GeoJournal 39: 73-79. © 1996 (May) Kluwer Academic Publishers. Printed in the Netherlands.

The geog raphy of property in inner-gity Johannesburg Rogerson, Jayne, University of the Witwatersrand, Department of Geography, Private Bag 3, Wits 2050, Johannesburg, South Africa ABSTRACT:Questionssurroundingpropertyinvestmentand the geographyof propertyhave been little researched in African cities. In this paper an examinationis undertakenof the changing geographyof property in the Johannesburg inner-city.Six distinct property districts in the inner-city are defined and their major property developments discerned. Ownership of the inner-city is narrowly focussed in the hands of 20 core institutional investors. Overallthe problemsof Johannesburg'seconomicallydeclininginner-cityproperty market are reflectedin patterns of officerentals, vacancies and occupation.

Introduction One of the least researched aspects of Africa's cities concerns issues of property investment and broader questions surrounding the geography of commercial property. As Rakodi (1994) acknowledges, this set of research questions is significant particularly in relation to patterns of property investment in the Central Business Districts (CBDs) of urban Africa. Currently, the limited literature concentrates on the developing property situation in Kenya, Zimbabwe and South Africa where investment in office and shopping developments largely is funded through the speculative investments of banks, insurance companies and pension funds (Simon 1992). The objective in this paper is to augment the sparse body of writings on property markets in urban Africa by investigating the contemporary situation of inner-city Johannesburg. The material presented here draws from a larger investigation and detailed ownership audit of the property built environment of South Africa's largest city (Rogerson 1995a). In this analysis, the present-day characteristics and problems that are associated with the changing commercial property built environment of the Johannesburg inner-city are described and reviewed.

Property districts in inner-city Johannesburg The major part of Johannesburg inner city is owned and controlled by only 20 landholders. The leading grou~ of institutional actors in term~ of ownership are South Africa's major insurance companies, banks

and mining houses. Overall, the list of key investors is headed by Old Mutual Properties, Anglo American, First National Bank, JCI, Sage, Sanlam and Standard Bank. As has been shown elsewhere (see Rogerson 1995a for maps), the detailed ownership profiles of these institutional investors shows patterns of geographical concentration in specific areas of the inner-city, more particularly in the CBD. Especially over the last two decades, Johannesburg's CBD has evolved into a number of distinctive 'property districts', each with a specific identity. In terms of analysing the unfolding geography of the inner-city, it is important to appreciate the differentiation or grading of the property built environment into what is called A, B, C and D grade building stock. The details of this grading system are: - A Grade: Prime space, generally not older than 15 years, prime location/high quality finishes, on-site parking (unless special curcumstances pertain), air-conditioned. Market rentals near the top of the range. - B Grade: Generally older buildings, but accommodation close to modern standards, prime location, air-conditioned, on-site parking (unless special circumstances pertain). - C Grade: An older building but in good condition, although finishes not up to modern standards, good location, may or may not have on-site parkipg, unlikely to be centrally air-conditioned. - D Grade: All remaining buildings. Six property districts may be distinguished in terms of the built environment of the Johannesburg innercity, namely Exchange District, Financial District,

74 Commercial District, Midtown District, Station District and Braamfontein (see Figure 1). Exchange District is bounded by Bree and Pim streets to the north, Rissik street to the east and Market street to the south, with Goch street forming the western boundary (Ampros 1994a). The axis of this dynamic area is, to a large extent, the Johannesburg Stock Exchange, which has drawn a number of other major developments to the district to secure the financial community. Among major recent property developments are First National Bank's massive Bank City project, Old Mutual Centre, Ten Sixty Six, Ernst and Young House, the JSE Annexe, and the Civic Spine. Over the last few years the Exchange District has grown rapidly; it furnishes 459,757 sqm of office accommodation, broken down by grade as follows viz., A Grade 242,588 sqm; B G r a d e - 116,541 sqm; C Grade 54,513 sqm; and D Grade - 46,115 sqm. Of the total available office space, over 75 percent is quality A or B grade space, making this district one of the prime office locations within the inner-city of Johannesburg. The most important new property developments taking place are First Place, the last of the four block complex for First National Bank, and a new office development for the Johannesburg branch of the South African Reserve Bank. Future planned development centres on stimulating a cultural district in the Newtown area which is part of a co-ordinated set of initiatives designed to revive the inner city. The Newtown re-development is planned not only to act as catalyst for regenerating Johannesburg but potentially also to be "the soul that Johannesburg has never had" (Johannesburg 1994a, p. 4). The Financial District is bounded by Market street to the north, Rissik street to the east, Hall street and Village road to the south, and the M1 to the west (Ampros 1994b). This district houses most of the country's major mining houses and financial institutions and also a number of insurance companies. Among major developments in recent years is the Standard Bank Centre Phase 2, the new Anglo American head offices and office developments for Investec. The Financial District has the largest amount of office space which totals 972,000 sqm. This is broken down by grade as follows: A Grade - 391,622 sqm; B Grade - 275,143 sqm; C Grade 271,135 sqm; and D Grade - 34,100 sqm. Of the available space, over 65 percent is A or B grade space. Office space currently under construction includes expansion of Standard Bank's head office and the new head office for the Gencor mining house. Important refurbishments which are presently taking place in the Financial District are the R90 million revamp of the Southern Life Centre and major alterations to the Investec head office in Fox street. Three major future developments are planned in the Financial District; JCI Main Place, a 70,000 sqm

J. Rogerson

Figure 1. Property districts of the Johannesburg innercity. office park; Forum 66, a development of 18,000 sqm of prime office space; and, Westgate, a development which will include a transport system node, retail/ office centre, and social/recreational facilities. To further enhance the Financial District, six city blocks between Market and Main streets are to be transformed into a historical precinct forming a semipedestrian mall in which the original old buildings on each side will be preserved. Most importantly, the Financial District will be strengthened by the creation of a new govemment precinct for the offices of the Gauteng provincial administration. The area is to be further upgraded through the integration of various government ministry buildings and the incorporation of the historic Post Office building. The Commercial District is bounded by Bree street to the north, Albert street to the south, Delvers and Goud streets in the east, with Von Brandis street forming its western boundary (Ampros 1994c). The Supreme Court is a significant landmark in the area, and the legal profession Occupies a notable segment of office space around the court. The district also contains various accounting firms, airline companies and consular offices. Further, the medical and dental professions cluster in buildings on the northern boundary. Smal Street Mall and the Carlton Centre form the retail and entertainment hub of the area, accounting for 60,000 sqm of prime retail space. Johannesburg's only remaining five-star hotel, the Carlton, is located in this district. In total, the Commercial District has 679,021 sqm of office space, which is differentiated by grade as follows: A Grade - 287,667 sqm; B Grade - 120,067 sqm; C Grade 114,645 sqm; and, D Grade - 156,642 sqm. Overall,

Inner-city Johannesburg 60 percent of building stock is A and B grade space. At present (1995) no new office space is under construction in this area. The only notable planned development in this district is an international convention centre, a possible R500 million project. The key to the go-ahead of this project, however, is a planned casino for which a licence is sought in terms of new post-apartheid gambling legislation. The convention centre would make Johannesburg a potential host for international meetings such as those of the OAU, United Nations organizations or the Commonwealth. The proposal would, if successfully implemented, augment the formal financial and commercial centre around the Carlton Centre. Lastly, fringing the Commercial District is the planned 'theme park' development of Jewel City. Phase 1 will form a superblock providing 40,000 sqm of manufacturing and trading space. In addition to manufacturing, Jewel City will provide space for training in technical skills and assistance for aspirant jewellery entrepreneurs (City of Johannesburg 1994b). The Midtown District forms the central core of the Johannesburg CBD and is bounded by Bree street in the north, Albert street in the south, Von Brandis street in the east and Rissik street to the west (Ampros 1994d). This district houses a range of diverse activities including the offices of the Receiver of Revenue, Motortown in the southern sector and most importantly, Eloff street which is the traditional retail centre of the Johannesburg CBD (see Rogerson 1995b). Overall, the Midtown area has 483,872 sqm of office space which is broken down as follows: A Grade - 34,680 sqm; B Grade - 115,479 sqm; C Grade - 264,116 sqm; and D Grade 69,597 sqm. It is evident that in this district only 31 percent is A and B grade space. Currently, no new developments are underway in the Midtown district. Of note, however, is the refurbishment of the old African Life Centre in Commissioner street (renamed 111 Commissioner street) and the conversion of Anstey's Building from office use to sectional title residential units. In addition, renewed interest is being shown in the newly pedestrianised Kerk street and Eloff street, by property owners and retailers, with a joint upgrade of the planned pedestrianised Eloff street under discussion among major property owners in the area (Rogerson 1995a). Planned developments include Old Mutual Properties CNA site with further stimulus anticipated from the projected move in 1996 of the central Johannesburg branch of Edgars retailers to the Intown Centre. This move will revitalise the strong retail node which is crystallizing on the newly pedestrianised Kerk street (Rogerson 1995b). The Station District is bounded by Noord street and Park station in the north, Harrison street in the west, Nugget street in the east and Bree street forming its southern boundary (Ampros 1994e). As Park station, the road transport terminal and the South African Airways Terminal fall within the

75 boundaries of the Station District, this area is the transport focus of Johannesburg. In total Station District has the smallest amount of office space (331,191 sqm) which is differentiated as follows: A Grade - 5,635 sqm; B Grade - 80,586 sqm; C Grade - 164,172 sqm; and D Grade - 80,798 sqm. Only 26 percent of office space in this district is classed as A and B grade space. At present there are no refurbishments or new developments currently underway in this district. Nevertheless, Ampros (1994e) highlight three notable planned developments viz., Gateway Mall, comprising a shopping centre catering for formal and informal traders as well as a two-tier basement garage to provide parking and loading for kombi taxis; Park City, a multi-million rand transport, housing and commercial development designed to link the Johannesburg CBD with the Braamfontein area; and, the upgrading and re-development of parts of the eastern side of the district as a consolidated residential area. The final property district of the inner-city is Braamfontein, Johannesburg's first decentralised office node, which is situated to the north of the Johannesburg CBD (Ampros 1994f). Braamfontein is the locus of several major company headquarter offices, the municipal offices of the Greater Johannesburg Transitional Metropolitan Council and a number of major educational institutions, most importantly the University of the Witwatersrand. In Braamfontein there is a total of 809,432 sqm office space which is graded as follows: A Grade - 261,260 sqm; B Grade- 177,843 sqm; C Grade: 282,207 sqm; and D Grade - 88,122 sqm. Of the total office space 54 percent is classified A and B grade space. Recent refurbishments in the area include the Civic Theatre, the Braamfontein Centre, the Parktonian Hotel and Liberty Life's recently completed Jorissen Place. The major planned future development is the extension of the Park City development plan. "The idea is to link Braamfontein to the Johannesburg city centre and create a tree-lined 'Champs Elystes' linking Hillbrow to the Newtown cultural precinct" (Marsland 1994). This project is envisaged to transform the southern end of Braamfontein into an international trade centre and tourist transit centre.

The changing property geography of the inner-city During the last decade the property geography of the Johannesburg inner-city has experienced considerable change as a result of several influences. The dominant theme is the relative decline of the innercity as a whole as compared to the rise of new decentralised property developments (Figure 2). Over the past decade, the heart of the Johannesburg CBD has shifted markedly away from the older Commercial District core area of Eloff

76

Figure 2. Decentralized property nodes in metropolitan Johannesburg. street and the Carlton Centre. Instead, the new commercial axis of the city is to the north west or in Exchange District. The establishment of the Johannesburg Stock Exchange within this area was a magnet to other businesses; since its establishment there the Exchange District has gained in importance. Not only does this area now contain the offices of large banking, insurance, property and broking institutions but it also houses them in the most architecturally modern and stylish manner. The majority of new developments and refurbishments taking place within the CBD are for key institutions (Old Mutual and Standard Bank) or giant corporations such as Anglo-American or Gencor. Increasingly, the Johannesburg CBD no longer attracts small and medium, predominantly, whiteowned businesses which are relocating or already have moved to suburban locations. In particular, decentralisation of offices and retailing has been taking place at an accelerating pace to Johannesburg's northern suburban areas (Rogerson 1995b). This represents a continuation of trends that began in the 1970s for major new office and shopping centre developments to decentralise outwards towards the northern, north western and north-eastern suburban areas of the metropolitan area (Shiceka 1995). Especially during the past decade, the nature of decentralized office development in Johannesburg has undergone a rem~kable transformation. Few tenants, other than large corporations, are attracted to high ~¢nsity and high rise property developments. Instead, the commercial preference is for locating in

J. Rogerson low density office parks where landscaping and a pleasant work environment is offered. In addition, tenants prefer to own or occupy their own buildings and if this is not possible then to be able to enter their premises from a common foyer without traversing other tenants space (Moross and Partners 1995, p. 8). The shift northwards of new property development in Johannesburg is further explained by the preference of commercial property developers for locating decentralized offices in upmarket residential areas close to the residences of key decision-makers (Moross and Partners 1995). Fina!ly~ over the last five years, there has been a series of factors which have re-inforced a negative push away from the inner-city. One key issue relates to the sky-rocketing costs of parking in the Johannesburg inner-city (Rogerson 1995a). Another factor relates to the activities of the National Monuments Commission which often imposes prohibitive costs on companies and developers in terms of preserving and incorporating historic facades in inner-city property redevelopments. The weakening attraction of the inner-city has been worsened by increasing levels of poverty and crime, rising unemployment and deterioration in several aspects of the urban infrastructure in the inner-city (Shiceka 1995). Of these various factors, the most critical in terms of the increasingly negative property image of the Johannesburg inner-city is the escalation in levels of violence and crime (Coovadia 1995; Heine 1995). Evidence for changes taking place in the property market of inner-city Johannesburg is contained in patterns of rentals, office take-up and vacancies. In a comparative inter-city comparison of office rentals from 1986 to 1992 it was shown that the relative performance of the Johannesburg CBD lagged far behind that of other South African cities, most importantly of Durban and Cape Town (Rode 1993). Further comparative evidence of the weak performance of office space within the Johannesburg CBD is furnished by Rode (1993) who computed growth in demand for office space (grades A, B and C) for the period 1981-1992. The findings revealed major inter-city variations in patterns of office demand with growth in the Johannesburg CBD described as "dismal" (Rode 1994, p. 7). The declining demand for property office space in the Johannesburg CBD is shown in Figure 3 which discloses the growth in demand for decentralised office space as compared to the flat demand for CBD office space. Within the Johannesburg inner-city, office rentals are highly variable. As shown on Table 1, however, certain parts of the CBD perform better than others and some buildings within the same grade equally perform better than others. Indeed, it is evident that the Exchange District and Financial District lead in terms of the highest achievable office rentals with the lowest rentals in the Station District (Table 1).

Inner-city Johannesburg

77

by office vacancy factors which reached a level of 23.6 percent in May 1994 surveys of B grade stock in the Johannesburg CBD. This figure contrasts with 25O ................................................................................................................................ ~II~ .m/ that of 10.6 percent for A grade stock in May 1994, /J a finding which some observers interpret as suggestive of a possible turnaround in the office market. Positive cumulative take-up figures and a further drop in vacant space in 1995 indicate that a hesitant resurgence in demand is beginning to erode the oversupply of offices in Johannesburg's inner-city (Rogerson 1995a). None the less, vacancies within 50 ..................................................................................................................................................................................... the B and C grade buildings of the Midtown, Station, Financial and Commercial Districts still account for I I t I I I I I o I 1961 an estimated 437,819 square metres of available office space. This figure is almost two and a half [ -AF-- CBD -II-- Oeee~Jrallsed l times the cumulative net take-up of office space Figure 3. Index of office demand: Johannesburg CBD (180,000 sqm for A and B grade buildings only) relative to decentralised nodes. which occurred over the twelve month period May 1993-94 for the entire Greater Johannesburg area As regards office vacancies, it is apparent that the (see Rogerson 1995a). In detail, for the surveyed movement of companies out of the CBD together period May 1993-94, Johannesburg's inner-city with the intra-CBD relocation of others to more experienced a net occupation of 31,300 sqm which attractive A grade buildings in the Exchange District stands in stark contrast to the decentralised areas has been at the expense of B and C grade buildings which recorded a net take-up of 149,000 sqm. during in other parts of the CBD. The vacuum which has this same period. been left in many parts of the inner-city is indicated The high vacancy levels within the CBD prompted some property owners to board u p and, in some Table 1. A, B, C and D Grade office rentals for the instances, even to demolish office buildings in the Johannesburg inner-city 1994 inner-city to either retail or ground level. The high availability of marginal C and D grade office stock District Grade of Rental within the city, coupled with the protracted economic building recession, has meant that rentals have not increased and that tenants are able to negotiate rentals from a Exchange district A Grade R26/sqm-R35/sqm position of strength. Interviews conducted with key B Grade R18/sqm-R23/sqm actors in the institutional property sector disclosed C Grade R13/sqm-R18/sqm special problems arising with C and D grade innerD Grade R6.50/sqm-R9/sqm city buildings. As high operating expenses overtake Financial district A Grade R26/sqm-R30/sqm achievable rentals in many of these C and D grade B Grade R18/sqm-R25/sqm buildings, property owners pay out more than they C Grade R14/sqm-R18/sqm receive from rentals. Thus, an oversupply of lowD Grade R6,50/sqm-R9.50/sqm grade stock together with low rentals means that in Commercial district A Grade R22/sqm-R30/sqm many buildings achievable rentals fall far short of the B Grade R16/sqm-R24/sqm building's basic growing operating costs (municipal C Grade R12/sqm-R16/sqm rates, refuse, security and cleaning). Many property D Grade R6.50/sqm-R10/sqm landlords have reacted by simply boarding up or Midtown district A Grade R24/sqm-R30/sqm demolishing buildings with the disused or razed B Grade R17/sqm-R22/sqm buildings signifying a blight on the physical landC Grade R11/sqm-R16/sqm scape of the Johannesburg CBD. An added problem D Grade R4/sqm-R9/sqm has been the invasion of empty buildings by illegal Station district A Grade no A Grade available squatters further reinforcing the general appearance B Grade R18/sqm-R21/sqm of blight. C Grade R12/sqm-R17/sqm Some property developers argue that by 1995 the D Grade R5/sqm-R9/sqm recession had bottomed out and that with the new Braamfontein A Grade R24/sqm-R32/sqm post-democratic elections buoyancy, an economic B Grade R17/sqm-R23/sqm upturn will result in the take-up of the large number C Grade R10/sqm-R16.50/sqm of vacancies in the CBD. None the less, it must be D Grade R5/sqm-R8/sqm cautioned that the Johannesburg CBD requires further boosting in terms of changing its negative image to Source: Ampros, 1994a, 1994b, 1994c, 1994d, 1994e, 1994f. investors and prospective tenants alike. The CBD of 150

K

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J. Rogerson

78 Johannesburg suffers from a strongly negative image associated with crime, dirty streets and pavements, environmental blight and pollution (Heine 1995). In an effort to address these problems new initiatives include the innovation of 'business improvement districts' as part of a wider policy framework to revive the inner-city economic base. The need to address the economic plight of the Johannesburg inner-city is now recognised as a key priority by most government decision-makers. As Coovadia (1995, p. 1) argues the "significance of the inner city cannot be over-emphasised, nor can the negative impact on the country of the continuing decline of this area". .... With the demise of apartheid and the close of a long period of racially exclusive business areas, the landscape of South African cities, however, has altered irrevocably. In the case of Johannesburg the opening up of the CBD to African businesses and trade has brought major change to the character of certain parts of the inner-city. In particular, the areas fringing taxi ranks, railway stations and bus termini have become bustling markets with nearby streets transformed into informal trading areas (Rogerson 1995b). The formal retail economy has adjusted in character to the needs and opportunities offered by the African consumer. Thus, as a result of the deracialization of urban space, a major restructuring has taken place of the retailing and commercial property landscape of inner-city Johannesburg. The factor seen as offering the greatest potential future hope for a revival in the inner-city property market is the decision made by the Gauteng provincial government to locate its offices in the Johannesburg CBD. During 1995 recorded vacancy levels dropped in the inner-city as a consequence of the rental of 89,000 sqm of office space by the new regional government. A deliberate policy decision was taken by the Gauteng provincial government to locate its offices in the Johannesburg CBD within buildings that fit within programmes for renewing the inner-city. It has been argued that Johannesburg's selection as Gauteng capital will continue to increase demand for good quality space in the city at the expense of the Pretoria CBD (RMBT 1994). More broadly, Johannesburg's position as capital of Gauteng province has renewed confidence in the city and in its CBD, "with regional government acting as a revitalisation catalyst" (Anon 1994). Spin-offs include creating employment, attracting related new offices and increased residential accommodation requirements.

Concluding remarks The changing geography of property in the inner-city of Johannesburg must be understood in terms of the varying mixes and performance of differing grades of building stock. It is evident that the Johannesburg

CBD has evolved into a series of distinct property districts each with its own identity. Moreover, the differentiated nature of the CBD is currently being reinforced and, to some extent, re-defined by a series of new property developments and refurbishments. Ownership of the CBD is narrowly focussed in the hands of a series of institutions, most importantly of banks, mining houses and insurance companies. The investment decision-making processes of this small group of enterprises are fundamentally shaping and re-shaping the property built environment of Johannesburg's inner-city. Over the past two decades the overriding theme in the property market has been the rising challenge of new decentralised commercial property developments in Johannesburg's northern suburban areas. The decreased attractiveness of the inner-city relative to these new decentralized nodes of property development is reflected in the shifting patterns of office rentals, vacancies and occupation. To a large extent the future performance and changing geography of property development in Johannesburg will be determined by the success or failure of on-going development initiatives designed to transform the ailing economy of the inner-city.

References

Ampros: Report on the Letting Market of the Exchange District, Johannesburg: July 1994. Anglo American Property Services, Johannesburg 1994a. Ampros: Report on the Letting Market of the Financial District, Johannesburg: July 1994. Anglo American Property Services, Johannesburg 1994b. Ampros: Report on the Letting Market of the Commercial District, Johannesburg: July 1994. Anglo American Property Services, Johannesburg 1994c. Ampros: Report on the Letting Market of the Midtown District, Johannesburg: August 1994. Anglo American Property Services, Johannesburg 1994d. Ampros: Report on the Letting Market o f the Station District, Johannesburg: September 1994. Anglo American Property Services, Johannesburg 1994e. Ampros: Report on the Letting Market of Braamfontein: November 1994. Anglo American Property Services, Johannesburg 1994f. Anon: Johannesburg takes the gold. Contact: Newsletter of the Central Johannesburg Partnership 5 (November): 6 (1994). Coovadia, C.: The effects of the local government's presence and policies on the CBD and surrounding areas. Paper Presented at the Conference on Commercial Opportunities in Rejuvenating Johannesburg, 30-31 January 1995. Heine, G.: Public safety in the CBD - the impact on tourism and commerce. Paper Presented at the Conference on Commercial Opportunities in Rejuvenating Johannesburg, 30-31 January 1995. Johannesburg, City of: The redevelopment of Newtown, Johannesburg. Future Build I, 8:4-8 (1994a). Johannesburg, City of: Johannesburg, Jewel City, South Africa. City Council, Johannesburg 1994b. Marsland, L.: Jo'burg launches R3-bn 'super-city', Weekend Star, 30-31 July 1994. Moross and Partners: Johannesburg Nodal Development Study. Unpublished Report Prepared for the Johannesburg City Council 1995.

lnner-ci~Johannesburg Rakodi, C.: Globalism, urban change and urban management in Africa. Paper Presented at the United Nations University Seminar, London, December 1994. RMBT: The South African Property Market: Review of the Property Market November 1994. RMBT, Durban 1994. Rode, E. G. Rode's Report on the South African Property Market, 1994: 3, Vol. 7, No. 3. Rode and Associates, Bellville 1994. Rogerson, J.: The built environment of the inner-city. Unpublished Report Prepared for the Johannesburg Inner-city Strategic Development Framework, Johannesburg 1995a.

79 Rogerson, J.: The changing face of retailing in the South African city: the case of inner-cityJohannesburg. Africa Insight 25, 3: 163-171 (1995b). Shiceka, S.: Regional government's perspective on property investment in inner Johannesburg. Paper Presented at the Conference on Commercial Opportunities in Rejuvenating Johannesburg, 30-31 January 1995. Simon, D.: Cities, Capital and Development: African Cities in the World Economy. London, Belhaven 1992.