Economic pressures impact South African real estate

Economic pressures impact South African real estate

The impact of the current economic challenges in the real estate sector is becoming more apparent with rental growth in office and industrial sectors slowing in all the major cities according to the latest Q2 city snapshots released by JLL for Johannesburg, Cape Town and Durban.

“In Johannesburg, Cape Town and Durban we have seen rental growth slowing in the office sector, with no year-on-year (Y-o-Y) change in the vacancy rates for Cape Town and Durban; while Johannesburg has had a minimal increase of 300 basis points Y-o-Y,” says research analyst Omphile Ramokhoase.

The office market in Cape Town continues to benefit from office to residential conversions which have helped the city maintain a low vacancy rate compared to other cities. In Durban, the pressures in the market have given tenants some negotiation power – which may come as a sigh of relief considering the current economic climate that businesses are operating in.

In comparison to the office sector, the industrial sector has shown resilience with more stable performance in all the major city metropoles.

The Johannesburg Industrial sector’s rental growth appears to be slowing down in contrast to previous periods. This can be attributed to the challenging economic environment. Durban’s low vacancy rate continues to justify a substantial development pipeline with the Clairwood Logistics Park in Mobeni sitting at 350,000 sq m (square meters) and Cornubia Ridge Logistics Park with a total of 112,000 sq m.

“The current headwinds faced by South Africa continue to negatively impact the real industry. Be that as it may, the South African economy and real estate sector have potential for growth and a long-term outlook by market participants will be key to unlocking this potential,” concludes Ramokhoase.