According to  Rode’s Report on the SA Property Market, industrial rentals have grown over the past year by 17% in Central Witwatersrand, 15% in Durban, 32% in Cape Town and 32% in Port Elizabeth.

This rise in Industrial rentals is related to a high demand for space partly because of high economic growth and partly because of lower interest rates. The demand is also being driven by developers and investors who are competing to satisfy growing tenant demand. According to The Financial Mail’s Property Handbook 2007 zoned land in Midrand 24 months ago cost approximately R220/m² but has escalated to between R450/m² and R500/m² with prime land on the freeway costing even more. In the ‘best’ locations zoned land has changed hands at as much as R1000/m². This increase in land price has related to an increase in rentals with rentals as much as R45/m² being achieved.

The challenge being faced by tenants occupying industrial premises is that on renewal landlords are increasing their rentals by as much as 50% in some cases. Landlords can justify this because escalations are not driven by inflation or CPIX but rather by  the increase in the property market. Unfortunately for a tenant, if they don’t accept the increase on renewal they will have to go out to the market to source a new premises but the rentals across the board in the area will match the renewal rentals anyway. This together with the cost of moving, loss of productivity and the unsettling of the staff usually encourages tenants to stay in their premises.

The highest vacancies in Gauteng, about 4%,  according to David Green, MD of Pace Property Group are  in Midrand, Ormonde, City Deep and Booysens where buildings are older and not suited to modern requirements.