Rising building costs

Posted On Tuesday, 16 August 2005 02:00 Published by eProp Commercial Property News
Rate this item
(0 votes)

Rising costs putting pressure on rentals and prices in new commercial and industrial developments.

Construction IndustryRising costs over the past three years, and particularly the past 12 months where increases edged towards 20% in KZN, is putting pressure on rentals and prices in new commercial and industrial developments.

The Bureau of Economic Research’s (BER) Building Cost Index reports a current increase in building costs of around 17% year on year.

This could have serious implications for the market, especially for speculative developers in KwaZulu Natal, comments Rob Moran, KZN regional director of JHI Real Estate.

The shortage of land has put pressure on land prices and this, coupled with the aggressive acceleration of building costs, has meant that rentals have risen in order as to make developments viable.  Rentals for “A” grade industrial space are now in the range of R33-R38/m².

The office market has been similarly effected with significant increases in rentals for new “A” grade space.

Stats SA reports that commercial developments completed this year in KZN have increased by 20% compared to the similar period in 2004.

“There is huge demand for building materials to satisfy the needs of new developments and this is one of the reasons for the steep rise in costs,” says Moran.

In terms of actual plans passed, however, the region lags the rest of the country.

Moran believes that the increase in cost of building may constrain certain sectors of the market in the short to medium term.  However, the natural factors of supply and demand will see the market rectify itself in due course, particularly in the light of sustained economic growth.

Last modified on Friday, 18 October 2013 20:54

Most Popular

Balwin's Munyaka registers record R850 million in opening weekend sales, selling 555 apartments

Mar 09, 2020
JSE listed Balwin Properties, a developer that cares about environmentally responsible…

Balwin Properties and ABSA launch South Africa’s first green home loan

Mar 13, 2020
Apartment 71933
JSE-listed Balwin Properties Limited (Balwin Properties or the Company) and Absa Group…

Growthpoint reports a steady first half with its growth strategies paying dividends

Mar 11, 2020
Growthpoint Properties Group CEO Norbert Sassee
Growthpoint Properties (JSE: GRT) reported distributable income growth of 2.2% to R3.2bn,…

Spear REIT launches innovative self-isolation campaign for returning travellers in Cape Town, South Africa to combat COVID-19:

Mar 18, 2020
Double Tree Op
JSE listed Spear REIT Limited, the owner of the Double Tree by Hilton Cape Town, is the…

Financial Fitness – Is this the right time to buy property?

Mar 20, 2020
Governor Lesetja Kganyago SARB1
With the South African Reserve Bank’s announcement of interest rates cut of 100 basis…

Please publish modules in offcanvas position.