CITICHAT 17/2007 - 4 May 2007
The Changing City (2)
1996 to 2000 turned out to be a period of ongoing decline yet also a consolidation period for the inner city during which time various policies and strategies were develop off which increasingly positive investment would start to flow. As one would expect during such a volatile period, media headlines captured the dichotomy of the times - “Squalor and decay growing in inner city” and “Joburg’s inner city – from bad to worse” to “Inner city decay can be reversed” and “Putting shine back in the City of Gold”
Politically, the first democratic council, 1995 to 2000, concentrated to a large extent on restructuring the apartheid structures they had inherited. This did have the effect of extending the period of political paralysis that characterised the previous regime in so far as urban management was concerned.
But the local authority’s lack of urban management performance during this period was not the only aspect that contributed to ongoing decline. A number of CBD property owners were as culpable.
Last week I quoted from Richard Tomlinson’s 1999 Economic Report that noted that “The Johannesburg CBD is essentially owned and controlled by 20 major landowners of which the most notable are Old Mutual, Anglo American, First National Bank, JCI, Sage, Sanlam and Standard Bank.”
Soraya Goga, “Property Investors and Decentralisation” remarks that “the existing CBD owners market also provided the capital for decentralized investment…..CBD owners through investing in real estate in new locations in a period of economic decline, undermined their investments in the CBD……..both the owners and the investment markets were not competitive but oligopolistic …..the issue in Johannesburg is not so much that relocation occurred but the extent of relocation. Given that CBD owners could have dampened decentralized demand, relocation seems to have been excessive.”
Goga argues that (1) an excess of capital in search of investment and held by long term financial institutions (insurance houses and pension funds) acted as a necessary condition in driving investment to decentralized areas (2) the oligopolistic industry structure of these institutions drove ‘false’ competition within the market to exacerbate conditions of oversupply and (3) poor internal organization and management within the investment institutions contributed to the oversupply across the metropolitan area. Clearly the lack of commitment to the CBD was recognized by Council who probably considered that this placed no priority on improving service delivery.
An examination of the major current property owners in the CBD reveals the extent to which the previous institutions disinvested. Southern Life, Sanlam, the Mines Pension Fund, Sage Properties, JHI, Liberty Life, Ampros, Investec etc are no longer present (some no longer exist!) whilst a number of the banks have considerably shed their CBD property holdings. There no longer is a ‘top twenty’ of major property holders but rather a small number of major investors who hold property in excess of a billion rand and then a growing number of others who hold a small number of properties, in each case the total value of which would be below a billionrand. So the current property owners represent a very different breed largely as individuals or consortiums. That’s good for the inner city as such investors often pay a lot closer attention to urban issues than many of the larger institutions of yesteryear - it is their own money at stake! So the first major structural change in the inner city relates to ownership.
Whilst, as I have said, this can be seen as a positive change, my one concern is that the private individuals and new corporations responsible for the larger private sector investment of the past five years (and that which is to probably come over the next five) is almost totally from the white sector.
Jennifer Robinson, “Johannesburg’s Futures” argues that “apartheid’s demise has not ended the experiences of segregation and inequality that have shaped the lives of most of the people living in Johannesburg. New developments seem as likely to reinforce old patterns as transform them, despite many hopes of initiating a new, integrated and compact city form across the country.” The inner city will not be truly transformed until the majority of property ownership is transformed.
The second noticeable structural change in the inner city relates to the geography of the provision of residential accommodation be it upgrading or refurbishing of existing accommodation or conversion of office buildings to residential. At least R2 billion has been invested in this market over the past five years contributing at least 10 000 new or refurbished units and another R3 billion has already been identified as known projects planned for the next few years. These are occurring in a number of areas. Firstly, the Jeppe/Bree/Plein corridor through the inner city appears to be a major focus for the provision of middle income residential as does Braamfontein although the latter also caters for the middle to higher income.
Secondly, the middle to higher end of the market is also being catered for in an area generally west of Rissik and between Commissioner and Anderson Streets. In this areas between 850 and 1000 units are currently at one stage or another of development.
Whilst the large Brickfields project in Newtown (742) units is in the middle income category, a substantial number of upper-income units are planned for the Central Place sites opposite the new AngloGold Ashanti headquarters and in the proposed ‘Majestic’ site in the Market Theatre precinct. 43 units have recently been developed and sold in the Quinn Street conversion from offices to residential and a large project, ‘The Sidings’, will be started shortly behind, or just west of, the Quinn Street development, and will bring a further 440 units onto the market.
Interestingly, the pace of refurbs, conversions or upgrades in Hillbrow and Berea, the traditional high density areas of the inner city, is not as active as I expected. The Trust for Urban Housing Finance (TUHF) records loans into Berea of R50 million and Hillbrow of R40 million between June 2003 and March 2007 – certainly the need would appear to be many times those numbers although other financial institutions are also lending. These areas contain some 420 multi-unit medium to high rise buildings of which 220 are sectional title. According to Ian Fife, a major property owner in the area, no real secondary market has developed in Hillbrow yet, with just the beginnings of one in Berea. Clearly the upside potential in these areas is huge but the Council does need to act to regularise service delivery and by-law enforcement.
One concern that I have in this densifying of residential accommodation in built-up areas such as the Jeppe/Bree/Plein corridor is the lack of open space and social facilities. Inner city residents desperately need space to congregate, socialize and relax and the City has to react urgently to these needs or we will have a potential disaster on our hands.
The third structural change is not really a change as much as a consolidation of an earlier change. I mentioned last week that, instead of a clustering of activities that one finds in most major cities, the dominant developments of the ‘70s were spread and located at the four corners of the traditional CBD. Well, ABSA have now announced and commenced construction of another major extension to their campus (R1.1 billion) which is to the east of the traditional CBD. This eastern sector now contains the growing ABSA campus, Jewel City which is currently also being extended and, to its north, a mixed use residential and industrial precinct that is starting to emerge from a really gritty area. So the node on the east of the traditional CBD initiated originally by the location of the Carlton Centre and the UBS, is considerably strengthening.
But another of the ‘70s nodes outside of the traditional CBD is also being strengthened, this time on the western edge, through some interesting developments. ABSA have recently also purchased 11 Diagonal Street, a purchase that will change the use of that building from commercial letting to predominantly institutional. Then FNB have purchased the previous AA Life Building, also on Diagonal Street, and this will have the same result, the institutionalising of previous commercial space. FNB may also be considering redeveloping their open site between the old Stock Exchange building and their new parking garage on the previous First Card site. Immediately to the north west of both of these buildings, Anglo Gold Ashanti’s new corporate head office is to be completed by mid-year. To the south of these Diagonal Street developments, the Johannesburg Land Company’s purchases of properties as well as the open land west of the Magistrates Court for a major office park development, will result in a new dynamism for this south western quadrant. All of this now supports the Standard Bank Superblock development which was the ‘70s ‘breakaway’ from the traditional CBD.
So that leaves the traditional CBD itself. This is in fact the area that coincides with the historic CBD which approximates the area created by consolidating the two original mining camps in 1887. It was later of course the prime area for retail and attracted some major development in the late 90s (Bank City, 1066, etc) as well as new retail for Woolworths, Edgars and Game. But for the past few years nothing much has happened in the area.
Well all that is likely to change. The Gauteng Provincial Government Precinct, if the revised proposals of the architect are accepted by his client, will have a major impact on the southern part of this area. At least one major commercial project is being considered whilst the central part is being impacted on with a great deal of residential conversions and upgrading as previously mentioned down the Jeppe/Bree/Plein corridor. The northern sector is the site for the massive Park Station development being planned by the city’s Transportation Department. This, which includes major bus and taxi ranks, also envisages substantial residential and retail activity. In my estimation it will be a multi billion rand development that will be an ideal vehicle for a Private Public Partnership and is planned currently to be developed in six phases between now and 2015. To its north-east is the R100 million Gautrain station already under construction.
Given all the above it is probably not surprising to learn that within the inner city:
1. 9655 property transfers amounting to some R6 billion took place between 1996 and 2006, the greater proportion since 2001.
2. Capital developments by both the public and private sectors amounted to between R6.5 and R7.5 billion (roughly 2001 to 2006) of which R2.5 to R3 billion was from the public sector.
3. Known projects (of which some commenced in early 2007) already reflect investments over the next 3 to 5 years of R12 billion of which R3 billion will be public sector which EXCLUDES the cost of the proposed Bus Rapid Transport System. Excluded also is public sector work that may flow from the City’s 2010 office.
4. The known future projects also include a further 4000 to 5000 residential units, new, converted or refurbished.
Isn’t it great when a plan comes together?
See you at the Summit, regards, neil
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