Property Investors and Decentralization: A Case of False Competition?
Between 1975 and 1992, owners of office real estate in the central busi-ness district (CBD) of Johannesburg began investing in decentralized locations. Their motives did not stem from user demand arising from economic growth, the most common motivation (Wheaton, 1987; Barras and Ferguson, 1985, 1987). The Johannesburg economy, like the South African economy, was undergoing an economic crisis. An average 10% gross geographic product (GGP) growth in Johannesburg in the 1970s dropped to 0.6% in the 1980s before increasing to 1.7% between 1991 and 1994 (Gelb, 1999; Marais, 1998). Office construction, however, increased 42% between 1975 and 1995, thus casting doubt on the alleged relationship between economic growth, office demand, and concomitant supply. Johannesburg’s office supply was not reacting to demand generated from economic growth. The city had an oversupply of space and rental income was declining across the region.