Office development timing

Any astute property investor who has been around for some time will be well aware of the cyclical nature of property values. Property values are not the only variable subject to the ebb and flow of the economy. Vacancy levels are very much a product of the health of the economy and must be scrutinized very carefully when investing in a certain area.

Due to the prolonged nature of developing a substantial office complex, the timing of completion vs the estimated likelihood of absorption is key. Investor sentiment at inception of development may be strong, however upon completion the state of the economy may be in a completely different phase, as many office developers are finding today.

Leading development company ‘Vlaming’ may have the solution to the timing problem, according to Neil Vlaming “construction on major projects only begin once a substantial proportion of the complex has been pre-sold” he adds that another key strategy is to customize development to the needs of smaller users as opposed to the larger owner occupiers as this optimizes space and appeals to a larger target market.

Neil goes on to state that although sentiment in the office sector is currently down , there is still a fundamental need for office space, as many firms are holding back until business confidence increases. It is inevitable for the economy to recover somewhat in the not too distant future and when this happens, Vlaming will be in the perfect position to capitalize on the opportunity, with development sites in key nodes such as Waverly, Rivonia, Fourways, and Bryanston , all of which are strategically situated alongside highways or other major points of interest.

In order to get the timing just right, it is important to judge the demand for office space at least 18 months in advance. Investors with a long term view are likely to reap the rewards of careful strategic analysis.

Source: Ari Ben    SkyRise , March 2011

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