Rising building costs

Posted On Tuesday, 16 August 2005 02:00 Published by eProp Commercial Property News
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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

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