The future looks bright for Durban’s commercial property market, despite the economic slump plaguing the industry.
In fact, current construction activity could see Durban challenging Cape Town and Joburg for international occupiers.
The latest Durban Market Report by JLL states that vacancies in both the city’s industrial and office markets are showing “promising signs of recovering demand”.
The report reveals investor confidence also “remains intact” as new developments come on to both markets.
But while the office sector is seeing some firming in rental rates, JLL says price sensitivity in the industrial market has led to rates stagnating in recent months.
The average prime office rental rate is R185/m² and the average office rental rate overall is R122/m².
For industrial property, the prime rental range is R65/m² to R80/m².
JLL says the office vacancy rate in the eThekwini metro is currently at 13.2% - which is an improvement from 14% in the first quarter of this year - and although the struggle with this rate continues, Umhlanga has now established itself as the “premier office location” in the Durban metro region.
“Prime office accommodation is in short supply with vacancies in this segment at 1.3% compared to 13.2% in the overall office market. Nevertheless, demand in the city is improving, even in segments that have struggled in previous quarters,” the JLL report says.
Come December, the office market generally is expected to “pick up slightly”, says JT Ross’s Craig Woods. With a lack of confidence around land reform issues, there seems to be more tenants wanting to lease rather than buy, which could see the market pick up.
“We have found very keen interest at decent rates, particularly on new builds in key areas and parks like Umhlanga Ridge and Lion Match. Things have been very slow in Westville, however, which could be related to the sheer number of people moving north.”
Keen interest is being shown in office parks such as Lion Match, where several decent rental rates can be found. Picture: JT Ross
More positive activity is also being seen on the industrial side, with “very low vacancy rates” throughout Durban, Woods says. “Logistics warehouse stock is extremely popular and we are busy with a big development in Riverhorse which will see a large amount of space come on to the market in the new year. There is also lots of development happening at Cornubia, especially with mini factories, and we have a positive outlook for the next year or so.”
Echoing this, Tristan Rasmussen of Rasmussen Industrial Properties says new developments currently taking place in Durban are:
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South: Clairwood Logistics Park – developed by Fortress REIT.
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North: Northfields Logistics Park – developed by JT Ross.
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Cornubia Industrial Park – various developers.
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Cornubia Logistics Park – developed by Fortress Property Fund.
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West: Hammarsdale Logistics Park.
However, there are “quite a few ‘big box’ (10 000m²-plus) vacancies coming onto the market, especially in the South Durban basin".
“Demand and rentals have stagnated due to virtual non-growth in the South African manufacturing sector,” Rasmussen says. The JLL report has the average industrial vacancy rate at below 6%. However, overall it states: “The longterm outlook is what is most encouraging for Durban. It is clear investors are taking a longterm view on eThekwini and its economic growth beyond the five-year mark. This is partly driven by public sector initiatives to invest in the city’s infrastructure, with the expansion of the port being of key importance.
“There is a reinforcement of mixeduse developments in current construction activity, which is comparable to global trends and should see Durban compete more strongly with Cape Town and Joburg for international occupiers.”