The JLL South Africa research team has released its Q1 2016 research reports for the Johannesburg retail market, Johannesburg office market, Johannesburg industrial market and Cape Town office market with the following notable highlights:
– The retail market has seen a decline in vacancies in Q1 2016, coinciding with further retail sales growth in the economy. The underlying question is the extent to which household consumption can continue to support the ongoing growth in the retail sector given the recent rise in inflation and interest rates. Both occupiers and investors are likely to operate with increased caution while looking out for the consumer response to recent changes.
– Given the current economic backdrop, the Johannesburg office market remains stable with no significant growth in rentals or absorption in the quarter. Take up of office accommodation was only as a result of occupiers moving from one node or asset class to another, rather than new entries into the market. The market is expected to feel some pressure in 2016 with rental rates, as well as vacancies expected to remain muted. With supply beginning to outweigh current demand as well as the prevailing economic conditions, developer confidence is likely to slow.
– In the Johannesburg industrial market, the retail sector has contributed to continued activity in the logistics and warehousing sector, stimulating demand for industrial accommodation. Investor confidence has grown despite economic challenges, resulting in the rise of a number of speculative developments breaking ground. Average rentals experienced a 2.8% y/y decline in the overall market in Q1 2016, with the southern and western nodes driving much of the decline. Public sector initiatives are reaffirming investor confidence in the city and businesses can look forward to improving efficiency in the city.
– In Cape Town, over 18,000m2 of office space was taken up in Q1 2016, indicating stable levels of office demand in Cape Town. The office market saw no change in the vacancy rate of 7.2% from Q4 2015. However, vacancies declined in Grade P accommodation, while marginal increases were recorded in Grade A and Grade B properties. Oversupply may be a real concern in the short term if demand begins to slow as a result of the decline in business confidence in the economy.