Evidence of buoyancy in commercial property market amidst challenging political and economic conditions

JLL releases Q1 2018 market reports for key office, industrial and retail markets

While the South African economy has exited a technical recession, growth remains largely anaemic and this is making its presence felt across the sectors. Dampened business and consumer confidence is causing industry decision-makers to delay any capital allocation decisions. However, in various instances, there is pleasing proof of relatively robust demand, decreasing vacancies and growing rentals.

The improved activity in the financial and business services sector of the economy, which is a key driver of office demand, has positively impacted the Cape Town and Durban office markets. Johannesburg is experiencing a short-term oversupply of stock and some rental contraction. It appears that the gradual introduction of new accommodation is key to mastering the balancing act of supply and demand in this market.

Report highlights include:

  • A closer look at the Johannesburg office market reveals a two-track trend unfolding: healthy developer interest continues but the city is battling a high vacancy rate.

  • The Cape Town office market saw a decline in the vacancy of all the major asset types, including Grade C accommodation. This is an excellent indicator of overall confidence in the business climate of the city, from large to small and medium sized enterprises. 

  • In the Johannesburg industrial market, vacancy rates remain largely unchanged at 4.0%, the spread of these vacancies, however is of high interest.

  • Durban industrial nodes continue to enjoy significantly low vacancy rates. However, there is considerable variance between nodes. Industrial properties located in the north are performing well, recording low vacancies and fetching higher rentals.

  • Lastly, JLL’s South Africa Retail Market Report reveals that neighbourhood and community centres have continued to perform well during the quarter, with an average 2.75% increase in trading density. Vacancy rates ended the quarter at an average of 6.0% and 3.0% respectively, while super-regional malls saw a 1.1% increase, sitting at an average vacancy rate of 4.1%, the highest level yet. This is unlikely to improve in the short term, with Finance Minister Malusi Gigaba painting a bleak economic outlook and concerns of sovereign downgrades reignited.

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