Clothing and footwear retailers have often outperformed the overall retail market, and have come to dominate activity in retail accommodation.
The Johannesburg office vacancy rate declined to 11.3% in Q3 2015 from 12.4% in Q3 2014, despite additional supply in the market. Although rental rates remained largely unchanged, Grade P accommodation showed a 5.7% rise in the average rental rate to R202/m2, depicting strong demand despite the unfavourable economic climate.
Tenants are showing a willingness to pay a premium for high quality accommodation that offers them improved efficiency. This remains a cost-saving decision, helping to reduce operational costs in the long term.
Demand for light industrial property in Johannesburg has remained stable in the quarter, with encouraging take up of space for the use of logistics, distribution and warehousing in prime locations. The northern and eastern nodes of the city have experienced growing activity with a large development pipeline of newer and larger logistics units. The market is expected to remain under pressure in the short to medium term in light of the prevailing economic backdrop in South Africa.
In the Cape Town office market, investor confidence showed improvement in Q3 2015 from the first half of the year with the majority of new developments being speculative in nature. The overall vacancy rate increased slightly to 9.0% in Q3 2015.
However, recent activity will see a reduction in the next quarter's vacancy figures once tenants, who have just finalised leases, have physically moved. Grade A accommodation recorded an average 6.4% year-on-year increase in gross rental rates, with Century City outperforming other nodes. The growing interest of corporates may see a continuation of increasing rental rates in the coming year.
