Real Estate Investor Magazine South Africa Real Estate Investor Magazine - Dec/Jan 2018 | Page 22

Finding the Right Commercial Property Strong Demand if You Know Where to Look BY MONIQUE DU TOIT J LL’s recent Q3 market report focuses on the industrial and office markets in South Africa’s main cities, namely Johannesburg, Cape Town, and Durban. Its findings show that, while the economy may not be flourishing, there is opportunity in the right areas. Offices JLL reports that, while the economy continues to struggle, it was increased activity within the financial and business ser- vices sector of the economy that helped us move out of a tech- nical recession in the second quarter. Development of office spaces has increased in all three metros, with Cape Town once again showing the best results. Vacancy rates in the Mother City were down in all major asset types in Q3, with the most impressive decline being seen in Grade P accommodation (vacancy rate: 7.7% compared to 9.4% in Q2). Examples of Grade P nodes in Cape Town in- clude Tygervalley/Bellville (showing rental growth rate of 5%) and Century City (6%). Meanwhile, Grade A nodes, including the Waterfont, grew by 4% in terms of rentals. Over in Durban, vacancy rates have shown a notable de- cline (down to 11.7% from 12.3% in Q2). uMhlanga showed the highest rate decline, with an estimated net absorption of 4 900 sqm, followed by Westville’s 2 400sqm. Areas across 20 DECEMBER 2017/JANUARY 2018 SA Real Estate Investor Magazine Durban have seen a slight improvement in rental rates, a total increase of 13% ifrom Q3 2016. As development takes hold, interest is returning to the CBD, with vacancy rates declining to 16.8% in Q3, compared to 17.7% in the previous quarter. Johannesburg’s office market once again recorded the high- est vacancy rate, albeit an improvement from the previous quarter (down to 12.6% compared to 13.3% in Q2). The in- ner city in particular is plagued by high vacancy rates (18.5%), with decentralised nodes recording a collective rate of 11.2%. Areas such as Sandton, Rosebank, Woodmead, and Bryanston genreally have a positive impact on the market, while Park- town and Midrand seem to negatively impact the vacancy rate. 91% of the national office developments are taking place with- in 10 nodes of the city, but this is likely to come to a close once current projects have been completed - a dwindling number of developments are being announced. At present, Johannesburg is experiencing an overuseply of stock, but this is believed to be short-lived as the city remains the business hub of the country. Industrial Durban’s industrial nodes’ vacancy rates show considerable variance. Industrial nodes in Durban North (like Riverhorse Valley) enjoys vacancy rates of around 0.3%, fetching rent- als as high as R78/sqm. In contrast, nodes like Umbilo and