Industrial rentals in Port Elizabeth during the fourth quarter of 2007 were 22% higher than a year earlier, while those for the central Witwatersrand area were around 30% higher, in the Cape Peninsula 25% and in Durban 14%.

Property economist Erwin Rode, however, warns that interruptions in electricity supply have begun to affect the mood of local manufacturers and this could have a negative impact on the demand for industrial space, although Eskom‘s moratorium on electricity certificates for new developments “could support rentals in the medium term”.

Rode states that after a decade of inflation-beating growth, flat rentals have performed disappointingly over the past two years, with only Johannesburg and Durban being able to record growth in excess of consumer inflation.

“High real house prices, increasing interest rates and stricter vetting criteria by banks continued to drive the deceleration in house-price growth during the reporting quarter.”

As a result of this, he says, residential building activity has been decelerating for some time, while – in contrast – on the non-residential front building activity has been posting higher yearly growth rates.

“However, recent data on new building plans passed suggests a possible future cooling in activity across both sectors.

“The Eskom constraint would reinforce this trend.”

Source: The Herald