Difficult times for industrial sector Q1 2018 - Johannesburg Industrial Market Report - JLL South Africa
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Johannesburg Industrial
Market Report
Difficult times for industrial sector
Q1 2018In numbers
Prime gross rental rate Vacancy rate
R70-R80/m² 4.0%
Outlook ▲ Outlook ▼
Despite the positive impact that a new president has had on the economy, Q1 2018 is an indication that there is much improvement
to be made – economic fundamentals remain a challenge even with some restoration in political stability. The most telling sign has
been the continued weakness in the ABSA Purchasing Managers Index (PMI), which dropped back below 50 index points in March to
46.9 index points, signalling a contracting manufacturing sector. In the last report, we warned of poor prospects in the manufacturing
sector contributing little to the recovery of the industrial property sector. Indeed this is turning out to be the case with the latest
manufacturing production growth at a marginal 0.6% y/y (February 2018, Statistics South Africa). Although the PMI improved in April
(50.9 index points), it is worth noting the persistent weakness in backlog in sales order and inventories in the ABSA PMI. The fact
that both these measures imply low or declining inventories is a warning of reduced need for storage space in the current economic
climate.
Aside from demand for hard and light industrial accommodation, the manufacturing trend suggests that there is little growth in
domestic demand for storage and logistics accommodation. Producers are likely to maintain low inventories and backlogged stock in
line with low demand.
A more interesting development is the one on trade. With the strengthening of the Rand in Q1 2018, it is not surprising that imports
increased by 9.1% y/y in the quarter, compared to a 3.4% contraction in the same period in 2017. However, while the Rand peaked
at R11.57 to the US Dollar in February, this has somewhat reversed to R12.44 at the end of April. With the slight weakening in the
Rand between February and March, imports contracted by 2.0% in the month, contributing to a trade surplus for the last month of
Q1. Volatility in the currency and the ongoing fragility in household balance sheets is likely to be creating significant uncertainty for
importing retailers. With that, there is likely to be continued delay in decision making with regard to warehousing and logistics.
Development pipeline
Development Approximate size (m²) Status Node Developer
Randport Industrial 130,000 Ongoing Germiston Atterbury
Plumbago Business and Kempton Park,
100,000 Development land JT Ross
Logistics Park Pomona
Mini units under
Old Mint Park 75,217 Midrand Atterbury
construction
Dominic Corner 67,875 Development land Boksburg Growthpoint
Under
Westlake Industrial Park 24,000 Longmeadow Fortress
construction
Under Louwlardia, Fortress/M&T
Louwlardia Ext 74 20,000
construction Centurion Developments
S&J Industrial Estate 200,000 Development land Germiston Abland/Redefine
Westlake View Park 8,000 Development land Modderfontein Abland
Sterling Industrial Park 26,000 Development land Samrand Growthpoint
Wadestone Industrial Park 70,000 Development land Wadeville Growthpoint
2 Johannesburg Industrial Market Report | Q1 2018Prime industrial
gross rentals (R/m²)
R70,00 R65,00 R70,00 R75,00 R75,00 R80,00 R65,00
Centurion
Lanseria
Kya Sands North
Midrand
Fourways
Pomona
N1
Northriding
Bryanston
Linbro Park
West
Roodepoort
N3
Sandton Isando
R65,00
N1
Illovo East
Melrose OR Tambo
Rosebank International Airport
Jet Park
LLongmeadow
Robertville
South Eastgate
Johannesburg CBD M2
City Deep
Germiston
M1
Alrode
R60,00 R65,00 R65,00 R55,00 R69,00 R80,00 R65,00
Source: JLL
3 Johannesburg Industrial Market Report | Q1 2018South African trade balance (imports vs exports)
300
250
200
ZAR (Billions)
150
100
50
0 Q1 2018
Exports Imports Trade balance Q1 2017
-50
Source: SARS
The year-on-year growth in imports could contribute positively to logistics demand if it continues.
ABSA PMI - backlog in sales orders and inventories
60.0
50.0
40.0
30.0
20.0
10.0 Backlog of sales orders
0.0 Inventories
Ju 7
17
17
17
17
7
8
17
17
7
18
18
7
7
8
7
-1
-1
-1
-1
t-1
r-1
r-1
l-1
v-
p-
g-
n-
c-
n-
n-
b-
ay
ar
ar
b
Oc
Ap
Ju
Ap
No
De
Au
Se
Ja
Ja
Fe
Fe
M
M
M
Source: BER
PMI measures for backlog in sales orders and inventories remain below the 50 point benchmark indicating reduced need
for storage and logistics space.
Market outlook
While economic conditions provide very little clarity with regard to the short term outlook, we anticipate rental rates to
remain largely unchanged for now. Nevertheless, with the growing introduction of new accommodation and recent
completions, it is likely that an occupier market will form in the Johannesburg industrial real estate sector.
4 Johannesburg Industrial Market Report | Q1 2018Contact us JLL South Africa Johannesburg 3rd Floor, The Firs Cnr Biermann & Cradock Ave Rosebank, South Africa, 2196 Phone: +27 11 507 2200 With other regional offices in Dubai, Abu Dhabi, Riyadh, Jeddah, Al Khobar, Cairo, Casablanca, Lagos and Nairobi Tom Mundy thomas.mundy@eu.jll.com Zandile Makhoba zandile.makhoba@eu.jll.com Omphile Ramokhoase omphile.ramokhoase@eu.jll.com www.jll.co.za www.jllpropertysearch.co.za © 2018 Jones Lang LaSalle IP, Inc. All rights reserved. The information contained in this document is proprietary to JLL and shall be used solely for the purposes of evaluating this proposal. All such documentation and information remains the property of JLL and shall be kept confidential. Reproduction of any part of this document is authorised only to the extent necessary for its evaluation. It is not to be shown to any third party without the prior written authorisation of JLL. All information contained herein is from sources deemed reliable; however, no representation or warranty is made as to the accuracy thereof. 5 Central London Office Market Report | Q3 2016
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