Prime industrial property spaces measuring about 500m2 recorded nominal rental growth exceeding 5% during the second quarter of 2022, thanks to low vacancy rates.
According to the Rode Report for the second quarter of 2022, nominal rents grew 5.4% year on year compared with 2.2% in 2021 and 0.5% in 2020.
“Nonspeculative development in the sector and the superior performance of the logistics sector driven by an online sales boom are the reasons for the sector outperforming the retail and office property sectors,” said Kobus Lamprecht, head of research at Rode & Associates.
In Cape Town, nominal rents for prime space measuring 500m2 grew 7.2% year on year, with vacancies remaining well below 5% as demand exceeds supply.
Durban and the Central Witwatersrand grew 6.6% and 5.8% respectively, with growth in the East Rand recording 2.4%. Gqeberha and Bloemfontein had the highest vacancy rates of between 5% and 10% during the quarter.
“The Durban industrial property market fundamentals have improved as a result of the demand for space created by the July 2021 looting and the 2022 floods,” said Lamprecht.
The escalation rate, the rate by which rents is increased annually in terms of the lease agreement, has stabilised at 6%-7% over the past few quarters.
This means the market is expecting lower market‐rental growth over the lease period than say a year or two ago, said Lamprecht.
He said the growth in online accelerated during the Covid-19 pandemic as shoppers preferred to stay home instead of going to malls and running the risk of contracting the virus.
SA’s largest online retailer, Takealot, recorded a 27% increase in annual revenue growth to the end of March. Local online sales are expected to grow further as Amazon, the second-largest online retailer globally, is tipped to enter the SA market in 2023, according to a report by Business Insider, quoting leaked documents. The US giant has, however, not confirmed this.
Lamprecht said weaker global sentiment had resulted in a slowing online sales market, with Amazon recording a $3.8bn loss in the first quarter of 2022 — the retailer’s first loss since 2015.
He said manufacturing underpinned demand for industrial space for production purposes, with retail driving demand for warehousing and manufacturing space.
For the first four months of 2022, manufacturing production was down 1.1% year on year due to electricity supply constraints and flooding in KwaZulu-Natal, the country’s key manufacturing hub, he said.
In May, manufacturing output fell 2.3% year on year, amid rising input costs, increased load-shedding, supply-chain pressures and raw material shortages, said Thanda Sithole, FNB senior economist.
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