Private investment in the CBD

Some key dynamics and initiatives of note relate to the five-pillar plan adopted by the City some years ago:

To decrease and eventually eliminate the sinkholes.
To increase the ripple pond investments.
To support the economic sectors.
To intensify urban management.
To maintain and upgrade infrastructure.
A new breed of developers has emerged to tackle challenges and entrepreneurial projects at both the residential and commercial end of the spectrum. With office earnings potential remaining muted, 2004 saw the listed sector as net sellers of assets to the new 'turn-around' entrepreneurs, many of whom are investing in residential stock.

Office investments recorded a 4,5 percent rise in value from R1 014/m2 in 2002, to R1 418/m2 in 2003 and with further growth in 2004 expected according to the Investment Property Databank (IPD) report. More importantly, this is the first time positive capital growth was recorded in the city centre since the database's inception in 1995.

Pitched at the new entrepreneur grouping in particular, the Better Buildings Programme is gaining momentum, facilitating a turn around of blighted buildings with significant rates and taxes arrears. The portfolio has grown from 28 buildings to over 50, but the programme is battling to keep pace with demand from potential investors. Luxury apartment conversions are taking place in numerous select "character" buildings in price brackets equivalent to the north.

An area of some 26 city blocks on the eastern end of the CBD, bounded by Jeppe, End, Commissioner and Von Weilligh streets has emerged as a Fashion District. Some 32 buildings in the fashion core occupying a total floor area of 120 000m2 and a combined value of R30-million were identified for potential investments.

Newtown launched a R200-milion 4700m2 private sector mixed-use (retail, commercial and residential) development comprising 3 850m2 of office space at asking rentals of R55/m2, and 850m2 of retails space at around R70/m2.

The Gauteng Tourism Authority relocated from Rosebank in 2005 to take up nearly 50 percent of the office space. Newtown is supported by new traffic infrastructure that includes the Nelson Mandela Bridge to Braamfontein and the M1/Carr Steer interchange.

Tenants in the node include Blue IQ, the Sci-Bono Discovery Centre, a state-of-the-art science exhibition centre, the National Design & Crafts Centre, Museum Africa, Tourism SA, Gauteng's arts and culture department, African restaurant Moyo, the Market Theatre, and other complementary tourism-orientated businesses.

A R100-milion revamp of the Oriental Plaza in Fordsburg just to the west of Newtown was announced and will include a major food court, multi-purpose hall, gym, banking hall, supermarket chain, franchise stores, multi-level parking, cinema complex and hotel.

Letting opportunities at Constitution Hill open for 36 000m2 of office and 2 000m2 of retail space. The Constitution Hill Development Company is open to various development models, including doing the design, obtaining funding, erecting the building and letting the space to interested tenants, as well as facilitating organizations in building their own building under a long-term lease arrangement. The Hyatt group has planned a limited-service hotel on the 9ha site and a variety of government and nongovernmental organisations express interest in office space.

Johannesburg is now designated the largest Urban Development Zone (UDZ) in the country, comprising just under 18km2 of residential, industrial and commercial areas in and around the central business district. This initiative is expected to boost current efforts to regenerate Johannesburg's inner city, as developers and property investors take advantage of tax concessions to build and renovate buildings in designated areas.

The industrial property sector

Following the growth of northwestern Johannesburg, light industries have emerged to support the residential boom. This has helped spawn renewed demand in such places as Lazer Park, Northriding and KyaSands. As well as providing a massive labour pool for emerging business, major proposed developments in close proximity such as Cosmo City could well increase this demand - which typically is in the form of household products and accessories, furniture products and related goods and services.

To the northeast, the industrial property market of Midrand appears to be improving after a lull over the past four years as a result of the development of new modern nodes and a general decline in some of the key clusters - primarily IT related. New developments brought to market are generally fully let. One of the advantages for new developments is that land prices of between R150-R280/m2 are lower than those of other areas where comparable highway exposure is sought. By comparison, in popular nodes like Longmeadow and Linbro Park, land now trades at R350/m2 or more, with prime highway-fronting sites trading from R380/m2 to R400/m2.

Midrand's relative affordability should rapidly change as the strip is seeing new developments and limited land supply will create a premium in due course. As a node that has a wide variety of supply as well as propensity for combining light industrial and office, the market should continue improving.

Industrial supply indicators at a national level confirm that industrial property investment is growing strongly and supports the fixed investment sentiment emanating from the manufacturing survey in general. City Deep and Kaserne to the southeast of the CBD play a critical role in the economy of Gauteng.

Forty percent of all cargo exported from the Durban port originates in the area. The infrastructure development process around the terminal is well under way with three roads identified as priority areas.

Brownfield industrial complexes such as City Deep/Kaserne face competition from their more modern counterparts located along the city's freeway system to the north and east of Greater Johannesburg.

The City and Service Delivery

The demographics of the city, and how they are changing over time, are important indicators for measuring service delivery and human development. Strong migratory inflows into an area, over and above the internal population growth, can have a considerable impact on the delivery of social services.

The increase in the number of people living in Johannesburg stretches the ability of the City to deliver in terms of services and infrastructure.

Johannesburg's population increased by 22,2 percent over the period 1996 to 2001 compared to the national average of 10,3 percent. Johannesburg's success in creating jobs and the relatively high incomes of its inhabitants are acting as a magnet for people all over the country.

A growth in the number of households that is more rapid than population growth has significant implications for service delivery and infrastructure development, since many services are delivered to households, rather than to individuals. Good examples of these are electricity connections, indoor plumbing and housing.

Although the population growth rate was 22.2 percent, the number of households in the city increased by 39 percent, a ratio of 0,57, suggesting that household formation is increasing at roughly double the pace at which the population is growing. This places enormous pressure on delivery of services and infrastructure.

This challenge is predictable in a developing country going through an extended period of economic growth and real increases in personal income. As the income of the poorer part of the population increases, so the prevalence of large households (more than six) starts to decrease. In this way the population growth/household growth ratio can be seen as an indicator of development.

Certain poorer areas such as Doornkop/Soweto have shown a particularly strong increase in household formation. This puts even greater pressure on service delivery since the poorer the area the more dependent the inhabitants are on the public sector to provide services. In this situation it is difficult for service delivery to keep pace with the sub-division of households into separate units and this makes the provision of formal housing to all households in many respects a moving target.

The relationship between the household ratio/ranking and changes in the area's population is an important one. The poorest area of Johannesburg (Ennerdale/Orange Farm) is also the area that added the highest number of people - just over 115,000. Doornkop/Soweto showed the third highest absolute increase in population (just over 83 000), but is the third poorest. In fact the six poorest areas showed a population increase of 348 861, compared to just 210 106 for the five richest. (The middle area is Diepsloot/ Fourways, with a relatively low absolute increase).

This suggests that a significant number of migrants into the city have limited resources and assets at their disposal and so are moving to the poorer areas with the lowest infrastructure levels. Poorer migrants are likely to place relatively high demands on the City for delivery of services. The demographic profile of migrants moving into the city is critically important in these terms, and in terms of skills levels - which to some extent dictate the ease with which migrants may or may not be absorbed into the mainstream economy.

The poorest region, which has also had the highest absolute population increase, is Ennerdale/Orange Farm, where the number of formal dwellings increased by more than 100 percent from 1996 to 2001. In addition, the number of new formal dwellings (30 331) was markedly higher than the additional number of employed people in the area (21 412). This suggests a significant contribution made by the public sector in the provision of housing. At the same time, the number of non-formal housing units rose by more than 14 000, to just under 50 000 units. Consequently, despite the efforts of the pubic sector in creating a significant number of new housing units in an economically depressed area, the number of people without formal housing has increased by 40 percent.

Access to electricity is a key factor in improving standards of living and an examination of data indicates a similar pattern. From 1996 to 2001, almost 30 000 additional households in the Ennerdale/Orange Farm area had access to electricity (a 58 percent increase). Once again, the demographics of the area suggest that this was due to the intervention of the public sector rather than the inhabitants themselves.

Over the same period, the number of households without access to electricity increased by more than 16 000. In 2001, an additional 13 000 households in this region had only candles as a source of lighting in their households. This was despite a massive increase in delivery by the authorities.

The point is made again when the Doornkop/Soweto region is examined. There has been a 36 percent increase (more than 40 000) in the number of households with electricity. However, the number of households without electricity or solar power has also increased - by more than 9 000 households and the number of households with access only to candles rose by more than 7 000. Although eventually the pace of delivery will catch up with the pace at which migration swells the city's population, this may take a long time and is affected by the funds available. Additionally, fast tracking of housing and other services is likely to increase migration to the city rather than decrease it, certainly in the short to medium term.

Johannesburg is not the only city demonstrating this phenomenon. Other metros experience the same general ratio between population and household growth. This is a clear indication of fairly rapid urbanisation in South Africa, across all areas, in that the rate of household growth is higher than population growth in these metros.

However, the fact that Johannesburg recorded the highest absolute increase in population as well as the highest increase in the number of households (more than 280 000 compared to 208 000 for neighbouring Ekurhuleni), suggests that the city is facing much larger service delivery challenges than other metros.

It is clear that despite a higher absolute increase in households than other metros, Johannesburg is coping fairly well with these demands relative to other areas. The City has a particularly good relative score in the provision of formal housing and water. All of South Africa's major metros face the challenge of rolling out services at a rate that can keep pace with the very rapid increase in the number of households demanding those services.

Conclusion

Since 1994 Johannesburg has made remarkable progress in many key areas, such as economic growth and personal income.

It has been the most important source of job creation in the country and, excluding the effect of significant migration to the city, most indicators show that the quality of life for most of Johannesburg's inhabitants has improved markedly.

While there are still significant challenges ahead, not least of which is to be able to match the pace of service delivery to household growth, the city has built an excellent and solid platform to build on over the next few years.