Currently the incremental changes of small property entrepreneurs are making a massive impact in Johannesburg’s inner city where brownfield residential redevelopment offers significant contributions towards economic development and urban regeneration in the CBD, but red tape radically reduces their potential impact.

Done right, infrastructure and property investment in the Johannesburg CBD can spur economic redevelopment of degraded areas by intensifying their uses. Increased activity enables more business which fuels a broader critical mass of economic activity, accelerating increased investment and urban regeneration.

Providing homes is a particularly effective stimulus to local economic development because increased population densities make areas busier, leap-frogging beyond the ground floor activation stage of the welcoming shop front and café culture, to where people adopt the neighbourhood as their new home.

During the last few decades urban regeneration has transformed some previously decaying parts of the Johannesburg CBD. Although some is due to larger focused property investments like Propertuity’s Maboneng, it is small developments which have had a broader catalytic effect .

Small developers leading the way to urban regeneration

It seems that small property entrepreneurs are more readily taking up investment opportunities in the inner city than larger developers; one reason for this is because the Johannesburg CBD is currently beyond the risk profile of many institutional investors, property economist François Viruly points out. A risk worsened by South Africa’s constrained economic environment. The risk of economic failure is often considered too high for many large-scale institutional investors. Although this view is slowly changing, smaller investors seem to be among those willing to take the leap.

“I am amazed at the number of small players I meet at property entrepreneurship workshops who are active in the Johannesburg CBD. They are making it more inclusive for residential users, as well as developers and subcontractors,” Viruly says.

Paul Jackson, CEO of TUHF, a commercial property finance company that finances small property entrepreneurs to build homes in decaying urban areas and by doing so upgrade the areas, concurs: “More than two thirds of Johannesburg’s inner city construction is happening because of small property entrepreneurs. And they’re doing this against the odds.”

“In Yeoville and Bellevue [inner city suburbs] there is a proliferation of small developers investing in properties and that’s exactly what we need. People are densifying in the right way. Plan approvals just need to happen faster. Only a very small percentage of residents in the CBD are actually homeowners,” he says.

Viruly adds: “Unfortunately, what is holding up the market is the municipalities’ red tape – if you have to wait six months as a sole proprietor, the risk [of losing income] is too high and you’re out of business. This inertia literally bankrupts small players. Often local government is quick to claim that ‘the market did not respond’ to the measures it put in place. Currently their red tape threatens to push areas like the CBDout of everyone’s risk profile.”

Creating new neighborhoods  

The future redeveloped ABSA Tower precinct

A considerably bigger player, Divercity Urban Property Fund recently committed R2billion to create inclusive and diverse neighbourhoods on brownfield sites in Johannesburg’s inner city by building affordable residential space and commercial properties, namely the ABSA Towers Main building (redevelopment of an existing building) and, four blocks away down Main Street, Jewel City, historically the work space of diamond dealers and manufacturers which stretches across six city blocks. For the first time in decades, Jewel City will be made publicly accessible and a central welcoming, pedestrian-friendly walkway along Fox Street, extending through to Maboneng across the road, will be created.

Carel Kleynhans, acting managing director of Divercity explains: “At their core, these developments are about providing affordable accommodation paired with essential amenities, close-to-work opportunities.

Once redeveloped, ABSA Towers Main will feature 520 affordable apartments, 10 000m2 office space, childcare facilities and ground floor retail that opens onto a plaza landscaped for pedestrians. We expect it to be a popular urban park for the neighbourhood to enjoy.”

“Jewel City will cater to more than 2 000 households who typically can only afford to live on the urban edge, too far away from work opportunities and amenities. When you consider the spatial history of our cities, these developments will be fundamentally inclusive and spatially transformative,” he adds.

Divercity will target a 4-star Green Star Design rating for the office component of ABSA Towers Main, and an EDGE rating for the residential component. The company follows a policy of implementing water and energy-saving measures which include low-flow taps and shower heads, dual flush toilets, LED lights, heat pumps, and smart water and electricity metering are a standard specification. In addition, sustainable materials are used wherever possible. “Divercity is trying to build precincts that are environmentally and socially sustainable by focusing on affordable housing provision in well located, mixed-use and amenity-rich precincts,” says Kleynhans. “Housing people close to where they work is by far the greatest contribution that we are making towards sustainability.” The unfortunate reality is that the vast majority of affordable housing delivery in Johannesburg still happens at the urban edge, Kleynhans adds. “The Corridors of Freedom transport-orientated development projects and the City of Johannesburg’s drive to stimulate investment in the inner city are starting to stimulate some building work in more centrally located areas, but at present this still represents a very small part of overall annual housing delivery.”

Stats SA estimates that between 2016 and 2021, 574 people will move to Gauteng each day, and most will seek work in or nearby Johannesburg. The demand for well-located housing in the inner city has forced officials and urban designers to adapt to ever increasing population pressures. “In township areas, our failing to plan proper urban environments and effectively implement them has borne the bitter fruit of areas characterised by the 40 x 40 x 40 x 40 rule where residents live in a 40m2 home, 40km from economic opportunity, spend 40% of their income on transport, and whose community is 40% unemployed. We should reduce these numbers to the twenties,” says Viruly.

“If households are expected to live in smaller homes, to bring them closer to work and leisure, municipalities must ensure that the precincts and the public spaces in close vicinity to these homes are improved. The delivery of affordable inner city housing has an important role to play in improving the quality of the housing environment for households and significantly reducing commuting costs,” he adds.

Barriers to progress

Jackson points out that serious barriers blocking effective government action are rooted in many policy makers’ mistaken belief that small-scale property entrepreneurs – “ordinary” people – cannot change their environment and bring accommodation at scale. “This means that clumsy broad-brush policy meant for larger developers hamstrings small players. “As a fund that does infill residential projects in degraded downtown areas, TUHF have funded nearly 35 000 units and since 2003 have loaned R5billion to their clients, two-thirds of which are black.” Consider Cosmo City, the green field residential development of 11 000 units. TUHF have enabled triple that number of developments, on infill sites. “Densifying areas with existing infrastructure links to public transport is exactly the type of development the South African economy needs. There are huge knock-on effects if we get this right,” says Jackson.

“We need the very small and very big developers. There is national, regional, municipal policy confluence on these efforts but so few programmes of support and action. South Africa’s inner-city context means that state efforts must be multi-year, programmed and properly-resourced – and then the private sector will come to the party in a big way.

“The efficiencies unlocked by densification stimulate local growth and, along with various other economic sectors, South Africa’s national economic growth is the aggregation of local growth. Small-scale projects spread the project capital out far more evenly among the whole development value chain.”

And the cycle is self-perpetuating, one development brings another.

Tebogo Mogashoa, Chairman of Talis Property Fund, a founding partner of Divercity, agrees: “Our vision is to fix every broken window where Divercity are involved in the Johannesburg CBD, one window at a time, and so encourage other investors to do the same – to join the drive to rejuvenate our city. Our goal is to successfully motivate for and develop a second fund that will further increase the affordable housing units in the inner city. We want to challenge apartheid-era planning which has driven most of our people out of the city and condemned them to live far away from work. We’re going to create facilities such as schools, hospitals and clinics, and offices to reignite the energy of the city.”

Excitingly, big and small entrepreneurial approaches in the residential property sector are slowly combining to quicken the pulse of Johannesburg’s inner city, building the case for a safer, busier downtown and encouraging development at the heart of South Africa’s economy.

Beyond the building scale to sustainable precincts

The planned Oxford Parks in Dunkeld, between Cradock and Oxford Roads

“The challenge is finding ways to disincentivise sprawl while making it easier to develop affordable housing at scale within the urban core, so as to not decrease the already low rate of housing delivery,” explains Marloes Reinink, owner of Solid Green Consulting, green building consultants on a new sustainable precinct area called Oxford Parks. Oxford Parks is designed to be a sustainable medium-density urban environment that has brought 300 000m2 of development rights to Johannesburg’s Dunkeld residential area, which links Illovo to Rosebank along Oxford Road. Although Oxford Parks is not yet registered for certification under the Green Star – Sustainable Precincts tool, it exemplifies many of the requirements.

“For cities to grow in a sustainable manner, developments must take the opportunity to move green design beyond the building scale into the public realm,” she says. Oxford Parks is planned to blend in with the surrounding area by transforming 50 single suburban existing family homes, currently occupied by about 200 people, into a denser vibrant mixed-use community accommodating between 3 000 and 4 000 people. It will offer 10 000 to 13 000 work opportunities. The existing public transport links will also be strengthened through intensified usage.

Characterised by no boundary walls or fencing, smaller block sizes, wide pavements and clear walking routes between public squares with street furniture and good lighting, “we looked at creating complete streets and encouraging pedestrianisation which increases sustainability as well as security through passive surveillance,“ Reinink adds. The precinct includes many different landowners guided by a Property Owners Association and an established Precinct Development Manual which directs any rezoning applications.

This article was originally published in the March 2019 edition of + Impact Magazine. Download the PDF version.

Thinking Big, Acting Small

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