6 LEAMINGTON COURT
-14,8
590 000 -5,1 560 000 2011 GRESSWOLD 21 MICHAELANGELO
590 000 -22,0 460 000 2014 GRESSWOLD 25 MICHAELANGELO
-13,6
390 000 28,2 500 000 2014 GRESSWOLD 9 RICHARD COURT
410 000 17,1 480 000 2014 GRESSWOLD 7 RICHARD COURT
410 000 12,2 460 000 2014 GRESSWOLD 2 RICHARD COURT 19,2
260 000 73,1 450 000 2013 SAVOY ESTATE 15 SAVOY GARDENS
280 000 14,3 320 000 2011 SAVOY ESTATE 22 SAVOY GARDENS
280 000 60,7 450 000 2013 SAVOY ESTATE 26 SAVOY GARDENS
280 000 64,3 460 000 2014 SAVOY ESTATE 27 SAVOY GARDENS
340 000 -11,8 300 000 2012 SAVOY ESTATE 2 SAVOY GARDENS
370 000 56,8 580 000 2013 SAVOY ESTATE 3 SAVOY GARDENS
370 000 62,2 600 000 2013 SAVOY ESTATE 12 SAVOY GARDENS 45,6
540 000 -18,5 440 000 2015 SAVOY ESTATE 36 TENERIFE
490 000 -14,3 420 000 2013 SAVOY ESTATE 18 TENERIFE
360 000 102,8 730 000 2015 SAVOY ESTATE 13 TENERIFE
360 000 116,7 780 000 2014 SAVOY ESTATE 30 TENERIFE 46,7
570 000 -21,1 450 000 2014 GRESSWOLD 35 VARONNE
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430 000 102,3 870 000 2014 GRESSWOLD 9 VARONNE
430 000 53,5 660 000 2014 GRESSWOLD 39 VARONNE
430 000 54,9 666 000 2015 GRESSWOLD 49 VARONNE 47,4
470 000 59,6 750 000 2015 GRESSWOLD 21 VAUDE
520 000 26,9 660 000 2014 GRESSWOLD 24 VAUDE
730 000 -8,8 666 000 2015 GRESSWOLD 32 VAUDE
920 000 -19,6 740 000 2014 GRESSWOLD 2 VAUDE
670 000 11,9 750 000 2015 GRESSWOLD 45 VAUDE 14,0
Prepared by Viruly Consulting For CoJ
Suite 38 P Bag X26 Tokai 7966 021 671 4223 [email protected]
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