JLL reports varying fortunes across local property market
The report, covering SA’s major cities, shows that the office, industrial, retail, hospitality, and residential sectors are all growing at different rates.
Within Cape Town’s office sector, semigration, better governance, and associated lifestyle factors continue to drive performance, albeit performing only marginally better than alternative regions in Gauteng or KwaZulu-Natal. The metropole is markedly smaller than Johannesburg or Pretoria, and therefore the influx of affluent and skilled migrants has the potential to bolster economic recovery for the city. Notwithstanding, the local economy still lacks the stimulus provided by the tourism sector that is yet to re-emerge in any meaningful form. Businesses are also not migrating to the same extent as individuals, meaning local purchasing power may be ticking up, but office demand not necessarily so.
According to the report, office development is currently at lower than conventional levels, with primarily occupier-driven development occurring. A feature that differentiates Cape Town’s office market from that of Johannesburg is that speculative development has historically been relatively low. This placed the city in a better position to handle the economic shock that was introduced by the Covid-19 pandemic and decimated office demand fundamentals. Moreover, the traditional central business district (CBD) in Cape Town has avoided the urban degradation associated with the likes of Johannesburg, Durban and Pretoria, for example.
eThekwini’s commercial market, in turn, shifted out of the traditional CBD toward uMhlanga and La Lucia’s commercial districts a few years ago and has gone from strength to strength since, barring the impact of the pandemic. Greater land availability and the degradation of the historic CBD led to this shift, and hence this node now offers the bulk of quality, contemporary stock, which is where the greatest demand is concentrated. The past six months have seen considerable take-up of vacant office space in the uMhlanga commercial node.
Mieke Purnell, research manager at JLL, said: “Most demand has originated from the business process outsourcing (BPO) sector, resulting in few fit-for-purpose premises remaining. Demand in eThekwini is almost solely directed toward these nodes, and the Durban CBD is thus experiencing historically high vacancies. P-grade vacancies have declined by 45% in H1 2022, and B-grade vacancies have risen by 28%. Approximately 25,000m2 of quality premises have been let to BPOs over the past six months, an exceptional uptake considering the inactivity within the commercial property market over the past two years.”
As in many regions across South Africa, there is good demand for logistics and distribution-related industrial property in Cape Town. Borne from technological advances, booming e-commerce and global supply chain disruption, there is a country-wide distinct shortage of prime logistics inventory. The consumer is an underlying roleplayer across the various demand drivers of industrial property, supporting the retail and manufacturing sectors that underpin the industrial sector.
Courtesy of Bizcommunity – read full article here.