Housing in Southern Africa October 2015

News

Opportunities for savvy developers

A ccording to Ken Reynolds, Re- gional Executive in Gauteng for Property Finance at Nedbank Corporate and Investment Banking (NCIB), the result of this is that more and more developers and building owners are realising themassive rede- velopment potential. Savvy investors are buying these structures. “There are a number of factors that contribute tobuildings becoming obsolete,” says Reynolds. “These include an increased reli- ance on IT in the workplace, which has made it critical that buildings are equipped to deliver the latest in technology requirements. The same is true for air-conditioning systems which have evolved over the years. Many older buildings are simply not equipped for these needs and there- fore lose their appeal and relevance.” He says that another trend in modern day businesses that may put buildings at risk of obsolescence, involves the shift fromclosed to open plan work spaces. “In the past, an average office building would have allocated up to 30m² per staff member. With the move to open plan workspaces, this allocation has reduced significantly to about 10m² per employee, with this increase in employee num- bers, it has created additional chal- lenges for older buildings in the form of insufficient common areas and parking spaces. These issues are particularly prevalent in many of the country’s Central Business Districts, and have contributed to

Significant changes in technology, workplace practices and production requirements have all resulted in an increasing number of commercial and industrial buildings in South Africa becoming obsolete.

commercial to residential, many of- fice buildings in the area have been refurbished into residential accom- modation. Another question many develop- ers face is whether to renovate or refurbish an existing building, or to rather knock it down and start again. “Brownfields projects, which in- volve refurbishing existing buildings, have the advantage of already having all the facilities in place such as water and electricity, as well as approval for services and zoning,” says Reynolds. However, he says that in some cases where the floor area ratio or clear- ance heights are unsuitable for the purposes for which the building will be transformed, it may be better to start from scratch. “With this in mind, the biggest mistake developers make is under- estimating the problems that they are going to find once redevelop- ment starts,” he says, “therefore, should the decision be to refurbish a building following a thorough feasi- bility study, additional contingency costs need to be factored in espe- cially for unforeseen challenges such as elevators that require replace- ment, massive plumbing, or electrical work that needs to be conducted,” says Reynolds. ■

many companies moving their head- offices more suitable venues.” Reynolds adds that obsolete build- ings are not limited to office space. In the industrial building segment, structures that are comprised of harmful materials and lowclearances have become undesirable. It is also increasingly prevalent to separate employees frompotentially harmful materials used in production processes, which was not necessarily the case when many older factory structureswere designed. In addition, the change in industrial activity from heavy to light engineering, as well as greater demand for warehousing and distribution, has seen a shift in the type of facility that companies now require. He says that while redevelopment presents significant opportunities for developers and owners, it is critical that they conduct thorough feasi- bility studies and market research before deciding on what to do with an existing building that has become obsolete. A key factor is understanding the demand for various types of proper- ties in the area in which the building is situated. For example, due to the change in the nature of the demand inBraamfontein, Johannesburg, from

October 2015