WATERFALL BUSINESS ESTATE (WBE) ECONOMIC IMPACT ASSESSMENT DR DIRK A PRINSLOO & DIRK NICO PRINSLOO August 2013
WBE: Economic Impact Assessment Objectives: To understand the Gauteng economic environment; To understand and quantify the economic impact of WBE; To quantify the employment opportunities created: Construction Phase (total jobs created as well as by the end of 2013); Operation Phase. Socio-economic impact/output; To understand and quantify the multiplier effect; Tax contribution. The focus was to quantify the economic impact and employment creation as a result of the development of the Waterfall Business Estate (WBE).
Property Economic Indicators Macro Economic Environment (RSA Economy) Trend Current Indicators 2006 2007 2008 2009 2010 2011 2012 2013Q1 Comments GDP Growth (Source: StatsSA) GDP 2013Q1 = 0.9% q/q Annual 2012 GDP = 2.3% Inflation (Source: StatsSA) CPI June 2013 = 5.5% Rand/Dollar (Source: Fin24) Building Plans Passed (Source: StatsSA) Building Plans Completed (Source: StatsSA) Car Sales (Source: NAAMSA) House Price (Source: ABSA) Formal Employment (Source: StatsSA) R/US$ - R10 Positive trend is starting to emerge Sideways trend still dominate, with positive trends starting to emerge Total vehicle sales in 2012 = 623 921 (9% y/y growth) Limited growth in all sectors of the residential market ±10 million formal employees (nonagricultural) in SA; Retail Sales (real prices) (Source: StatsSA) June 2013 y/y = 1.9% SACCI BCI (Source: www.sacci.org.za) FNB Building Confidence Index (Source: www.ber.ac.za) Interest Rates (Source: SA Reserve Bank) Repo Rate = 5.5% PMI (Source: www.kagiso.com) Oil Price (Source: Sasol) Currently at 90.7 points (base year 2010 = 100) The FNB BCI for 2013Q2 was 41 points, up from 37 points in 2013Q1 July 2013 = 52.2 points (>50 points = expansion) US$110 per barrel Reserve Bank Leading Indicator (Source: SA Reserve Bank) Stable over the past 2 years
Macro Economic Environment: Indicator Definitions Economic Indicator SACCI BCI FNB Building Confidence Index Definition South African Chamber of Commerce and Industry (SACCI) Business Confidence Index (BCI); Reflects the business climate that is market-related and accounts for economic developments that has a bearing on the business mood in South Africa. This index reflects the state of the building industry (residential and non-residential) in South Africa. PMI Purchasing Managers Index; An indicator that reflects the health of the manufacturing sector. PMI is based on 5 major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.
WBE: Central location within region One of the most central locations for the whole of Gauteng/Region
Gauteng Economy Average GDP Growth Rate Per Annum (>1997) Gauteng 3.3 Western Cape 3.12 KZN 3.11 Eastern Cape 2.78 Mpumalanga 2.09 Free State 2.05 Limpopo 2.04 North West 1.9 Northern Cape 1.41 1 1.5 2 2.5 3 3.5 % Growth pa Gauteng growth was consistently higher than the other provinces over the past 15 years.
Gauteng Population & Households 2011 Census Data: Gauteng: Pop: 12 272 263 HH: 3 909 022 City of Tshwane: Pop: 2 921 488 HH: 911 535 West Rand: Pop: 820 995 HH: 267 396 Mogale City: Pop: 362 422 HH: 117 373 City of Jhb: Pop: 4 434 827 HH: 1 434 855 Randfontein: Pop: 149 286 HH: 43 300 Westonaria: Pop: 111 976 HH: 40 101 Merafong City: Pop: 197 520 HH: 66 625 Ekurhuleni: Pop: 3 178 470 HH: 1 015 464 Sedibeng: Pop: 916 484 HH: 279 767 Emfuleni: Pop: 721 663 HH: 220 134 Midvaal: Pop: 95 301 HH: 29 965 Lesedi: Pop: 99 520 HH: 29 668
Gauteng: % of total population WBE City of Tshwane: 23.8% West Rand: 6% City of Jhb: 36% Ekurhuleni: 25.8% Sedibeng: 7%
Gauteng: Growth Rate 2001 2011 Gauteng: 2.7% WBE City of Tshwane: 3.1% West Rand: 1.0% City of Jhb: 3.2% Ekurhuleni: 2.5% Sedibeng: 1.4%
Gauteng Economy Gauteng represents 34% of the South African GDP; CoJ represents 17% of the South African GDP; RSA GDP = ±R3 trillion (current prices); Gauteng GDP = ±R1 trillion; CoJ GDP = ±R500 billion;
Economy in General Summary of the SA & Gauteng outlook: SA = moderate (2.5%-3.5%) over the medium term; Gauteng market expected to continue to grow well (@>3%); Consumers in general are under pressure; Residential property market is starting to show growth; Global economic recovery is slow.
Waterfall Business Estate: Market Information Centrally located within the Gauteng market; Midrand market is attractive due to the agglomeration effect of JHB and PTA (MAS Rank = 5, Rank will improve to 2 in 2017); Considered as an infill development ; > 100 000 households in the surrounding market (mainly LSM 9-10+); Midrand office market = ±600 000m² (3 rd largest office node in JHB), 4% Vacancy Rate; Strong distribution and warehouse hub.
Gauteng Economy The Market Attractiveness Score (MAS) model was developed by Urban Studies to give an indication of the past, current and expected growth taking place in each node. The MAS highlights the attractiveness of each node in terms of property development. The following table shows the MAS for the most important nodes in South Africa (2009, 2013, 2017): Node Rank 2009 Rank 2013 (current) Rank 2016 Sandton 1 1 1 Midrand 8 5 2 Century City 3 2 3 Umhlanga 5 3 4 Menlyn 7 7 5 Rosebank 16 4 6 Centurion 6 6 7 Cape Town/ V & A Waterfront 2 8 8 Clearwater 10 9 9 Greenstone/ Modderfontein - 10 10
10b Waterfall Business Estate (WBE): Status Quo 15 10 9 8 10a 12 3 20 24 21 22
WBE: Bulk Info Parcel Township Area (m²) FAR Bulk (m²) Zoning 3 tbc 50 000 0.3 15 000 Commercial 8 JV X79 180 190 0.5 90 095 Commercial JV X80 216 150 0.5 108 075 Commercial 396 340 198 170 9 JV X77 226 264 0.5 113 132 Commercial JV X78 150 047 0.5 75 024 Commercial 376 311 188 156 10 - Phase 1 JV X67 40 622 0.49 20 000 Office Surplus Rights JV X67-0.37 15 000 Retail/Office/Hotel JV X83 54 947 0.67 37 000 Special Office JV X84 26 445 1.13 30 000 Office JV X85 17 971 0.89 16 000 Special JV X86 151 642 1.33 201 000 Retail/Office/Hotel Surplus Rights JV X86-0.17 26 000 Retail/Office/Hotel JV X87 46 254 1.17 54 000 Office/ Hotel JV X88 32 846 0.82 27 000 Office/ Hotel 10 - Phase 1A JV X90 37 507 1.12 42 000 Office JV X89 28 203 1.13 32 000 Office JV X91 13 253 1.13 15 000 Office JV X93 22 676 1.1 25 000 Office 10 - Phase 2 JV X92 26 527 1.13 30 000 Office 10 - Phase 3 JV X94 22 170 1.22 27 000 Office JV X95 34 936 1.17 41 000 Mixed Use JV X96 12 662 0.47 6 000 Motor Retail JV X97 Mosque JV X99 7 591 0.53 4 000 Retail JV X102 13 935 0.43 6 000 Special 10 - Phase 4 JV X98 36 654 0.9 33 000 Residential JV X100 40 086 0.9 36 000 Residential JV X101 46 038 0.91 42 000 Residential JV X103 25 326 0.91 23 000 Residential JV X104 20 491 0.59 12 000 Motor Retail 758 782 800 000 10a - Phase 2 JV X74 222 300 0.67 150 000 Office 10b JV X46 53 300 0.38 20 000 Office 12 JV X49 152 000 0.43 65 000 Office 15 JV X47 51 692 0.4 20 677 Special Office JV X50 25 883 0.35 9 151 Value Retail JV X51 37 719 0.24 9 000 Shopping Centre 115 294 38 828 20 JV X7 10 500 0.4 4 200 Office 21 Buccl X10 140 800 0.38 53 000 Commercial 22 Buccl X9 208 675 0.5 104 338 Commercial 24 JV X69 247 727 0.6 148 636 Special Industrial/ Commercial Total 2 671 529 1 766 127
WBE: Economic Impact: Construction Phase Cost Summary Construction Phase Total Building Cost 13 123 596 600 Professional Fees (@11%) 1 443 595 626 Cost 14 567 192 226 VAT 2 039 406 912 Total Cost (excl. esculation) 16 606 599 138 Total Cost (incl. escalation of 4% for 15 years) 29 907 546 865 Total employment created during construction phase 27189 Employment created per annum 2 719 Impact already significant during initial development phase.
WBE: Economic Impact: Construction Phase 14000 Employment during different construction phases 12000 10000 8000 6000 4000 2000 0 Start-up phase Initial development phase Peak development phase Slow down phase Mature phase 2023/24
WBE: Economic Impact: Construction Phase Worker Output The amount spend within the community due to the jobs created in the construction phase: Socio-Economic Output Total WBE (monthly) Total WBE (annual) WBE (end of 2013) (monthly) WBE (end of 2013) (annual) Consumer/ Retail Goods 95 421 388 1 145 056 652 9 542 139 114 505 665 Transport 32 582 913 390 994 955 3 258 291 39 099 495 Insurance 20 160 677 241 928 128 2 016 068 24 192 813 Income Tax 35 579 377 426 952 526 3 557 938 42 695 253 Medical 15 040 505 180 486 064 1 504 051 18 048 606 Education 7 418 431 89 021 173 741 843 8 902 117 Housing 48 176 164 578 113 968 4 817 616 57 811 397 Other 36 539 409 438 472 913 3 653 941 43 847 291 Total Output 290 918 865 3 491 026 380 29 091 886 349 102 638
WBE: Economic Impact: Multiplier Effect The multiplier effect illustrates the way in which Economic Impact has a ripple effect on other role players, sectors and industries in the economy; Also referred to as indirect or induced impact; General benchmark multiplier values: National Impact = 2.5-3.5; Provincial Impact = 2.0-2.5; City Impact = 1.5-2.0. Impact Total Total Construction Cost (WBE) 29 907 546 865 Net Economic Impact (Multiplier @ 1.5) 14 953 773 433 Total Economic Impact 44 861 320 298
WBE: Economic Impact: Operational Phase The operational phase highlight the activities following the construction phase; Total number of workers at operational phase: WBE (total) = ±60 000 workers; WBE (end of 2013) = ±6 500 workers.
WBE: Economic Impact: Operational Phase Output of the workers employed within the WBE: Socio-Economic Impact (monthly basis) Total WBE (R) WBE (end of 2013) (R) Consumer/ Retail Goods 326 487 048 37 333 575 Transport 127 428 833 14 571 402 Insurance 80 978 922 9 259 885 Income Tax 172 342 545 19 707 255 Medical 56 536 825 6 464 948 Education 32 964 453 3 769 463 Housing 172 791 587 19 758 602 Other 212 160 805 24 260 446 Total Monthly Output 1 181 691 018 135 125 576
WBE: Economic Impact: Tax Contribution Tax income per annum for the WBE = ±R440 million WBE (when completed) will contribute 4% of the total property rates income for the City of Johannesburg (CoJ); Variable Commercial Residential Total Replacement Value 26 916 792 179 2 990 754 687 29 907 546 865 Tariffs (cents in the rand) 0.01577 0.00526 WBE Rates & Taxes (per annum) 424 585 480 15 725 388 440 310 868 Estimated CoJ Rates & Taxes for 2022/23 10 587 815 074 Constribution of WBE to Total Propery Rates Income 4%
Conclusion Construction Phase: Total Cost = ±R30 bn; Total number of jobs created = ±27 000; Total number of jobs created (2013) = ±2 700; Multiplier effect (indirect impact) @ 1.5; Total economic impact = ±R45 bn. Operation Phase: Number of workers = ±60 000; Number of workers (end of 2013) = ±6 500. Tax contribution: ±R440 million per annum; 4% of City of Johannesburg property rates income. Waterfall Business Estate will become one of the strongest nodes within the Gauteng Market.