After the devastating fires last week at the Bank of Lisbon building – also occupied by The Department of Local Government and Housing, validated fears have arisen that this incident may repeat itself in other, non-compliant buildings in the Johannesburg city centre. As early as 2005 talks have started to address urban decay and rejuvenate the CBD, and in 2015, Parks Tau – then Mayor of Johannesburg, allocated a total of R 5 000 000 000 to project Kopanang in an effort to redevelop 21 buildings mostly tenanted by government departments.
Lightstone data reveals that the Bank of Lisbon building was bought in 2005 for almost a tenth of its initial selling price. Linda Tshabalala, Head of Commercial Property at Lightstone explains that after the municipal valuations by the City of Johannesburg earlier this year, the value of the building was set at R 13 280 000, however the insurance replacement value was estimated at a mammoth R 28 564 500. “After a health and safety inspection it was found that the building was only 21% compliant,” says Tshabalala. “This could possibly have a severe effect on any potential insurance pay-out after the fire, adding to the wave of devastation.”
Government departments have now been ordered to evacuate the Johannesburg CBD while a probe is underway which will determine whether buildings should be demolished or restored. According to Tshabalala, leasing agents should take this move seriously as they may face government departments leaving their lease agreements earlier than initially agreed. “Ironically though, construction and development companies may benefit as the opportunity to redevelop and re-energise the city centre presents itself.”
The Johannesburg CBD is labelled as an Urban Development Zone and is particularly attractive to investors because of its tax incentives. “Lightstone transfer data shows that when older buildings are bought and revamped, even on a minor scale, could easily be sold for two or three times their purchase amount after a refurbishment.” One such example is 305 Fox Street. A recent Lighstone Commercial Property Report from Lightstone indicates the building was bought for R1 000 000 in 2013; after the municipal value roll in 2017 it was valued at R 2 768 000 however after it’s refurbishment in the same year it is now listed for R6,2 million. The building now houses a coffee shop, restaurants and apartments proving a solid investment and social upliftment in the district. “This is a prime example of how a refurbishment is a very lucrative investment in the long run.”
As the details around the developments are continually being discussed, Tshabalala reiterates the need for low cost housing and earmarks these buildings as the potential solution. “The current housing problem in South Africa attests to the urgent need to restore buildings and repurpose them as low-cost housing and other useful amenities.”