In the Johannesburg retail market, South African consumers have seen a more challenging start to the new year, putting a dampener on the prospects of retail sales growth. However, the outlook is not likely to be balanced across all sectors with centres located in more affluent areas expected to perform much better than those in lower income areas. Developer confidence remains high on the back of a growing city and the longer term outlook is more encouraging for investors.

In the Johannesburg market, demand for office accommodation remains unchanged in the current climate, contributing to slower growth in rental rates, but the long term outlook is encouraging for the city. The development pipeline will see an additional 430,000m² being added to overall office stock within the next two years. The overall vacancy rate in Johannesburg showed a marginal increase attributable to an increase in supply rather than a decline in demand and it is anticipated that the Johannesburg office market will continue to be a tenant-driven market.

Industrial occupation has continued to be supported by local trade activity in Johannesburg, despite it having come under increased pressure in recent months. Industrial vacancies increased notably from Q4 2014, while the average rental rate for industrial properties remained largely unchanged in Q1 2015. Economic conditions forewarn of a further deterioration in industrial activity in the economy, but nevertheless present an opportunity for tenants to position themselves for the long term. 

The first quarter of 2015 has seen a continuation of flat market conditions in the Cape Town office market. The overall vacancy rate in Cape Town remained stable at 9.3% in Q1 2015. Pressure on rental rates is most visible in Grade P properties and it is anticipated that low demand will see rental rates declining in some of the best buildings. 

Total leasable area in Cape Town showed a slight 3.2% q/q increase to 2,435,165m2 in Q1 2015. Although conditions are not at their most favourable for landlords, there are a number of developments currently underway, which will see overall stock increasing further over the year ahead. The most notable is the 38,000m² under construction in Century City. This includes a 18,000m2 office development in Bridge Park due for completion in July 2015.