Mike Deacon, development director of Colliers RMS, says the trend to modern buildings is partly a reaction to the neo-classical Georgian and Tuscan-style developments that dominate the suburban office landscape.

He says one of the principal factors that led to unhappiness in the institutional market was the unfounded assumption that all acquisitions would have similar rates of increase in rental levels, the same vacancy factors, equal maintenance costs and the same residual values.

'This was patently rubbish. The style can be successful in the right context and if handled well, but the architectural standard of many of the developments is dismal. The modern trend comes mainly from the demands of the many multinational companies that have opened in SA since 1994. They often rejected the manor house' developments, partly on functional grounds and partly for aesthetic reasons.

'Offices of companies such as Compaq, Citibank and Merrill Lynch are all in modern buildings.'

Deacon says many developers assumed that low cost equals high return, but this is often nonsense.

'The returns drop as soon as the lease runs out and must be renegotiated. Worse still, the building will probably become vacant.

'The key to high returns is to have the optimal expenditure level for sustainable demand from satisfied tenants.'

In following the trend towards modernist design, Colliers RMS say they have let all 60000m² of recently developed offices. Only 300m² in Illovo, Johannesburg, now under negotiation, remains, while about 250000m² of office space elsewhere in Johannesburg is empty.

The company has been the consultant on an additional 30000m² of recent office development. All of these have been let in a very difficult market, says Deacon.

The 7000m² Marion Street development on Rivonia Road in the Sandton CBD is fully let to new cellphone service provider Cell C.

Less than 100m away, the 10000m² of the Regal Bank building in Grayston Drive was bought last month by Old Mutual.

Says Deacon: 'Many buildings look great until you get to the detail. Unless you get the design right you are not going to get an acceptable investment return. Poor design leads to accelerated visual and physical decay, poor rental growth and long vacancy periods.

'In a tough market where choice is wide it will often mean no tenant, followed by a slashed rental. You do not build for now. You build for what you anticipate the future to be.'

Business Day