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October 2015
News
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
Opportunities
for savvy
developers
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.
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
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.
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