Rro 2011 4

PROPERTY PUBLICATIONS
A DIVISION OF RODE & ASSOCIATES (PTY) LTD.
www.rode.co.za
2011 :
Real office rentals stutter fundamentals
Business cycle indicators
losing vigour, bringing with them implications for property Houses overvalued by 25%
Rodes Report 2011:4
on the South African Property Market 2011:4

Vol. 22 no. 4 Erwin G. Rode (editor-in-chief) John S. Lottering (editor)
Editor-in-chief
Erwin G. Rode
Published by
Rode & Associates (Pty) Ltd. Reg. No: 2009/005600/07 PO Box 1566, Bellville 7535 Tel. 021-946 2480 Fax 021-946 1238 E-mail: john@rode.co.za Website: www.rode.co.za
Editor
John S. Lottering
Survey administrator
Juwayra Januarie
Advertising
Lynette Smit 012-664 4159
Cover illustration
Konrad Rode 082 44 66 526 www.rodegraphics.com
Subscriptions
Angelique Claasen 021-946 2480 Annual subscription: 4 issues: R4.500,00 (excl. VAT)
Printing
RSAM Printers 082 418 4878 rsam@webafrica.org.za
Rode & Associates (Pty) Ltd., December 2011. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher. While all reasonable precaution is taken to ensure the accuracy of information, Rode & Associates (Pty) Ltd. shall not be liable to any person for inaccurate information or opinions contained in this publication. Portions of this report may be reproduced for legitimate academic or review purposes provided due attribution is cited.
Property is constantly in the limelight and investors are searching for meaningful, property-specific information. This makes a compelling argument for finely-targeted advertising in the Rodes Report on the SA Property Market. This independent analysis is one of the most widely-read publications of its kind.
Target audience: Rodes Report is targeted at investors and property practitioners such as property developers, property managers, landlords, merchant banks, commercial banks and non-residential property brokers. Continued exposure: A quarterly publication, Rodes Report is used as a reference source with a long shelf life. Rates and special advertising offers: Take advantage of Rodes special advertising offer: a first-timer offer of 10% less on our list price. Normal rates appear on the Rode website. Advertise on Rodes website: For an extension of your marketing, also consider an advertisement on the Rode website.
Telephone 012 664 4159 E-mail lynette@rode.co.za Website www.rode.co.za
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Services offered by Rode
www.rode.co.za
SPATIAL & DEVELOPMENT PLANNERS & ECONOMISTS

RodePlan specialises in town and regional planning to foster pathways to enable sustainable development. This includes: Land-use control: rezoning, subdivision, departure, consent use, removal of title restrictions, zoning schemes Spatial planning: spatial development frameworks (SDFs) and plans (SDPs) Governmental integrated development planning (IDP): processes and products, supported by a geographic information system (GIS). RodePlan focuses on town and development planning processes and products at macro, meso and micro level. RodePlan considers an in-depth understanding of the social, economic, political and environmental elements that underpin presentday society as fundamental to an SDF in order for spatial planning to complement economic growth and development. Rode also advises private clients on the development potential of specific properties and/or land disposal strategies. This is done in collaboration with our expertise as property economists. RodePlan's clients include property owners, developers, engineering companies and government institutions.
Rodes Report 2011:4
PROPERTY VALUATION & RESEARCH

As one of South Africa's largest valuation firms, Rode annually values property portfolios which include shopping centres, agricultural property, residential, commercial and industrial property. Rode also undertakes municipal property valuations, as well as specialized valuations such as bare dominiums. Rode's property valuation services are underpinned by the rigorous surveying of, inter alia, market rental levels and capitalization rates. Rode's valuation services also rely extensively on techniques such as regression models, as well as the opportunity cash flow (OCF) method. This ensures uniform and realistic market valuations, and is Rode's competitive edge.
Farm valuations
Rode's agricultural valuation department specialises in the valuation of farms and smallholdings, and understands the value-drivers within this sector.
Bare dominiums
Rode is widely regarded by lending institutions as the authority on the valuation of bare dominiums (leased fee estates in the USA). A bare dominium property is usually a property with a long lease, where the cash flow of the lease has "been" "stripped out" e.g. by selling the present value of the cash flow of a lease to a third party.
PROPERTY CONSULTANTS
Rode Consult provides forecasts, overviews and expert opinions for corporates, government departments and private clients on a wide range of property issues. Recent outputs include: Writing a macro overview of the South African housing market for the national Department of Housing Producing demand forecasts for specific office nodes and flats markets Producing forecasts of rental levels using econometric modelling Analysing property portfolios Producing long-term forecasts of property values in South Africa Analysing the property market in Bloemfontein and other Free State towns Acting as expert witness in arbitration and litigation Consulting for spatial and development planners and economists.
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PROPERTY PUBLICATIONS
Rode's Report on the South African Property Market

The Rode Report analyses and reports on most sectors of the property market. It covers, among others, trends and levels of rentals and standard capitalization rates by property type, grade, node/township, the listed real estate market, and building construction costs and building activity. Quarterly updated; print or electronic version.
Rode's South African Property Trends

Trends is aimed at general managers with strategic decision-making power and property investment analysts who are involved in asset allocation and viability studies. It offers a statistically-based analysis and forecast by property type of all key indicators affecting the property market, and it covers all the major metropolitan areas to provide a complete framework for property investment planning. The forecasts include those for standard capitalization rates, prime industrial and office rentals, office take-up, office vacancies, building costs, the property cycle and expected total returns on a notional office-building portfolio. Biannual CD publication.
Rode's Retail Report on South Africa

Rode's Retail Report contains analyses and reports on retail property, including shop rentals, operating expenses and escalation rates. It covers about 100 shopping centres and 120 street-front micro locations (highstreet shops) in six metropolitan areas. Retail sales data is presented by magisterial district and by merchandise category. It also contains data on new shopping centres, mooted developments and extensions to existing centres. Quarterly CD publication.
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Rode's Time Series database

Rode updates and rents out approximately 5 000 property time series, which offer property researchers and analysts a unique opportunity to analyse submarkets from office, industrial and residential rentals to capitalization rates and house prices covering more than two decades. A Pro and a Lite database is available. The main difference between the Pro and the Lite database is that the former contains the disaggregated or nodal data. Electronic publication on CD, updated quarterly.
Rode's Growth Points

Target market: CEOs, general management, fund investment managers, analysts Identifies areas of growth and stagnation in order to direct investment strategy Nine South African cities are included: Johannesburg, Pretoria, Cape Town, Durban, Port Elizabeth, East London, Bloemfontein, Nelspruit, Polokwane Updated once a year Price on enquiry
Rode's Sales
Target market: anyone who has to estimate market values of commercial and industrial properties, as well as vacant land. The report analyses and reports on actual transactions. It estimates capitalization rates and calculates sales prices per square metre that are based on actual transactions in contrast to the opinion surveys underlying Rodes Report. Users of Rodes Sales are advised to make use of this information in conjunction with Rodes Report. Monthly electronic publication.
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Rode staff
Rode staff
Erwin Rode BA, MBA (Stell): CEO Garth Johnson BCom (Stell), BComHons(Econ) (UNISA), NDREES (UNISA) Juliana Dommisse BEconHons (Stell) John S Lottering BCom(Finance)(UWC), BComHons(Econ)(UWC),MCom(Econ) (UWC) Angelique Claasen Abigail Jaftha Bianc Johnson Journalism (City Varsity) Elizma Hawksley Lynette Smit Juwayra Januarie Karen E Scott BComHons (Stell), BComHons (UCT) Monique Vernooy BTech(QS) (Cape Tech), NDREES (UNISA) Tobi Retief BA (Stell), NDREES (UNISA) Madeniah Jappie BScHons (Property Studies) (UCT) Anneke Meijers BCom(Stell), BCom Hons(Econ) (Stell) Berchtwald Rode BA (Stell), MTRP (UOFS) Tanya Lendis Stephan van der Walt MA (Stell) Janelle Van Harte Paralegal (School of Paralegal Studies) Martin Carstens B Iuris, B Admin Hons (Mun Admin), M Admin (UNISA), D Admin (UP)
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Contents
Contents
State of the property market
State of the property market in quarter 3 of 2011 1
Capitalization rates
Investment demand at risk of being dampened further How to estimate capitalization rates anywhere 4 14
Listed property
A double whammy for listed property prices 17
Office rentals, operating expenses, and office demand & vacancies

Rental office rentals stutter Low confidence suppressing demand for space 21 37
Non-industrial land values

Office, shopping-centre and filling-station stand value 49
Industrial rentals and vacancies and industrial stand values

Business cycle indicators losing vigour Values of industrial stands are struggling 54 81
Residential market
Whats up? Residential rentals stutter while retail sales are booming Houses overvalued by 25% 104 117
Building activity & building costs

Tender prices accelerate as profit margins are milked dry 121
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Tables
Tables
Table 1.1: Table 2.1: Table 2.2: Table 2.3: Table 2.4: Table 2.5: Table 2.6: Table 2.7: Table 2.8: Table 4.1: Table 5.1: Table 5.2: Table 5.3: Table 5.4: Table 5.5: Table 5.6: Table 5.7: Table 6.1: Table 6.2: Table 7.1: Table 7.2: Table 7.3: Table 8.1: Table 8.2: Table 8.3: The property market at a glance Survey of capitalization rates: office buildings Change in capitalization rates: office buildings Survey of capitalization rates: industrial buildings Change in capitalization rates: industrial buildings Survey of capitalization rates (%): shopping centres Change in capitalization rates (%): shopping centres Survey of capitalization rates (%): street-front shops Change in capitalization rates (%): street-front shops Total return on property unit trusts and property loan stocks Pioneer office rentals Market rental rates for office buildings Standard deviation of market rental rates for office buildings Market parking rentals Office rental escalation rates on new leases (%) Typical gross outgoings for prime office buildings Escalation rates on operating costs Committed new developments Sapoa office vacancy factors (%) Office stand values National shopping-centre stand values National filling-station land survey Pioneer rental rates for new, state-of-the-art industrial developments Mean prime industrial market rentals Standard deviation from mean prime industrial market rentals 1 8 9 10 10 11 12 13 13 19 25 26 28 30 32 33 36 41 42 51 52 53 56 57 67
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Tables
Table 8.4: Table 8.5: Table 9.1: Table 9.2:
Predominant market escalation rates (%) for industrial leases Indicative operating expenses for industrial buildings Market values for industrial stands Standard deviation from industrial stands
79 80 83 93 106 107 112 119 120 123 123
Table 10.1: Gross-income yields (%): Flats Table 10.2: Flat rentals: standard-quality block of flats Table 10.3: Flat rentals: upmarket-quality block of flats Table 11.1: Gross-income yields (%) on houses by price class Table 11.2: Gross-income yields (%) of townhouses by price class Table 12.1: New buildings completed (private sector)(m2) Table 12.2: New residential buildings (private sector)(m2)
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Annexures
Annexures
Annexure 1
Glossary of property terms and abbreviations I
Annexure 2
Technical background to the Rode surveys IX
Annexure 3
How to interpolate industrial rental rates and land values XII
Annexure 4
Approximate building cost rates as at September 2011 XIII
Annexure 5
Monthly forecast of Haylett by MFA XVIII
Annexure 6
Absa Home Building-cost Index XIX
Annexure 7
BER Building Cost Index XX
Annexure 8
Prime overdraft rate at month-end (%) XXI
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Panellist codes
Panellist codes
Code ACU AE AH AI AI AI AI AI AI AI AI AJ AL AN AP AQ AR ASA AT AV AW AX AY AZ BA BC BD BG BL BM BQ BR BR BR BR BR BS BT BU BW BX BY BZ BZ Company Acumen Properties Astol Properties Alex Thornhill Properties Ada Boksburg Aida Brits Ada Commercial Pretoria Ada Pretoria Aida Rustenburg Aida Tzaneen Aida Phalaborwa Aida Lichtenburg Property Specials Bothma Eiendomme Annenberg Real Estate API Property Group Assetbridge Real Estate Ash Brook Investments 71 ASAP Property Agents Anne Griesel Properties 5th Avenue Properties Watprop Avron Commercial Industrial Properties CC Alpine Estates AJ Nel Brammer Ross & Shapcott Barclay Miller & Associates (Pty) Ltd Bruce McWilliams Industries (Pty) Ltd Batting Properties Benchmark Property Group Jones Lang LaSalle Brightridge Properties Broll Property Group Broll Property Group Broll Property Group Broll Property Group Broll Property Group Penthouse Real Estate Basie Botha Estate Agents Barbour & Thorne Buschow Properties Buffalo City Municipality Bobby Rogers Property Broker Bales Investprop Bales Investprop Telephone number 0312662003 0114554781 0538326889 0119173135 0122523330 0123483720 0125430054 0145921501 0153073680 0157817930 0186325777 0114753955 0583076400 0214657780 0112341144 0219058490 0832301611 0126431938 0113931810 0112346111 0118870473 0215520001 0114537600 0832819644 0118734903 0118035821 0413961400 0437220649 0214215000 0115072200 0117864747 0114414000 0114414108 0118341136 0214197373 0413635559 0116726251 0137522700 0573532951 0845103119 0437220240 0123614484 0216838877 0861332562
Rodes Report 2011:4
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Panellist codes
CB CC CD CE CF CI CL CM CN CP CQ CR CR CR CS CU CV DA DC DD DE DG DK DL DN DO DP DQ DT DV DW EB EB EB EB EB EB EC ED EH EJ EK EL EM EP ER ES EV FN FN
Centurion Letting & Sales CCI Properties CC Chris van der Walt Properties Cenprop Real Estate Cathy Cordier Eiendomme City Property Administration Cleomic Property Consultants Capitol Commercial Properties Citynet Citiprop Real Estate Connaught Properties (Pty) Ltd Colliers International Colliers International Colliers International Chase & Sons Africape Property Investments (Pty) Ltd. Chris Hearn and Associates Dallas Properties CC Dave Furness Properties Diamond Properties Dedekind Real Estate DG Ladegaard Real Estate Direct @ Home Estates Delta Real Estate David Newham Property Management Bainprop (Pty) Ltd De la Porte Property Group DesKay Real Estate DTZ Leadenhall (Pty) Ltd Dan Viljoen Estates Divaris Property Brokers ERA Real Estate ERA Bundu Properties ERA Ermelo ERA Sun Properties ERA National George ERA Kuruman EVS Elite Valuation Services Edric Trust Ermelo Homenet Erasmus JoosteIng Ellenberger & Kahts East London Estates & Auctioneering Property Management & Rental Specialist CC Ecclesiate Property Specialists Associated Property Brokers Eli StrhEdmsBpk Engel & Vlkers Commercial Properties Fine & Country Bethlehem Fine & Country Kellaprince
0126536180 0828211214 0415821110 0333949595 0562121518 0123198811 0117061591 0219141840 0114833930 0214658391 0117252780 0215915067 0312672001 0413742205 0164213170 0219144533 0314629270 0118273417 0136536330 0214340001 0366372297 0169339633 0186320269 0219302343 0219480934 0116092542 0215519777 0437484252 0112742300 0116832345 0215311551 0145974977 0157810589 0178192398 0436433024 0448741113 0537123503 0741922667 0514489431 0178192880 0184734511 0514301511 0437351662 0217901991 0458381131 0437260501 0152975890 0123467777 0583032333 0137544400
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Panellist codes
FO FP FR GB GB GE GO GO GO GO GW GY HE HH HK HN HN HN HN HN HS IP JL JL JL JP KA KC KE KI KM LA LD LF LH LM LP LS MD MI MJ ML MO MP MR MW NE NR OC OD
Fosprops Properties/ Homenet PPA Property Development CC Fraser & Hurd (Pty) Ltd/Fraser Properties Galetti Commercial and Industrial Galetti Commercial and Industrial Gustrouw Estates (Pty) Ltd Pam Golding Pam Golding Pam Golding Commercial Pam Golding Commercial Goldswain Investments Guy de la Porte Property Solutions Homelet Grahamstown Hendrik Tryhou Property Consultants Huurkor Harcourts Heloman Harcourts Jana-Marie Real Estates Harcourts Excellence Harcourts Queenstown Harcourts Parklane Summerton Edelson Commercial CC InvestPro Just Letting Randburg/ Northcliff Just Letting Potchefstroom Just Letting City Bowl John Price Estates Kailas Property Bureau Keith Roux Properties Keydom Real Estate Kitchings Agencies Kirchmann-Hurry Investments Ltd Landlords We do Rentals Lendac Property Brokers Louis Group Properties Leader Homes Louis Kruger Property Management Les' Property and Rentals Lock Sloane & Partners Mont Blanc Projects & Properties (Pty) Ltd Platinum Global Majola & Boyd (Pty) Ltd Mindry Properties CC Moolman Group of Companies Monarch Rentals (Kingdom of Rentals) Marder Properties Mc William Murray Realty Newbridge Property Services National Real Estate Omnicron Commercial Property Brokers (Pty) Ltd Oudtshoorn Eiendomme
0357898583 0123429099 0413654445 0214186308 0117831195 0218547220 0218711480 0583035565 0214177878 0437054040 0437222876 0217948879 0466222839 0137441671 0124008600 0118246028 0155161526 0184687089 0458382560 0333423340 0415811768 0437263116 0117932757 0182931858 0214233344 0415833903 0114826461 0437213465 0132826187 0419229870 0117067131 0219751770 0732148655 0214223030 0538313955 0219033101 0437266933 0317011010 0826005326 0514474711 0861111789 0317834307 0152914700 0118494211 0114531220 0312674800 0219139131 0514059933 0219147363 0442725895
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Panellist codes
OG OM OM OP PA PC PE PF PG PH PI PJ PK PL PM PN PQ PR PS QC QS QU RA RD REW RF RM RO RQ RR RS RY RZ SC SF SO SN SQ SX TE TG TH TR TR TR TR TR UN VD WA
Oscar Saunderson Group Old Mutual Investment Group Property Investments Old Mutual Properties Omnipark Pty (Ltd) Pace Property Group Propco (1985) (Pty) Ltd Property Scene Group Permanent Trust Property Group Proximo President Estate & General Agents (Pty) Ltd PHG Property Group Profile Property Solutions Philips Property Brokers Pears Property Consultants (Pty) Ltd PDL Property Management (Pty) Ltd Propergation Estates Pro-Net Estates Harcourts Polla Scheepers Property Scene Real Estate Cosmoprop Commercial Property Brokers Commercial Space Quadrant Properties Real Estate & Property Services Redefine Income Fund Real Estate @ Work Rent-A-Flat Remax Kuruman Reef Property Consultants Realty Value Realnet Rawson Properties Milnerton Rita Stipec Properties Oriprops Stockton Property Consultants Seeff Durbanville & Brackenfell Simmons & Associates Selection Estates Steer & Company Status-Mark Trust & Estate Co. Theo Goosen Estate Agents Trevor Hosioski Investment Properties Trafalgar Property Services Trafalgar Property Services Trafalgar Property Southern Suburbs Trafalgar Property & Financial Services Trafalgar Property Management Unified Properties Van der Westuizen Eiendomme Wall & Smith Property Consultants
0215914499 0313661811 0437270990 0216836077 0112175959 0312090161 0413734146 0214418800 0176312033 0118738707 0514488831 0333472786 0117826007 0217623474 0137527333 0219146444 0132433113 0343125841 0357923217 0219148035 0216714343 0115309840 0878081578 0112830028 0836328011 0117891007 0537123123 0116821827 0357891376 0137532544 0215587102 0152954537 0137528091 0114259857 0219755290 0437221705 0867555545 0214261026 0116680100 0026461231224 0152959014 0117834569 0112145200 0123265963 0214105500 0313017017 0437266066 0437482323 0536310846 0217972552
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Panellist codes
WJ WK ZB ZB ZB ZE ZZ
Warren Jack Property Group Wakefields Property Management (Pty) Ltd Sotheby's International Realty PE Sotheby's International Realty George Sotheby's International Realty Zenith Properties Anon
0413656200 0312047400 0413630168 0448732519 0466361388 0562123207
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Acknowledgments
Acknowledgements
The writers of Rode's Report express their sincere thanks to: 1. Sapoa, for use of the basic data from their office vacancy surveys, which we analysed further. 2. Medium-Term Forecasting Associates (MFA) of Stellenbosch, for the use of their monthly forecast of building-input costs (Haylett), as well as their leading indicator of building activity. Also for their kind permission to publish the Bureau for Economic Researchs building-cost index, to which they hold the marketing rights. 3. 4. Absa for the use of their home-building-cost index. Davis Langdon, an AECOM company, for the use of their building cost data for various building types. 5. Juwayra Januarie, who manages the surveys and compiles the annexures and Lynette Smit and Angelique Claasen for their technical assistance. 6. All the panellists who so kindly gave of their time and expertise in responding to our surveys. The complete list of panellists who contribute to the RR, together with their codes, appears on the following page. For each of the survey tables in the RR you will find, listed against every node or area, the codes for all the panellists who contributed information this quarter. 7. Ken Gardner, who has the task of making sure that all gross grammar mistakes are corrected. 8. The JSE Securities Exchange, Statistics South Africa and the Bond Exchange of South Africa for the use of their data. 9. Other property practitioners throughout South Africa, experts in their fields, too numerous to mention individually. Without the generous assistance of these professionals, much of our research would be impossible.
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Foreword
Foreword
Dear Reader Welcome to the fourth issue of Rodes Report on the South African Property Market (RR) for 2011, which reports on surveys conducted in the third quarter of 2011. As usual, we report on movements of a number of critical property variables, ranging from capitalization rates, rentals, escalation rates, land values, and operating costs for the non-residential property market, to changes in house prices and flat rentals in the residential property market. Readers are again reminded of our website www.rode.co.za which contains interesting and relevant property-related articles, most of which are published in our monthly e-newsletter, to which readers can subscribe through our website. Its free of charge. If you want to communicate with a specific niche market, you can contact Lynette on 082-323 5799 for RR advertising rates. Juwayra Januarie and Bianc Johnson are in charge of expanding our survey panel; their job is to give you access to the opinions of as many property experts as possible. We appeal to all market participants who feel they have what it takes to become an RR panellist, to please contact Juwayra or Bianc on 021-946 2480 its for the benefit of everyone in the industry. As a panellist you will also get invaluable exposure. Happy reading! Sincerely
John S. Lottering Editor 8 December 2011
Rodes Report 2011:4
Chapter 1: State of the property market
State of the property market in quarter 3 of 2011

The following are the significant findings or conclusions made in this issue of Rodes Report: Real office rentals stutter Business cycle indicators losing vigour, bringing with them implications for property fundamentals Houses overvalued by 25%
Quantitative overview of the property market

Table 1.1 provides a snapshot of how the property market has performed over the past four quarters by comparing the latest information (quarter 2011:3) with that collected a year earlier.
Table 1.1 The property market at a glance at quarter 2011:3*

% growth on four quarters earlier (on smoothed data) Nominal Real** A-grade CBD office rents Johannesburg +1,4 -4,0 Pretoria +13,9 7,9 Durban +2,0 -3,4 Cape Town +12,3 6,3 A-grade decentralized office rents Sandton CBD +7,8 2,1 Randburg Ferndale -5,7 -10,7 Brooklyn/Waterkloof (Pta) -8,8 -13,6 Hatfield -2,0 -7,2 Berea (Durban) -2,7 -7,9 La Lucia Ridge +2,9 -2,6 Claremont (CT) -0,7 -6,0 Tyger Valley +14,4 8,3
* Unless otherwise specified ** Nominal values deflated by BER Building Cost Index; however, flat rentals are deflated using the Consumer Price Index.
Rodes Report 2011:4
Table 1.1 (continued) The property market at a glance at quarter 2011:3*

% growth on four quarters earlier (on smoothed data) Nominal Prime industrial rentals (500 m units) Central Witwatersrand Port Elizabeth Durban metro Cape Peninsula +4,6 -1,2 +5,1 +4,2 Flat rentals (standard quality, all sizes) Johannesburg metro Pretoria metro Durban metro Cape Town metro Port Elizabeth +1,5 +4,8 +1,5 +4,2 +3,0 -3,3 -0,2 -3,3 -0,8 -1,9 Real** -0,9 -6,4 -0,5 -1,3
* Unless otherwise specified ** Nominal values deflated by BER Building Cost Index; however, flat rentals are deflated using the Consumer Price Index.
Capitalization rates
The South African business-cycle indicators have been losing some of their steam in recent months and, read together with what has been happening in the world economy, are prompting a growing number of economists to scale down their rather upbeat outlook for the economy. The nonresidential property market is a derivative of the economy, so this development has the very real potential to impact on the rating of the property market, that is capitalization rates. During the upswing phase of the business cycle, property fundamentals are likely to do well. In turn, this will stimulate investment demand and lead to an improvement in the market ratings of property; that is, capitalization rates are likely to fall. Should the current cooling in the composite leading business-cycle indicator1 lead to an
actual decline in economic activity, the outcome could be upward pressure on capitalization rates. Nonetheless, in the third quarter of 2011, capitalization rates for retail, prime office and industrial property still managed to remain at roughly the same level they were in the previous quarter. The market for prime property is still inherently healthy.
Office rentals
Moderating economic activity and floundering business confidence, and its debilitating effect on office demand and vacancies, at the moment do not augur well for office rentals.
In fact, in the third quarter of 2011, market rentals could on a national basis only muster modest growth of 4%. This comes after having achieved an unsustainleading economic indicator provides a guideline for economic growth for at least six months ahead.
1 Published by the Reserve Bank, the index is used to predict the direction of the economy's movements in the months to come. In the case of South Africa, the
Rodes Report 2011:4
able growth of about 11% in the first quarter. Meanwhile, building-cost inflation (the cost to construct buildings, as measured by the BER Building Cost Index) is again growing and is clocking about 6%. This implies that, in real terms, office rentals have actually contracted. Thus, we see the business-cycle slowdown is already a strong depressing force on the upswing phase of the long office cycle.
slowdown in manufacturing output is likely to have on the demand for industrial property.
Flat rentals
Residential rentals continue to cruise along, showing mediocre growth below that of consumer inflation. Although flats are still outperforming both houses and townhouses, growth remained moderate at 2% year-on-year in the third quarter of 2011. Over the same period, rentals on townhouses showed growth of about 1%, while those on houses remained at roughly the same level as a year ago. Discouraging for investors in the buy-to-let market is that these growth rates were well below the rate of consumer inflation, which stood at 5% (excluding housing) in the third quarter of 2011.
The acceleration in building-cost inflation can be explained by building contractors having now milked their profit margins dry. Therefore, they now have no option but to pass on higher input costs in the form of higher tender prices. This comes after intensive tendering competition over the past two years has forced contractors to cut their profit margins to the bone. The result of this was weaker growth in overall tender prices which includes profit margins relative to the growth in building-input costs (as measured by the Haylett Index).
Industrial market
Slack in the demand for industrial space is currently displayed by the poor to moderate growth in market rentals. In the third quarter of 2011, market rentals on the Central Witwatersrand and in Durban mustered growth of 5% the best regional performance. The Cape Peninsula followed with growth of 4%, while in Port Elizabeth market rentals were actually somewhat lower (-1%) than they were a year ago. Bearing in mind the fact that building costs grew by 6% (y-o-y), this implies that in real terms industrial rentals in all of these industrial areas are actually lower than they were a year ago. Prospects for industrial rentals remain weak, this as a result of an economy struggling to find its feet amidst uncertain global economic conditions not to mention the adverse impact that the current
The house market

For now, no vigorous growth in house prices can be expected until the magnitudes of the key drivers of demand change significantly. One such driver is, of course, interest rates. In the meantime, house prices remain far above their long-term replacement-cost trend line. In fact, houses are still 25% more expensive than what is suggested by their long-term trend line. Considering that asset prices are mean-reverting, the implication is that a resumption in the down trend in real houses prices is inevitable its only a question of time and speed. A real decline in house prices does not necessarily mean the nominal prices will decline; a more likely outcome is that nominal prices might grow at, say, 2% per annum for a few years while inflation is at, say, 6%.
Rodes Report 2011:4
Standard capitalization rates
Chapter 2: Capitalization rates
Investment demand at risk of being dampened further

Written by John S. Lottering The South African business-cycle indicators have been losing some of their steam in recent months and, read together with what has been happening in the world economy, are prompting a growing number of economists to scale down their rather upbeat outlook for the economy. The nonresidential property market is a derivative of the economy, so this development has the very real potential to impact on the fundamentals of the property market. One of these fundamentals is capitalization rates. The uncanny, strong inverse relationship between the coincident business-cycle indicator1 of the Reserve Bank and Rodes capitalization rates is depicted in the following graphs.
Industrial leaseback capitalization rates vs Coincident business cycle indicator
14 160
do well. In turn, this will stimulate investment demand and lead to an improvement in the market ratings of property; that is, capitalization rates are likely to fall. Note from the graphs how the opposite applied during the most recent downswing phase of the business cycle and how, when economic activity picked up, capitalization rates trended down again. September 2011 marked the third consecutive month that the composite leading business-cycle indicator 2 dropped (not shown in a graph). Should this trend persist and lead to an actual cooling in economic activity, the outcome could be upward pressure on capitalization rates.
Regional-shopping-centre capitalization rates vs Coincident business cycle indicator
13 160
r = -0,8
12 140 Capitalization rates (%) Business cycle indicator (2000=100) 11
r = -0,8
13 140 Capitalization rates (%) Business cycle indicator (2000=100)
10
120
9 100 8
12 120 11
Capitalization rates (smoothed) Business cycle indicator

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
80
Source of data: Rode's Time Series; SARB
10
100
Capitalization rates (smoothed) Business cycle indicator

9 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 80
Shopping centres
In the third quarter of 2011, capitalization rates on regional and community shopping
2 Also published by the Reserve Bank, the index is used to predict the direction of the economy's movements in the months to come. In the case of South Africa, the leading economic indicator provides a guideline for economic growth for at least six months ahead.
Source of data: Rode's Time Series; SARB
During the upswing phase of the business cycle, property fundamentals are likely to
1
An index that is a broad-based measure of current economic conditions, helping economists and investors to analyze the business cycle. It is coincident in contrast to leading (ahead of the cycle).
Rodes Report 2011:4
centres remained roughly at their previousquarter levels.

Capitalization rates Regional shopping centres
ardized income yield of about 9,3% in the top cities and nodes. By standardized income yield we mean the capitalization rate is calculated on the assumption that the property is let at market rentals.
Capitalization rates Prime industrial leasebacks
13 Smoothed 12 11 10 9 8 7 Pretoria Cape Peninsula Central Witwatersrand Durban 90 92 94 96 98 00 02 04 06 08 10
14 13 12 11 10 9 8 Cape Peninsula Durban Pretoria Central Witwatersrand 90 92 94 96 98 00 02 04 06
Smoothed
Source of data: Rode's Time Series
08
10
Our respondents were of the opinion that standard capitalization rates on regional shopping centres are about 7,5%, while those on community centres are about 9%.
Capitalization rates Community shopping centres
Prime decentralized offices

Johannesburg decentralized Grade-A multi-tenant office capitalization rates in Johannesburg decentralized were all, barring Sandton CBD, slightly up in the reporting quarter. The Sandton CBD also recorded the lowest capitalization rate. Here our panellists are of the opinion that investors would require a minimum net income return of about 9,3%. In the other Johannesburg decentralized office nodes, opinions of our respondents ranged between 9,8% and 10,6%. The Gautrain station undoubtedly helped to entrench Sandton CBDs darling status.
Capitalization rates Prime Johannesburg decentralized offices
15 14 13 12 % 11 10 9 8 Smoothed
Cape Peninsula Central Witwatersrand Pretoria Durban 90 92 94 96 98 00 02 04 06 08 10
Prime industrial leasebacks

16
With the exception of the Cape Peninsula, where capitalization rates on industrial leasebacks weakened (increased) slightly, capitalization rates in the other major industrial conurbations dropped (decreased) marginally. In the reporting quarter, our respondents were still of the opinion that investors in prime industrial property (with a leaseback covenant) required a minimum net stand-
14
Sandton CBD Parktown Rosebank Midrand
12
10
Smoothed 90 92 94 96 98 00 02 04 06 08 10
Rodes Report 2011:4
Capitalization rates Prime Johannesburg decentralized offices
Capitalization rates Prime Durban decentralized offices
15 14 13 Bryanston Rivonia Sunninghill Randburg
15 14 13 12 Smoothed
12 11 10 9 Smoothed 98 99 00 01 02 03 04 05 06 07 08 09 10 11
% 11 10 9 8
Umhlanga Ridge Westway Essex Terrace Berea 99 00 01 02 03 04 05 06 07 08 09 10 11

Cape Town decentralized Pretoria decentralized In the Pretoria decentralized office nodes of Centurion, Hatfield and Brooklyn, prime office capitalization rates stayed roughly at their previous-quarter levels. Capitalization rates continued to range between 10% and 10,5% in Pretoria decentralized.
Capitalization rates Prime Pretoria decentralized offices
15 14 13 12 % 11 10 9 Smoothed 8 96 98 00 02 04 06 08 10 Brooklyn Hatfield Centurion Midrand
In Cape Town decentralized, capitalization rates on prime multi-tenanted properties remained at roughly the same levels of the previous quarter. Our respondents are of the opinion that investors currently require a minimum standardized net income return of about 9% to induce them into buying or selling grade-A office buildings in Cape Town. In the Cape Town CBD the capitalization rates also stood at roughly 9%.
Capitalization rates Prime Cape Town offices
16
Century City Tyger Valley Cape Town CBD
Smoothed
14
12
%
10
Durban decentralized In the nodes of La Lucia / Umhlanga Ridge, Essex Terrace and Berea capitalization rates remained roughly at the same level of the previous quarter. In Durban decentralized, they ranged between 9,1% and 10,6%.
94
96
98
00
02
04
06
08
10
This concludes our analysis of capitalization rates and buyer profiles. The capitalizationrate tables follow.
Rodes Report 2011:4
Please note that figures referred to in the text may differ from the raw data in the tables owing to smoothing on our part. Interpretation tip: It is dangerous to rely on one quarters figure, as it may be an outlier owing to small sample sizes. Instead, consider the trend or contemplate using the average of at least two quarters for a more accurate assessment. For this reason, the graphs accompanying this article are smoothed. A standard capitalization rate (colloquially referred to as a cap rate) is the expected net operating income for year 1, assuming the entire building is let at open-market rentals, divided by the purchase price. This calculation ignores VAT, transfer duty and income tax, and it assumes a cash transaction. All references in Rodes Report to cap rates and capitalization rates mean standard capitalization rates. Capitalization rates for CBDs (excluding the Cape Town CBD) are of little use because when office properties are sold they are invariably converted to flats.
The high standard deviation from the mean capitalization rate for office and industrial properties in some nodes, as reported in the accompanying capitalization rate tables, is indicative of the uncertainty prevailing in these nodes or areas. With few sales taking place, the evidence on ruling capitalization rates is thin and opinions vary more than in the more popular areas. This means that the income-producing property market has become even more inefficient in these nodes which makes the valuation of these properties a rather hazardous exercise.
We are indebted to our expert capitalization rate panel, comprising major owners and leading brokers who know their market segments intimately. This survey would not be possible without their invaluable contributions. Codes of those panellists who supplied information for this quarter's survey appear in the tables on the following pages. An explanation of the contributor codes can be found on p. xvi.
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Table 2.1 Survey of capitalization rates (%) Office buildings

Best location
Johannesburg CBD Braamfontein Parktown Rosebank Sandton CBD Rivonia Bryanston Sunninghill Randburg Ferndale Midrand Germiston CBD Pretoria CBD Hatfield Brooklyn Centurion Menlyn/Lynnwood Vaal Triangle Nelspruit Polokwane Durban CBD Berea Essex Terrace Westway La Lucia/ Umhlanga Ridge Pietermaritzburg Cape Town CBD Bellville CBD Bellville Tyger Valley Claremont Port Elizabeth East London Bloemfontein CBD Windhoek
Means for quarter 2011:3 Grade A: Grade A: Grade B: Multi-tenant Leaseback Multi-tenant Mean SD n Mean SD n Mean SD n
11,2 10,6 10,2 9,8 9,3 10,1 9,9 9,9 10,6 10,4 11,3 10,9 10,5 9,9 10,2 10,1 10,4 10,0 10,2 11,3 10,6 10,5 9,1 9,3 10,2 9,5 9,0 10,3 9,5 0,3 0,1 0,2 0,2 0,3 0,0 0,4 0,3 0,5 0,1 0,1 0,3 0,4 0,2 0,4 2 2 2 2 2 2 1 1 1 2 1 1 1 1 1 1 1 2 1 3 2 1 2 3 1 4 1 2 3 10,6 10,1 9,7 9,2 8,6 9,5 9,4 9,4 10,1 9,9 11,0 10,2 9,7 9,2 9,5 9,2 9,6 10,0 10,0 10,7 10,2 10,0 8,9 8,9 10,2 9,5 9,0 10,0 9,5 0,4 0,0 0,2 0,4 0,0 0,0 0,2 0,2 0,2 0,1 0,1 0,4 0,0 0,5 2 2 1 2 2 2 1 1 1 2 1 1 1 1 1 1 1 2 1 2 2 1 2 3 1 3 1 2 2 12,1 11,7 11,2 10,5 10,6 11,4 10,7 11,6 12,2 11,5 12,4 11,1 11,2 11,0 11,2 11,1 12,1 11,7 11,9 11,9 11,0 11,0 10,0 10,6 11,2 10,3 10,0 11,5 11,1 0,0 0,2 0,5 0,5 0,9 0,5 0,9 0,2 0,8 0,0 0,4 0,2 0,1 2 2 1 2 1 2 2 1 1 2 1 2 1 1 1 1 1 2 1 3 2 1 1 3 1 5 1 1 3 -
Grade C: Multi-tenant Mean SD n

13,4 12,4 12,8 11,8 12,3 12,5 12,4 12,4 12,9 12,4 13,5 13,1 12,6 12,3 12,8 12,4 13,2 12,4 13,0 13,5 12,7 12,5 12,5 13,0 11,0 12,8 12,3 0,0 0,5 0,8 0,5 0,4 0,4 0,2 0,8 0,2 0,4 2 2 1 2 1 1 1 1 1 2 1 1 1 1 1 1 1 2 1 3 2 1 1 1 3 2 3 -
n = Number of respondents = Not available fewer than two respondents SD = See Glossary of terms and abbreviations in Annexure 1.
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Table 2.2 Change in capitalization rates (% points) Office buildings

Means for quarter 2011:3 less quarter 2011:2
Grade A: multi Best location Grade A: leaseback Grade B: multi Grade C: multi Broker & owner contributors
Johannesburg CBD Braamfontein Parktown Rosebank Sandton CBD Rivonia Bryanston Sunninghill Randburg Ferndale Midrand Germiston CBD Pretoria CBD Hatfield Brooklyn Centurion Menlyn/Lynnwood Vaal Triangle Nelspruit Polokwane Durban CBD Berea Essex Terrace Westway La Lucia Ridge Pietermaritzburg Cape Town CBD Bellville CBD Bellville Tyger Valley Century City Westlake Claremont Port Elizabeth East London Bloemfontein CBD Windhoek
0,0 0,3 -0,1 -0,2 -0,4 0,1 0,4 0,1 0,1 -0,4 0,2 0,0 -0,1 0,0 0,0 0,1 -0,1 0,0 0,3 -0,1 0,0 -0,2 -0,4 0,0 0,1 -1,0 -0,4 0,2 -0,1 -
0,3 0,0 0,0 0,1 -0,3 0,6 0,2 0,1 0,0 -0,5 -2,0 -0,1 0,2 -0,4 0,0 0,1 0,0 0,0 0,0 0,0 0,0 -0,1 0,0 -0,1 0,0 -0,8 -0,3 0,1 0,0 -
0,3 -0,1 0,0 -0,5 0,0 0,8 -1,0 -0,1 0,0 -0,1 0,2 -0,7 0,2 0,0 0,1 0,0 0,0 0,3 0,0 0,6 0,0 0,0 -0,2 0,0 0,1 -0,2 0,5 -0,5 0,0 -
0,1 -0,5 -0,8 0,1 0,1 0,0 0,1 0,1 0,0 0,2 0,0 0,0 0,0 0,5 0,0 0,0 0,0 0,0 0,0 -
BM, TH, ZZ BM, TH BM, TH BM, TH BM, TH BM, TH BM, TH TH TH AW, TH TH TH, ZZ TH TH TH TH TH HH, TH TH MW, PC, TH, ZZ PC, TH PC MW, PC MW, PC, TH TH DD, GY, QS, TH, ZZ DD DA MJ, TH CC, EK, TH
NB: The number of broker/owner codes does not necessarily match the sample size as indicated by the n in the table on page 1 0. This is so because several of our owner contributors wish to remain anonymous, but we do not show multiple ZZ codes in the table.
-0,3 0,0 -
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10
Means for quarter 2011:3 Prime leaseback Prime quality Prime industrial Best location (AAA Tenant) non-leaseback park Mean SD n Mean SD n Mean SD n Central Wits 9,1 0,3 3 10,2 0,2 2 10,0 0,6 3 West Rand 9,9 1 10,8 1 10,7 1 East Rand 10,2 0,8 2 9,9 0,4 2 10,5 1 Far East Rand 9,6 1 10,5 1 10,6 1 Pretoria 9,2 0,4 2 10,6 1 9,9 0,7 2 Vaal Triangle 9,8 1 10,7 1 10,7 1 Nelspruit 9,7 1 10,5 0,0 2 10,8 0,2 2 Polokwane 9,8 1 10,9 1 10,8 1 Durban 9,2 0,3 4 10,0 0,4 3 10,0 0,5 4 Pietermaritzburg 9,7 1 10,7 1 10,7 1 Cape Peninsula 9,4 0,5 4 9,8 0,2 2 9,7 0,3 3 Port Elizabeth 9,6 0,1 2 10,4 0,0 2 10,2 0,2 2 East London Bloemfontein 9,9 0,1 2 10,7 1 11,4 0,3 3 Windhoek n = Number of respondents = Not available fewer than two respondents SD = See Glossary of terms and abbreviations in Annexure 1.
Table 2.3 Survey of capitalization rates (%) Industrial buildings
Secondary quality building Mean SD n 11,3 0,3 2 11,9 1 10,9 0,4 2 11,5 1 11,6 1 11,7 1 11,8 0,2 2 11,8 1 11,1 0,1 3 11,3 1 10,6 0,0 2 12,1 0,5 2 10,4 0,3 3 -
Means for quarter 2011:3 less quarter 2011:2

Best location Central Wits West Rand East Rand Far East Rand Pretoria Vaal Triangle Nelspruit Polokwane Durban Pietermaritzburg Cape Peninsula Port Elizabeth East London Bloemfontein Windhoek Prime leaseback -0,6 0,1 0,7 0,0 -0,4 0,0 0,1 0,0 0,0 0,0 0,3 0,0 0,0 Prime Secondary Prime nonquality leaseback industrial building park -0,2 0,4 -0,5 0,0 0,0 0,0 0,0 -0,1 -0,1 0,0 0,5 0,1 1,0 1,6 0,1 0,7 1,0 -1,0 0,9 1,0 0,8 0,6 1,0 1,9 0,0 -1,3 -0,8 -1,6 -1,5 -1,7 1,1 -1,1 -1,0 -1,0 -0,4 -0,5 -1,6 0,0 Broker & owner contributors AW, TH, ZZ TH HN, REW, TH TH, ZZ TH, ZZ TH HH, TH TH MW, PC, TH, ZZ TH GY, QS, TH, ZZ MJ, TH CC, EK, TH
Table 2.4 Change in capitalization rates (% points) Industrial buildings
NB: The number of broker/owner codes does not necessarily match the sample size as indicated by the n in the table on page 11. This is so because several of our owner contributors wish to remain anonymous, but we do not show multiple ZZ codes in the table.
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Table 2.5 Survey of capitalization rates (%): shopping centres

Best location Witwatersrand Pretoria Vaal Triangle Nelspruit Polokwane Durban Pietermaritzburg Cape Town Port Elizabeth East London Bloemfontein Platteland Townships Windhoek Means for quarter 2011:3 Super regional Regional Mean SD n Mean SD 7,6 1 8,0 7,6 1 8,0 7,8 1 8,2 7,6 1 8,2 0,1 7,8 1 8,2 7,6 1 8,2 0,1 7,9 1 8,3 8,3 0,7 3 8,2 0,5 8,4 0,5 2 8,6 0,4 8,2 0,2 n 1 1 1 2 1 2 1 3 2 2 Community Mean SD 9,0 9,0 9,1 9,0 0,0 9,5 9,0 0,0 9,2 9,3 0,7 9,9 0,5 9,5 0,4 10,5 n 1 1 1 2 1 2 1 2 2 3 1 -
n = Number of respondents = Not available SD = See Glossary of terms and abbreviations in Annexure 1.
Table 2.5 (continued) Survey of capitalization rates (%): shopping centres

Best location Witwatersrand Pretoria Vaal Triangle Nelspruit Polokwane Durban Pietermaritzburg Cape Town Port Elizabeth East London Bloemfontein Platteland Townships Windhoek Means for Neighbourhood Mean SD n 10,0 1 10,0 1 10,2 1 10,0 0,0 2 10,2 1 10,0 1 10,1 1 10,3 0,7 2 10,5 0,5 2 10,2 0,6 3 quarter 2011:3 Local convenience Mean SD n 11,0 1 11,0 1 11,2 1 10,8 0,3 2 11,2 1 11,0 1 11,1 1 10,5 0,4 3 11,2 0,3 2 11,2 0,6 3 Retail Mean 9,5 9,5 9,6 9,8 9,6 9,5 9,6 9,1 10,2 11,1 warehouse SD n 1 1 1 0,2 2 1 0,0 2 1 0,0 2 0,3 2 1,0 2 -
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Table 2.6 Change in capitalization rates (% points): shopping centres

Best location Witwatersrand Pretoria Vaal Triangle Nelspruit Polokwane Durban Pietermaritzburg Cape Town Port Elizabeth East London Bloemfontein Platteland Townships Windhoek Means for quarter 2011:3 less quarter 2011:2 Super Broker & owner CommuRegional nity regional contributors 0,2 0,2 0,1 TH 0,2 0,2 0,1 TH 0,0 0,0 0,0 TH 0,0 0,2 0,0 HH, TH 0,0 0,0 0,4 TH 0,2 0,4 0,1 PC, TH 0,0 -0,1 0,1 TH 1,1 0,6 0,8 DD, QS, TH 0,0 0,0 0,0 MJ, TH 0,0 CC, EK, TH 0,0 -
Table 2.6 (continued) Change in capitalization rates (% points): shopping centres

Best location Witwatersrand Pretoria Vaal Triangle Nelspruit Polokwane Durban Pietermaritzburg Cape Town Port Elizabeth East London Bloemfontein Platteland Townships Windhoek Means for quarter 2011:3 less quarter 2011:2 Local NeighbourBroker & owner Retail convenwarehouse hood contributors ience 0,2 0,5 0,0 TH 0,2 0,5 0,0 TH 0,0 0,0 0,0 TH 0,1 0,1 0,2 HH, TH 0,0 0,0 0,0 TH 0,2 0,5 0,0 PC, TH 0,0 0,0 0,0 TH 0,9 10,5 0,1 DD, QS, TH 0,3 0,3 0,0 MJ, TH 0,5 0,2 0,0 CC, EK, TH -
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Table 2.7 Survey of capitalization rates (%): street-front shops

Best location Witwatersrand Pretoria Vaal Triangle Nelspruit Polokwane Durban Pietermaritzburg Cape Town Port Elizabeth East London Bloemfontein Windhoek Means for quarter 2011:3 Metro CBD SD n Mean N/A 1 11,0 N/A 1 11,0 N/A 1 11,1 0,0 2 10,9 N/A 1 11,1 0,0 2 11,0 N/A 1 11,1 0,0 3 10,1 0,5 2 11,0 N/A N/A N/A 0,2 2 10,6 N/A N/A N/A Decentralised SD N/A N/A N/A 0,1 N/A 0,0 N/A 0,1 0,0 N/A 0,5 N/A
Mean 11,1 11,1 11,2 11,1 11,3 11,2 11,3 10,0 11,6 N/A 11,2 N/A
n 1 1 1 2 1 2 1 2 2 N/A 2 N/A
Table 2.8 Change in capitalization rates (% points): street-front shops

Best location Witwatersrand Pretoria Vaal Triangle Nelspruit Polokwane Durban Pietermaritzburg Cape Town Port Elizabeth East London Bloemfontein Windhoek Means for quarter 2011:3 less quarter 2011:2 Metro CBD Decentralised Broker & owner contributors -0,1 0,0 TH -0,1 0,0 TH -0,1 0,0 TH 0,3 0,0 HH, TH 0,0 0,0 TH 0,0 0,0 PC, TH 0,0 0,0 TH 0,2 0,4 DD, GB, TH 0,1 0,0 MJ, TH 0,0 0,0 EK, TH -
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14
Capitalization rate equations
Chapter 3: Capitalization-rate equations
How to estimate capitalization rates anywhere

Updated by Anneke Meijers This chapter provides the reader with a handy tool to estimate the market capitalization rate of various property types anywhere in South Africa, provided the user is confident about the subject propertys gross-market-rental rate. As the reader will see below, market-rental rates are amazingly successful in explaining the level of capitalization rates. On reflection, though, this should not be all that surprising, considering that all the good and bad news pertaining to a property is encapsulated in the ruling market-rental rate. Here we think of rental-level drivers such as: Location Risk (examples of varying risk profiles are a leaseback compared with a multitenanted property, the robustness of the covenant) Grade/age
Office-building equation
In our regression analysis of office buildings, we use the market capitalization rates (dependent variable) and gross marketrental rates (predictors) of grades A, B and C buildings in the areas surveyed by Rodes Report (RR). The source of the national equation given below is this issue of RR. The regression is based on 55 observations in mainly decentralized nodes. With the decaying of some CBDs, we excluded the following outlier nodes in the construction of our model: Johannesburg CBD Braamfontein Pretoria CBD Durban CBD.
We also excluded two secondary cities with small capitalization-rate samples, viz. East London and Germiston. The updated equation is: office capitalization rate % = 15,161 (0,0488*gross rental) where gross rental = the gross market rental rate per rentable m2 per month for grades A, B or C office buildings in quarter 2011:3.
An important risk factor that is typically not reflected in a rental is the design of the building, as it influences its ability to be relet. Here one thinks of purpose-built buildings. Thus, the moderately strong relationship between market-rental rates and capitalization rates allows the researcher to build a regression model with which to estimate the levels of capitalization rates.
Rodes Report 2011:4
15
The correlation coefficient r = -0,78. The standard error (SE) is 0,7 and n = 55. Readers should note that it is not advisable to use this function for gross market rental rates that fall much outside the range of R40/m/month to R132/m/month. Example: If the gross office rental is R60 per rentable m2 per month, then the capitalization rate is: office capitalization rate % = 15,161 (0,0488*60) = 12,2% Warning: To guard against volatility in the latest survey data, the reader is advised to also consult the regression equation and its applicable rental rate in the previous issue of RR, and to consider using a twoquarter average capitalization rate (unsurveyed) if necessary. Industrial-property equation This national equation expresses the relationship between the capitalization rates and gross market rental rates of prime stand-alone non-leasebacks, secondary stand-alone industrial buildings, and industrial parks. The gross market rental rates are those applicable to 1000 m2 units. The source of
the data is this issue of Rodes Report. The industrial-regression equation, which is based on 26 observations, includes all primary and secondary industrial cities. The updated equation is: industrial capitalization rate % = 13,792 (0,081*gross rental) where: gross rental = the gross market rental per rentable m2 per month as in quarter 2011:3 for stand-alone prime nonleaseback or prime industrial parks or stand-alone secondary industrial space of 1000 m2, located in primary and secondary industrial cities. The correlation coefficient r = -0,76. The standard error (SE) is 0,44 and n = 26. It is not advisable to use this function for gross market rental rates that fall much outside the range of R22/m/month to R38/m/month. Also, remember to use the rental rate applicable to an area of 1.000 m. Example: If the gross industrial rental for a 1000 m building, located in a primary or secondary industrial city, is R20 per rentable m2 per month, then the capitalization rate is: industrial cap rate % = 13,792 (0,081*20) = 11,6% .
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Rodes Report 2011:4
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Listed property
Chapter 4: Listed property
A double whammy for listed property prices

Written by John S. Lottering The current cooling in the growth of income streams and the weakening (albeit marginally) of income yields, are resulting in a double whammy for listed property prices. The graph which follows shows how the yearly growth of income streams has cooled since the beginning of 2011. After reaching a yearly growth rate of 9% in January 2011, growth has now decelerated to 3% in November 2011.
Growth in income streams: PLS
smoothed
growth outlook must be vacancy rates that are stubbornly refusing to drop. The implications of this are that tenants still have bargaining power and, of course, the possibility of continued moderate growth in market rentals. Global unease over the worsening European sovereign debt crisis leading to a reversal in sentiment towards emerging markets combined with rising domestic inflation expectations due mainly to galloping food prices and rand weakness has in recent months resulted in some upward pressure on long-bond yields. Concomitantly, this has also led to a derating of listed property. As seen in the shaded area of the graph, the net income yields on property loan stocks have weakened (increased) from about 7,1% in August 2011 to about 7,6% in November 2011.
Long-bond yields vs PLS yields
30
20 % growth (y-o-y)
10
-10
11
-20 04 05 06 07 08 09 10 11
Source of data: JSE
10 9 Yields (%) 8 7 6 5 05 06 07 08 09 10
Bonds PLSs
The most important driver of the growth in income streams remains contractual rentals that are escalating at between 8% and 10%. Market rentals have, however, underperformed relative to contractual rentals over the past three years or so. This means the likelihood of negative rental reversions on leases that are now coming up for renewal. Another damper on the income-
11
Source of data: Rode's Time Series; Bond Exchange of SA
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Listed property
% growth (y-o-y)
In the meantime, the composite leading business-cycle indicator1 is losing some of its oomph. In September 2011, the leading index fell for the third month in a row. This was in sync with the poor performance of the composite leading business-cycle indicators of South Africa's major trading partners. Should this trend continue, the result could be more upward pressure on listedproperty yields. This is so given the robust inverse relationship (r = -0,8) between the SA leading business indicator and the markets rating of listed property (see corresponding graph).
PLS net income yields vs S.A. composite leading business cycle indicator
r = -0,8
growth in listed-property prices has lost so much of its vigour. As the graph shows, after reaching a yearly growth rate of about 12% in June 2011, price growth has since then lost pace to such an extent that no growth was recorded in November 2011 (y-on-y).
Growth in PLS prices
80 60 40 20 0 -20
120 110 Business cycle indicator (2000 = 100) 100
smoothed
PLS yields (%)
25 90 20 80 15 10 5 92
-40 03 04 05 06 07 08 09 10 11
Source of data: JSE
PLS yields Business cycle 94 96 98 00 02 04 06 08 10
Source of data: JSE; SARB
Table 4.1 shows the performance of the individual property unit trusts (PUTs) and property loan stocks (PLSs) for different periods to the end of September 2011 (ex Catalyst Fund Managers).
Putting both sides of the price coin together that is, income streams and net income yields it becomes clear why the
This concludes our chapter on listed property.
1 Published by the Reserve Bank, the index is used to predict the direction of the economy's movements in the months to come. In the case of South Africa, the leading economic indicator provides a guideline for economic growth for at least six months ahead.
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Listed property
Table 4.1 Total return on property unit trusts and property loan stocks September 2011
Individual stock performance Total return PUT Index PLS Index SA Listed Property Index (SAPY) CAPITAL PROPERTY VUKILE ACUCAP RESILIENT SA CORPORATE PANPROP HYPROP PREMIUM GROWTHPOINT REDEFINE FOUNTAINHEAD EMIRA SYCOM OCTODEC HOSPITALITY-A HOSPITALITY-B FORTRESS-A FORTRESS-B INVESTEC PROPERTY FUND REBOSIS VUNANI DIPULA-A DIPULA-B VIVIDEND
*Cumulative growth over period Source: Catalyst Fund Managers
3 year* 72,3% 66,9% 68,4% 107,3% 100,6% 93,4% 89,4% 86,5% 77,2% 69,0% 67,7% 66,6% 63,8% 59,7% 54,5% 48,2% 45,1% 43,1% -66,0% -
1 year* 8,8% 8,0% 8,3% 11,5% 11,1% 17,1% 11,8% 15,1% -1,2% 8,1% -6,2% 11,5% 5,1% 8,2% -2,1% 5,6% -2,5% 0,5% -47,6% 14,7% 100,7% 8,4% -4,7% 2,0% -0,8% -8,9% -8,9%
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Office rentals
Chapter 5: Office rentals
Real office rentals stutter

Written by Anneke Meijers Moderating economic activity and floundering business confidence, and its debilitating effect on office demand and vacancies, do not augur well for office rentals. In fact, in the third quarter of 2011, market rentals could on a national basis only show modest growth of 4%. This comes after having achieved an unsustainable growth of about 11% in the first quarter. Meanwhile, building-cost inflation (the cost to construct, as measured by the BER Building Cost Index) is growing at about 6%. This implies that, in real terms, office rentals have actually contracted. Thus, we see the business-cycle slowdown is already a strong depressing force on the upswing phase of the long office cycle. The national office picture could, however, hide differences within regions and nodes. Therefore, the remaining part of this chapter will aim to highlight such disparities.
R/m (log scale)
Nominal decentralized grade-A office rentals
120 100 80 60
Smoothed
40 Pretoria Johannesburg Durban Cape Town 20 94 96 98 00 02 04 06 08 10
In these two CBDs, vacancies continued to climb in the reporting quarter. Thus, for now, no magic with respect to rental growth should be expected from these CBDs. In contrast, impressive growth in nominal rentals was observed in the Pretoria (14%) and Cape Town (12%) CBDs. Pretoria CBD is an interesting phenomenon, what with its return to respectability since 2007; naturally on the back of state support in the form of a dominant tenant. The accompanying graph shows that Pretoria is catching up with Durban, and it has been narrowing the gap with Cape Town.
Nominal CBD grade-A office rentals
Regional performance
At the regional level, the strongest growth (+5%) was recorded in Johannesburg decentralized. This was followed by Pretoria and Cape Town decentralized where rentals were, on average, up by 3%. Durban suburbs are the only region where not even modest growth was achieved, with nominal rentals that were actually slightly lower (1%) than a year ago. Turning to the city centres, nominal rentals in all of the major CBDs are climbing, albeit in some cases at a pedestrian pace. For the first time since the end of 2009, rentals in the Johannesburg CBD (+1%) showed growth, while in the CBD of Durban, growth of 2% was recorded.
100 80 Johannesburg Pretoria Durban Cape Town
R/m (log scale)
60
40
Smoothed 20 94 96 98 00 02 04 06 08 10
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Office rentals
Real CBD grade-A office rentals 2005 rands
Nominal Johannesburg decentralized grade-A office rentals
140 120 100 R/m (log scale) 80 60
90 80 2005 R/m (log scale) 70 60 50 Johannesburg Pretoria Durban Cape Town

Deflated by BER BCI (2005=100)
Smoothed
40 Randburg Ferndale Bryanston Illovo Sandton CBD 20
40
30
Smoothed 06 08 10
94
96
98
00
02
04
06
08
10
94
96
98
00
02
04
Source of data: Rode's Time Series; BER
Nodal performance
On a more micro scale, we shall now consider individual office nodes by region. Johannesburg decentralized
Nominal Johannesburg decentralized grade-A office rentals
In Sandton CBD (+8%), Bryanston (+9%) and Rivonia (+7%) market rentals were able to show fairly impressive growth. Nonetheless, the general picture in Johannesburg decentralized is that of a cooling in rental growth. This can be explained by the fact that vacancies are still stubbornly refusing to drop. The easy explanation for this is that users of office space are in no mood to hire new staff and to expand their space given the uncertainty out there.
Real Johannesburg decentralized grade-A office rentals 2005 rands
140 120 100 R/m (log scale) 80 60

Smoothed
160 140 120 2005 R/m (log scale) 100 80
Smoothed
40 Parktown Rosebank Rivonia Sandton CBD 20 94 96 98 00 02 04 06 08 10
60
Parktown Rosebank Rivonia Sandton CBD 94 96 98 00 02 04 06 08 10
40
Noteworthy in the accompanying two graphs is: The outperformance of the Sandton CBD (in spite of a still-substantial oversupply of nearly 9% see the vacancy table in Chapter 6), and The continuing underperformance of Randburg. Randburg seems to confirm our hypothesis that peripheral areas (including countries!) and secondary properties tend to do relatively worse during tough times. We observe this in the national vacancies by grade at the end of Table 6.1.
Real Johannesburg decentralized grade-A office rentals 2005 rands
160 140 120 2005 R/m (log scale) 100 80
Smoothed
60 Randburg Ferndale Bryanston Illovo Sandton CBD 94 96 98 00 02 04 06 08 10
40
Rodes Report 2011:4 Pretoria decentralized Shifting our view towards Pretoria decentralized, we note shrinking market rentals in some of the top nodes, for example Centurion (-8%), Brooklyn/Waterkloof (-9%) and Hatfield (-2%). Weak demand, as illustrated by rising vacancy rates in these nodes, explains the poor rental performance. In Menlyn (+4%), a less dismal rental performance is observed, albeit still below inflation.
Nominal Pretoria decentralized grade-A office rentals
23
Office rentals Good growth in rentals was also recorded in Westlake (+8%), while in contrast rentals in Claremont (-1%) and Century City (3%) shrank. Here the contractions in rentals are explained by still-high grade-A vacancy rates in Claremont and Century City. The good news is that vacancy rates have been showing steady declines over the past two years, with the trend continuing in the reporting quarter (see Chapter 6).
Nominal Cape Town decentralized grade-A office rentals
140 120 100 R/m (log scale) 80 60 Tyger Valley Claremont Century City Westlake
140 120 100 80 R/m (log scale) 60 Smoothed
40
40
Smoothed
20 94 96 98 00 02
Centurion Brooklyn/Waterkloof Hatfield Menlyn 04 06 08 10
20
94
96
98
00
02
04
06
08
10
Real Pretoria decentralized grade-A office rentals 2005 rands
Real Cape Town decentralized grade-A office rentals 2005 rands
140 120 Smoothed Tyger Valley Claremont Century City Westlake
110
2005 R/m (log scale)
90 80 70
2005 R/m (log scale)
100
100
80
60
60 Smoothed 94 96 98 00 02
50
Centurion Brooklyn/Waterkloof Hatfield Menlyn 04 06 08 10
40
94
96
98
00
02
04
06
08
10
Durban decentralized Rentals in Durban decentralized exhibit mild contractions in real terms as well. The premier office node of La Lucia Ridge could only muster growth of 3%. This was followed by Westway (+2%) and Berea (3%). Of course, the poor performance of rentals is in line with the increases in vacancy rates in Durban decentralized.
Cape Town decentralized Rentals in Tyger Valley (+14%) are making a comeback. This improvement can be explained by grade-A vacancy rates that have dropped to single-digit levels for the first time in a number of quarters. However, considering the volume of new space that is going up in this node, one doubts the sustainability of this spurt.
Rodes Report 2011:4
24 Pioneer rentals
Office rentals
Nominal Durban decentralized grade-A office rentals
140 120 100 R/m (log scale) 80 60 Berea La Lucia Ridge Westway
40
The difference between pioneer rentals and grade-A market rentals could be a rough indication of prospects for market-rental growth (see Table 5.1). However, they can also just be outliers in market rentals achieved. Our analysis of building-construction costs is that contractors have stopped cutting the fat out of their tenders because they are now right on the bone theres no more fat left. Thus, from here onwards, changes in prices will more accurately reflect input costs (mainly labour and building materials). Therefore, rentals on new custombuilt buildings might soon start reflecting this reality (the pioneer rentals in Table 5.1). But dont expect this to feed through to existing grade-A buildings any time soon. For such a miracle, we require the economy to accelerate This concludes our section on office rentals. The office-rental tables follow.
06 08 10
Smoothed 20 94 96 98 00 02 04 06 08 10
Real Durban decentralized grade-A office rentals 2005 rands
110 100 2005 R/m (log scale) 90 80 70 Berea La Lucia Ridge Westway
Smoothed
60
50
94
96
98
00
02
04
Recap: nominal versus real rentals The term nominal refers to money rentals, whereas the term real refers to nominal less inflation. Rode mostly deflates nominal rentals with the Bureau for Economic Researchs Building Cost Index (BER BCI) to arrive at real rentals. The rationale for using building costs as deflator is the substitution principle and because building costs can serve as a proxy for the replacement costs. To illustrate, why would you buy a property at R110 when you can have it built (replaced) for R100? When rentals are low relative to replacement costs, the upside potential for rentals is great and vice versa. Thus, high real rentals (relative to previous periods) may be an indication of a market that is vulnerable to a downswing, and low real rentals indicate great upside potential. Pioneer refers to the highest rental actually achieved and could be a once-off outlier deal; hence pioneer is not market. The difference between pioneer and the highest market rentals may be used as a blunt tool to gauge the prospects for market rental growth in the short term. Grateful thanks to our expert panellists for the information they supply. Codes of the brokers and landlords who contributed to this quarter's survey appear in the table on p. 26. An explanation of the codes can be found on p. xvi.
Rodes Report 2011:4
25
Office rentals
Table 5.1 Pioneer office rentals

Highest gross nominal market rental rate achieved Rands per rentable m, gross leases (excl VAT) During quarter 2011:3 Pioneer Johannesburg dec. Pretoria dec. Durban dec. Bloemfontein dec. Port Elizabeth dec Cape Town CBD Cape Town dec. 172,50 136,67 122,50 120,00 138,33 126,67 Normal Grade A 104,13 112,00 112,50 85,00 98,75 90,42 Difference % 66 22 9 41 40 40
Rodes Report 2011:4
26 Table 5.2 Market rental rates for office buildings

Grade A+ Grade A Grade B Grade C mean mean mean
64,67 76,00 132,50 111,80 111,25 78,00 96,58 108,20 114,33 118,80 114,67 88,38 81,00 99,75 87,62 106,60 93,38 109,60 105,75 103,75 180,00 115,00 80,00 78,50 91,75 92,00 55,80 55,25 100,75 92,33 99,60 75,33 84,42 88,00 96,50 100,25 106,00 77,50 78,50 90,67 75,38 90,00 86,25 90,17 88,75 91,33 92,20 58,00 76,00 77,00 80,67 51,67 24,00 83,00 87,33 87,75 50,00 74,30 79,50 85,00 85,00 85,00 70,80 63,00 79,67 68,67 82,00 76,75 83,00 75,75 85,00 81,00 57,00 71,00 66,00 68,67
Office rentals
Quarter 2011:3 Rands per rentable m, gross leases (excl VAT)

Broker contributor codes
AR, AR, AR, AR, AR, AR, AR, AR, AR, AR, AR, AR, AR, AR, AR, AR, AR, AR, AR, AR, AR, AR, AR, AR, AR, AR, AI, AI, AI, AI, AI, AI, AI, AI, AI, AI, AI, AI, AI, AI, AI, AI BM, GB, PC, QU BM, GB, PC, QU AW, BM, GB, PC, QU AW, BM, GB, KM, PC BM, GB, PC, QU BM, PC, QU BC, BM, GB, PC, QU AW, BM, GB, PC, QU AW, BM, GB, PC, QU BM, GB, PC, QU BM, KM, PC BM, DT, GB, PC, QU BM, KM, PC MR, PC, QU MR, PC, QU AW, BM, GM, PC BM, GB, PC, QU BM, GB, KM, PC, QU BM, GB, QU BM, GB, PC, QU GB, PC BM, GB, KM, PC, QU BM, PA GB, PC BM, GB, PC, QU BM, PC EV EV EV EV EV EV EV EV EV EV EV EV EV EV EV Johannesburg CBD Braamfontein Sandton CBD Dunkeld West Wierda Valley Randburg Ferndale Rivonia Rosebank Illovo Illovo Boulevard Chiselhurston Parktown Richmond/Milpark Bedfordview Bruma Meadowbrook Woodmead Sunninghill Bryanston/Epsom Fourways Houghton Melrose Arch Hydepark Eastgate/Kramerville Ormonde Midrand Hendrik Potgieter Corridor Germiston Pretoria CBD Lynnwood Glen Lynnwood Lynnwood Manor Lynnwood Ridge Faerie Glen Val de Grace Menlyn Menlo Park (Brooks St.) Brooklyn/Waterkloof Nieuw Muckleneuk Hatfield Centurion Highveld Technopark Sunnyside Arcadia Murrayfield Nelspruit Polokwane Bloemfontein CBD Westdene 95,00 159,75 127,00 133,38 85,50 118,33 134,38 133,33 135,00 118,00 97,80 109,50 97,12 116,40 108,50 121,75 133,33 116,67 188,00 123,38 89,00 104,00 117,50
For definitions, see Glossary of terms and abbreviations in Annexure 1 or visit www.rode.co.za.
105,00 110,00 100,00 137,50 116,00 115,00 135,00 125,00 130,00 115,00 107,50 122,50 110,00 100,00 100,00 160,00 125,00 117,50
87,50 105,00 89,50 110,00 115,00 104,50 116,00 120,00 112,50 120,50 110,00 97,50 102,50 95,00 87,50 85,00 125,00 115,00 112,50
75,00 87,50 80,00 85,00 86,50 85,00 95,00 102,50 91,50 85,00 89,00 90,00 85,00 80,00 80,00 75,00 87,50 75,00 75,00
62,50 70,00 67,50 60,00 65,00 60,00 75,00 70,00 75,00 70,00 60,00 60,00 60,00 55,00 62,50 55,00 75,80 52,50 57,50
ES CC, EK CC, EK
Rodes Report 2011:4
27 Table 5.2(continued) Market rental rates for office buildings

Grade A+ Grade A Grade B Grade C mean mean mean
85,00 110,00 95,00 120,00 125,00 110,00 60,00 55,00 90,00 85,00 105,00 105,00 92,50 50,00 80,00 50,00 62,50 62,50 65,00 65,00 67,50 72,50 70,00 57,00 62,50 57,50 63,33 78,33 73,75 67,50 78,33 69,00 69,00 71,67 70,00 85,00 70,00 85,00 30,00 72,00 40,00 85,00 55,00 100,00
Office rentals
Quarter 2011:3 Rands per rentable m, gross leases (excl VAT)

Broker contributor codes
MW MW MW ACU, MW MW ACU, MW LS Durban CBD Durban Berea Essex Terrace Westway La Lucia Ridge Westville Pinetown Hillcrest-Kloof (Upper Highway) Empangeni Richards Bay P/Maritzburg CBD Pmb peripheral CBD* Pmb decentralized Port Elizabeth CBD Greenacres : Parks Greenacres: Single Walmer Park 1, 2 & 3 South End Humewood Cape Road East London East London dec. Cape Town CBD Sea Point V&A Portswood Ridge Granger Bay Salt River Woodstock Observatory Mowbray Kenilworth (Racecourse) Rondebosch/Newlands Wynberg Westlake Tokai Claremont Lower** Claremont Upper Pinelands Century City Maitland Goodwood (N1 City) Tygerberg Hills Bellville CBD Tyger Valley area Durbanville Airport Kuils River George Windhoek 125,00 40,00 75,00 75,00 77,50 40,00 60,00 35,00 45,00 57,50 55,00 40,00 45,00 50,00 52,50 69,00 65,00 47,50 65,00 62,50 62,50 47,50 75,00 75,00 67,50 70,00 50,00 75,00
* Defined as bounded by Pietermaritz, Berg, Loop, Burger, between Chapel and Commercial. ** Claremont Lower: east of Main Road For definitions, see Glossary of terms and abbreviations in Annexure 1 or visit www.rode.co.za.
120,00 127,00 115,00 125,00 125,00 100,00 142,50 145,00 95,00 87,50 85,00 92,50 109,33 100,00 111,67 110,00 100,00 113,33 130,00 120,00 55,00 101,67 85,00 120,00 65,00 180,00
100,00 80,00 90,00 75,00 85,00 95,00 98,33 95,00 115,00 105,00 90,00 80,00 75,00 80,00 91,67 93,75 80,00 93,75 80,00 80,00 93,33 90,00 99,33 80,00 95,00 40,00 94,00 60,00 100,00 60,00 150,00
FO
MJ MJ MJ MJ MJ MJ MJ AN, AN, AN, AN, BR, AN, AN, BR, BR, AN, AN, AN, AN, AN, AN, BR, AN, BR BR BR BR, AN, BR, AN, BR ZB TE BR, QS, BR, QS BR, QS BR, QS QS BR, QS BR, QS GB, QS, GB, QS, BR, GB, BR, GB, BR, GB, BR, GB, QS, WA BR, GB, GB, QS, QS, ZZ ZZ
WA WA QS, WA QS, WA QS, WA WA QS, WA WA
DN BR, DN, PN, QS DN QS
Rodes Report 2011:4
28
Office rentals
Table 5.3 Standard deviation of market rental rates for office buildings
Quarter 2011:3
Grade A+
Johannesburg CBD Braamfontein Sandton CBD Dunkeld West Wierda Valley Randburg Ferndale Rivonia Rosebank Illovo Illovo Boulevard Chiselhurston Parktown Richmond/Milpark Bedfordview Bruma Meadowbrook Woodmead Sunninghill Bryanston / Epsom Downs Fourways Houghton Melrose Arch Hydepark Eastgate/Kramerville Ormonde Midrand Hendrik Potgieter Corridor Germiston Pretoria CBD Lynnwood Glen Lynnwood Lynnwood Manor Lynnwood Ridge Faerie Glen Val de Grace Menlyn Menlo Park (Brooks St.) Brooklyn/Waterkloof Nieuw Muckleneuk Hatfield Centurion Highveld Technopark Sunnyside Arcadia Murrayfield Nelspruit CBD Polokwane
Grade A
Grade B
Grade C
R20,50 R4,69 R1,71 R5,50 R6,24 R14,40 R7,09 R4,12 R7,00 R3,92 R7,12 R3,13 R9,48 R5,17 R6,65 R2,36 R2,36 R6,68 R1,71 R7,11 R7,50 R17,50 R4,00 R0,00 R10,00 R2,50 R22,50 -
R2,87 R3,74 R11,32 R8,42 R8,93 R4,97 R5,72 R7,55 R8,78 R5,08 R8,58 R3,42 R4,00 R6,80 R3,07 R8,50 R3,42 R7,66 R8,17 R8,17 R6,12 R3,50 R4,92 R9,90 R12,50 R10,00 R0,50 R4,50 R4,0 R2,50 R5,50 R10,00 R2,50 R12,50 R2,50 -
R9,41 R10,38 R3,77 R2,69 R8,87 R4,50 R4,99 R7,48 R6,16 R3,56 R4,53 R3,28 R6,84 R3,30 R2,33 R8,46 R4,15 R5,64 R4,15 R4,15 R6,43 R3,00 R5,87 R3,30 R10,00 R2,50 R3,50 R5,00 R7,50 R1,50 R9,00 R5,00 R10,00 -
R2,36 R1,00 R2,00 R6,13 R5,26 R5,38 R0,50 R8,45 R2,83 R7,32 R2,62 R3,08 R2,05 R2,83 R6,26 R6,26 R6,98 R3,00 R3,94 R2,62 R2,50 2,50 R10,00 R2,50 -
For definitions, see Glossary of terms and abbreviations in Annexure 1 or visit www.rode.co.za.
Rodes Report 2011:4
29
Office rentals
Table 5.3 (continued) Standard deviation of market rental rates for office buildings
Quarter 2011:3 R7,50 Grade A+
Bloemfontein CBD Westdene Durban CBD Durban Berea Essex Terrace Westway La Lucia Ridge Westville Pinetown Hillcrest-Kloof (Upper Highway) Empangeni Richards Bay P/Maritzburg CBD Pietermaritzburg periphery* Pietermaritzburg decentralized Port Elizabeth CBD Greenacres : Parks Greenacres: Single Walmer Park 1, 2 & 3 South End Humewood East London CBD East London decentralized Cape Town CBD Sea Point V&A Portswood Ridge Granger Bay Salt River Woodstock Observatory Mowbray Kenilworth (Racecourse) Rondebosch/Newlands Wynberg Westlake Tokai Claremont Lower** Claremont Upper Century City Tygerberg Hills Bellville CBD Tyger Valley area George Windhoek
Grade A
Grade B
Grade C
R2,50 R0,00 -
R10,00 R10,00 R0,00 R2,50 -
R12,50 R7,50 R2,50 -
* Defined as bounded by Pietermaritz, Berg, Loop, Burger, between Chapel and Commercial. ** Claremont Lower: east of Main Road For definitions, see Glossary of terms and abbreviations in Annexure 1 or visit www.rode.co.za.
R5,00 R7,50 R0,00 R7,50 R10,00 R2,50 R8,99 R8,50 R9,43 R0,00 R6,24 -
R2,36 R15,00 R5,00 R0,00 R5,00 R8,16 R4,71 R7,40 R7,40 R4,08 R6,24 R2,36 R8,22 R5,00 R5,05 -
R2,50 R7,50 R2,50 R4,71 R2,36 R2,17 R2,50 R2,36 R2,94 R2,50 R2,36 R0,00 R8,03 -
R7,50 R5,00 R2,50 R1,00 R7,07 R7,50 R2,50 R2,50 R2,50 R2,50 -
Rodes Report 2011:4
30
Office rentals0
Table 5.4: Market parking rentals

Monthly parking Rands per bay per month (excl. VAT) As in quarter 2011:3 Covered reserved parking Gr A+
Johannesburg CBD Braamfontein Sandton CBD Dunkeld West Wierda Valley Randburg Ferndale Rivonia Rosebank Illovo Illovo Boulevard Chislehurston Parktown Richmond/Milpark Bedfordview Bruma Meadowbrook Woodmead Sunninghill Bryanston / Epsom Downs Fourways Houghton Melrose Arch Hyde Park Eastgate/Kramerville Ormonde Midrand Hendrik Potgieter Corridor Germiston Pretoria CBD Lynnwood Glen Lynnwood Lynnwood Manor Lynnwood Ridge Faerie Glen Val de Grace Menlyn Menlo Park (Brooks St.) Brooklyn/Waterkloof Nieuw Muckleneuk Hatfield Centurion Highveld Technopark Sunnyside Arcadia Murrayfield Nelspruit Polokwane Bloemfontein CBD Westdene Durban CBD Durban Berea 786 563 631 511 500 651 600 647 556 495 647 556 495 523 527 514 496 397 897 543 475 499 465 500 550 400 445 580 450 525 500 550 415 410 380 380 320 390 350 -
Gr A
650 647 498 550 397 450 550 547 555 500 489 555 500 489 494 495 473 460 366 480 477 442 437 431 500 500 450 400 350 515 400 450 500 525 375 375 300 300 250 370 325 350 700 525
Gr B
536 499 508 472 498 316 396 498 433 488 493 447 488 493 447 416 404 397 381 313 401 389 393 344 379 480 450 400 400 300 500 400 400 450 450 350 300 250 250 200 290 262 275 575 500
Gr C
377 430 457 428 390 286 348 390 407 450 417 450 417 340 356 334 313 225 344 374 280 355 450 400 400 375 300 500 400 400 450 400 300 250 200 200 160 250 200 225 450
Under shade net

300 337 380 327 361 281 336 361 361 380 304 358 380 304 358 330 308 335 338 397 336 288 311 294 316 340 400 425 321 287 415 350 412 300 300 312 287 190 190 130 220 112 125 -
Openair parking
250 266 285 223 266 238 260 266 326 306 236 300 306 236 300 254 258 250 248 343 253 191 242 216
269 280 425 345 300 210 365 300 287 300 340 234 265 100 100 100 180 100 100 -
Rodes Report 2011:4
31
Office rentals
Monthly parking Rands per bay per month (excl. VAT) As in quarter 2011:3 Covered reserved parking Gr A+
Essex Terrace Westway La Lucia Ridge Westville Pinetown Hillcrest-Kloof (Upper Highway) Empangeni Richards Bay P/maritzburg CBD Pmb peripheral CBD* Pmb decentralized Port Elizabeth CBD Greenacres : Parks Greenacres: Single Walmer Park 1, 2 & 3 South End Humewood Cape Road East London East London dec. Cape Town CBD Sea Point V&A Portswood Ridge Granger Bay Salt River Woodstock Observatory Mowbray Kenilworth (Racecourse) Rondebosch/Newlands Wynberg Westlake Tokai Claremont Lower** Claremont Upper Hout Bay Pinelands Milnerton Table View / Parklands Goodwood (N1 City) Century City Tygerberg Hills Bellville CBD Tyger Valley area Somerset West Mall Area George Windhoek 612 650 500 400 1.200 1.350 1.200 750 750 760 700 850 500 625 600 1.100 850 650 775 650 600 625 200 800
Table 5.4 (continued) Market parking rentals
Gr A
474 587 600 500 380 300 350 350 300 200 400 1.000 1.250 1.000 800 750 700 730 575 825 533 575 1.000 850 700 700 300 467 200 800
Gr B
474 550 550 462 300 250 783 1.200 750 400 700 450 550 575 550 550 492 600
Gr C
450 250 500 600 300 550
Under shade net

350 275 150 250 500 450 350 375 500 350 450 550 120 260 500
Openair parking
325 375 375 312 200 250 250 250 150 250 550 350 500 325 350 500 325 65 233 100 450
* Defined as bounded by Pietermaritz, Berg, Loop, Burger, between Chapel and Commercial. ** Claremont Lower: east of Main Road
Rodes Report 2011:4
32
Office rentals
Table 5.5 Office rental escalation rates on new leases (%)

Average escalation rate on net rentals for quarter 2011:3
Mean 9,0 9,0 9,2 9,2 9,2 8,8 8,8 9,1 9,2 9,2 9,5 9,2 9,0 9,2 9,2 10,0 9,2 9,2 9,3 9,8 9,8 10,0 9,2 9,0 9,0 9,0 10,0 10,0 10,0 10,0 9,0 10,0 12,0 10,0 10,0 10,0 10,0 9,0 10,0 10,0 10,0 8,0 8,5 8,0 9,5 8,5 Durban Berea Essex Terrace Westway La Lucia Ridge Westville Pinetown Hillcrest-Kloof (Upper Highway) Empangeni Richards Bay P/maritzburg CBD Pmb peripheral CBD* Pmb decentralized Port Elizabeth Port Elizabeth dec. East London East London dec. Cape Town CBD Sea Point V&A Portswood Ridge Granger Bay Woodstock Observatory Mowbray Kenilworth (Racecourse) Westlake Tokai Claremont Lower** Claremont Upper Hout Bay Noordhoek (Sun Valley) Pinelands Milnerton Panorama Rondebosch/Newlands Wynberg Table View / Parklands Century City Maitland Goodwood (N1 City) Tygerberg Hills Bellville CBD Tyger Valley area Durbanville Airport Kuils River George Windhoek Johannesburg CBD Braamfontein Sandton CBD Dunkeld West Wierda Valley Randburg Ferndale Rivonia Rosebank Illovo Illovo Boulevard Chislehurston Parktown Richmond/Milpark Bedfordview Bruma Meadowbrook Woodmead Sunninghill Bryanston / Epsom Downs Fourways Houghton Melrose Arch Hyde Park Eastgate/Kramerville Ormonde Midrand Pretoria CBD Lynnwood Glen Lynnwood Lynnwood Manor Lynnwood Ridge Faerie Glen Val de Grace Menlyn Menlo Park (Brooks St.) Brooklyn/Waterkloof Nieuw Muckleneuk Hatfield Centurion Highveld Technopark Sunnyside Arcadia Murrayfield Polokwane Bloemfontein CBD Westdene Durban CBD Mean 8,5 8,5 8,3 8,5 8,3 8,5 8,5 10,0 9,0 8,5 9,0 9,0 8,5 8,0 8,0 8,5 8,8 8,3 8,5 8,5 8,8 8,5 9,0 9,0 8,5 9,2 8,5 9,0 10,0
* Defined as bounded by Pietermaritz, Berg, Loop, Burger, between Chapel and Commercial.
** Claremont Lower: east of Main Road
Rodes Report 2011:4
33
Office rentals
As reported by brokers R/rentable m per month: quarter 2011:3 Mean SD Johannesburg decentralized nodes: Sandton 22,25 2,55 Dunkeld West 19,50 2,69 Wierda Valley 21,25 1,64 Randburg Ferndale 18,50 1,08 Rivonia 19,83 0,69 Rosebank 26,00 5,69 Illovo 24,40 3,61 Illovo Boulevard 26,50 2,06 Chiselhurston 27,88 2,08 Parktown 21,05 5,07 Richmond/Milpark 20,33 3,40 Bedfordview 16,88 4,13 Bruma 16,75 4,09 Meadowbrook Woodmead 22,40 2,24 Sunninghill 19,90 1,43 Bryanston/Epsom 21,00 3,70 Fourways 19,00 2,35 Houghton 21,00 5,34 Melrose Arch 31,50 3,50 Hydepark 22,80 2,04 Eastgate/Kramerville 18,00 2,16 Ormonde 19,00 Midrand 19,75 3,34 Hendrik Potgieter Corridor 21,00 0,83 Pretoria decentralized nodes: Lynnwood Glen 15,00 Lynnwood 10,00 Lynnwood Manor 20,00 Lynnwood Ridge 15,00 Faerie Glen 10,00 Val de Grace Menlyn 35,00 Menlo Park (Brooks St.) 15,00 Brooklyn/Waterkloof 10,00 Nieuw Muckleneuk 10,00 Hatfield 10,00 Centurion 8,00 Highveld Technopark 10,00 Sunnyside 10,00 Arcadia 12,00 Murrayfield 8,00 SD and n: See Glossary of terms and abbreviations in Annexure 1.
Table 5.6 Typical gross outgoings for prime office buildings

n
6 4 4 3 6 5 5 4 4 5 3 4 4 5 5 6 4 4 2 5 3 1 4 3 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
Rodes Report 2011:4
34
Office rentals
Table 5.6 (continued) Typical gross outgoings for prime office buildings
As reported by brokers R/rentable m per month: quarter 2011:3 Mean SD 15,50 20,0 20,0 28,0 29,0 30,0 32,0 29,0 27,0 10,0 11,5 10,5 10,0 10,0 10,0 10,0 10,0 n 1 1 1 1 1 2 1 2 1 1 1 1 1 1 1 1 1 -
Germiston Benoni CBD Benoni dec Boksburg CBD Boksburg North Boksburg (East Rand Mall area) Klerksdorp Vereeniging Vanderbijlpark Nelspruit Polokwane Bloemfontein CBD Westdene Durban decentralized nodes: Durban Berea Essex Terrace Westway La Lucia Ridge Westville Pinetown Hillcrest-Kloof (Upper Highway) Empangeni Richards Bay Pietermaritzburg CBD Pietermaritzburg peripheral CBD Pietermaritzburg decentralized
Port Elizabeth CBD Greenacres : Parks Greenacres: Single Walmer Park 1, 2 & 3 South End Humewood Cape Road
0,00 1,00 -
East London CBD East London decentralized

SD and n: See Glossary of terms and abbreviations in Annexure 1.
Rodes Report 2011:4
35
Office rentals
Table 5.6 (continued) Typical gross outgoings for prime office buildings
As reported by brokers R/rentable m per month: quarter 2011:3 Mean SD 20,0 15,0 15,0 18,0 17,0 24,0 15,0 22,50 12,0 10,0 14,5 5,0 n 1 1 1 1 1 2 1 2 1 1 2 1
Cape Town CBD Sea Point V&A Portswood Ridge Granger Bay Salt River Woodstock Observatory Mowbray Kenilworth (Racecourse) Westlake Tokai Claremont Lower Claremont Upper Hout Bay Noordhoek (Sun Valley) Pinelands Athlone Milnerton Panorama Rondebosch/Newlands Wynberg Table View / Parklands Century City Maitland Goodwood (N1 City) Tygerberg Hills Bellville CBD Tyger Valley area Durbanville Mitchell's Plain Airport Kuils River George Windhoek
1,0 0,5 0,5 -
SD and n: See Glossary of terms and abbreviations in Annexure 1.
Rodes Report 2011:4
36 Table 5.7 Escalation rates on operating costs

2011:3 9,0 9,0 9,8 9,0 9,0 9,0 8,8 8,9 9,0 9,0 9,5 10,5 9,5 9,8 9,8 9,2 9,7 9,7 9,7 10,0 10,0 9,5 9,5 10,0 9,7 10,4 12,0 10,0 10,0 12,0 11,0 10,0 12,0 10,0 11,0 10,0 9,0 10,0 10,0 10,0 10,0 Node
Office rentals
Johannesburg CBD Braamfontein Sandton CBD Dunkeld West Wierda Valley Randburg Ferndale Rivonia Rosebank Illovo Illovo Boulevard Chislehurston Parktown Richmond/Milpark Bedfordview Bruma Meadowbrook Woodmead Sunninghill Bryanston / Epsom Downs Fourways Houghton Melrose Arch Hyde Park Eastgate/Kramerville Ormonde Midrand Germiston Benoni CBD Benoni dec Boksburg CBD Boksburg North Boksburg (Mall area) Pretoria CBD Lynnwood Glen Lynnwood Lynnwood Manor Lynnwood Ridge Faerie Glen Val de Grace Menlyn Menlo Park (Brooks St,) Brooklyn/Waterkloof Nieuw Muckleneuk Hatfield Centurion Highveld Technopark Sunnyside Arcadia Murrayfield Klerksdorp Vereeniging Vanderbijlpark Nelspruit
Node
Polokwane Bloemfontein CBD Westdene Durban CBD Durban Berea Essex Terrace Westway La Lucia Ridge Westville Pinetown Hillcrest-Kloof (Upper Highway) Empangeni Richards Bay Pietermaritzburg CBD Peripheral CBD* Decentralised Port Elizabeth Port Elizabeth dec, East London East London dec, Cape Town CBD Sea Point V&A Portswood Ridge Granger Bay Salt River Woodstock Observatory Mowbray Kenilworth (Racecourse) Westlake Tokai Claremont Lower** Claremont Upper Hout Bay Noordhoek (Sun Valley) Pinelands Athlone Milnerton Panorama Rondebosch/Newlands Wynberg Table View / Parklands Century City Maitland Goodwood (N1 City) Tygerberg Hills Bellville CBD Tyger Valley area Durbanville Airport Kuils River George Windhoek
2011:3 8,5 12,0 12,0 10,0 10,0 10,0 9,5 10,0 9,5 10,0 10,0 10,0 9,5 10,0 10,0 10,0 10,0 10,0 9,5 9,7 9,7 9,5 9,5 9,7 9,7 10,0 10,0 10,0 10,0 10,0 10,0 5,0
* Defined as bounded by Pietermaritz, Berg, Loop, Burger, between Chapel and Commercial, ** Claremont Lower: east of Main Road
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Office demand and vacancies
Chapter 6: Office demand and vacancies
Low confidence suppressing demand for space

Written by Anneke Meijers The demand for office space remains weak as business confidence keeps declining. Nevertheless, on a national basis, vacancies are still stable.
Growth in office space demand (national dec.) vs RMB/BER Business confidence index
contracting demand r = 0,8 Growth in office space demand (%; y-o-y) 2
100
80
sector of GDP accelerated to just below 5% from about 3% in the previous quarter. The accompanying graph shows the strong tendency for the growth in service-sector output and the growth in the demand for office space to move together over time. The not-so-good news is that for office demand to show growth of 1% year-on-year, output produced by the services sector must grow by a yearly rate of at least 6,5% (constant prices).
Growth in GDP services sector vs Growth in office space demand (national dec.)
12 r = 0,6
Business confidence index
60
-2 40 Office demand Business confidence -6 01 02 03 04 05 06 07 08 09 10 11

Source of data: BER; SAPOA; Rode calculations
-4
20
8 Growth (%; y-o-y)
After reaching a trough in the latter half of 2009 and thereafter moving jaggedly north business confidence has since the start of 2011 made an about-turn. In the third quarter of 2011, fewer than 40% of the respondents surveyed by the BER were satisfied with the prevailing business conditions. On the basis of the robust relationship between office demand and business confidence, one can expect office demand to remain weak for now (see corresponding graph). This is so because businesses are unlikely to expand premises or hire new employees while confidence levels are low. Some good news from an office demand point of view must be the acceleration in the growth of output produced by the services sector of the economy. In the third quarter of 2011, yearly growth of this sub-
0 Office demand GDP services -4 03 04 05 06 07 08 09 10 11

Source of data: Stats SA; SAPOA; Rode calculations
An overview of office vacancies indicates a continued sideways movement, with vacancies on a national decentralized basis remaining roughly at 8% in the third quarter of 2011. The national CBD vacancy rose from about 12% to 13%. At the regional-decentralized level, vacancy rates in Johannesburg and Pretoria trended sideways, while in Durban and Cape Town marginal increases were observed.
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All these vacancies are for grades A and B combined.

Na tiona l office v a cancies G ra de A+, A and B combine d
20 D e ce ntr a lize d CBD 15
Owing to a combination of weaker demand and increasing supply, vacancy rates in Parktown have trekked north over the past number of quarters, and in the reporting quarter, vacancy rates in this node stood at roughly 10%. Of concern is the fact that more new developments are expected (see Table 6.1 at the end of this article). Elsewhere in Johannesburg decentralized, vacancies remained roughly at the same level they were at in the previous quarter.
De centralize d Johanne sburg office v a ca ncies G ra de A+, A and B combine d
25 Sa ndto n & e n v ir o ns Ro se ba nk P a r k to wn Riv o nia
Vacancy (%)
10
0 98 99 00 01 02 03 04 05 06 07 08 09 10 11 So ur ce o f da ta : Ro de ' s T ime Se r ie s; Sa po a
20
De centralize d office v a ca ncies G ra de A+, A and B combine d

16 P r e to r ia Jo ha nne sb ur g D ur ba n Ca pe T o wn
Vacancy (%)
15
10
12
Vacancy (%)
99
00
01
02
03
04
05
06
07
08
09
10
11
So ur ce o f da ta : Ro de ' s T ime Se r ie s; Sa po a
0 99 00 01 02 03 04 05 06 07 08 09 10 11 So ur ce o f da ta : Ro d e ' s T im e Se r ie s; Sap o a
A look at trends within Johannesburg decentralized shows that vacancies in Randburg, after having moved strikingly north over the past few quarters, fell by nearly 2 percentage points in the reporting quarter.
Decentralized Johannesburg office vacancies Grade A+, A and B combined
20 Bryanston/Epsom Downs Illovo Midrand Randburg
In most of the Pretoria decentralized office nodes, vacancy rates rose by at least a percentage point. However, in the eastern suburbs, vacancy rates fell by nearly 2 percentage points. Note the amazingly low vacancies in Pretorias golden node, Brooklyn. At the same time, there seems to be no end to the worsening competitive situation of the once-top node of Hatfield. This illustrates the geographic risk of degradation that landlords are constantly facing in South Africa. Consequently, landlords are well advised to regularly re-evaluate the nodes in which they are invested. In this regard, we would propose investing in Rodes Growth Points, which analyses this very aspect. Visit: http://www.rode.co.za/publications/ for more information. As Table 6.1 shows, Pretoria decentralized is still in danger of experiencing upward pressure on vacancies. This, as more speculative developments are expected to come on stream soon.
15 Vacancy (%)
10
0 99 00 01 02 03 04 05 06 07 08 09 10 11 Source of data: Rode's Time Series; Sapoa
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Pretoria dece ntralize d office v aca ncie s G ra de A+, A and B combine d

16 Br o o k ly n P r e to r ia Ea ste r n Subur bs Ce ntur io n H atfie ld
In La Lucia / Umhlanga, Durbans premium office node, vacancies increased marginally to just below 7%. This is more of a supply rather than a demand problem. A mixed bag of results can be observed in Cape Town decentralized. Vacancies in the Cape Town decentralized office nodes of Century City and Claremont have, over the past two years, shown steady declines. This trend continued during the third quarter of 2011.
12
Vacancy (%)
0 99 00 01 02 03 04 05 06 07 08 So ur ce o f da ta : Ro de 's T ime Se r ie s; Sa po a 09 10 11
Vacancies in Durban rose across the board in all office nodes. Increases in vacancies varied between 3 and 4 percentage points. In Berea (Durban), vacancy rates jumped from 15% to 19%, largely due to an increase in the grade-A vacancy rates from 5% to 17%. The big question is whether this ominous jump can be attributed to a purely cyclical phenomenon or whether it is structural.
Durba n de centra lize d office v a cancie s G ra de A+, A a nd B combine d
20 We stv ille Be r e a La Lucia / Umhla nga 15
In the office nodes of Pinelands and Rondebosch/Newlands, vacancy rates trended sideways, while they increased in the V & A Waterfront and Bellville. Capitol Commercial Properties surveys the Tyger Valley area (Bellville, north of the N1). According to its figures (see www.propertysite.co.za), the vacancy rates in November 2011 for grades A+, A and B were 12%, 8% and 18% respectively. A slight decrease was observed in grade A+ vacancies, while grade-B buildings showed a marginal increase in vacancies.
Cape Tow n de ce ntralized office v aca ncies G ra de A+, A and B combine d
20 Ce ntur y City Wa te r fr o nt Be llv ille 15
Vacancy (%)
10
Vacancy (%)
99 00 01 02 03 04 05 06 07 08 09 10 11 So ur ce o f da ta : Ro de 's T ime Se r ie s; Sa po a
10
Cape Tow n de ce ntralized office v aca ncies G ra de A+, A and B combine d

30 P ine la nd s Ro nde bo sch/Ne wla nds Cla r e mo nt
03 04 05 06 07 08 09 So ur ce o f da ta : Ro de ' s T ime Se r ie s; Sa po a
10
11
25
Vacancy rate (%)
20
15
10
0 00 01 02 03 04 05 06 07 08 09 10 11 So ur ce o f da ta : Ro d e ' s T im e Se r ie s; Sap o a
Vacancies in the Port Elizabeth decentralized office node of Walmer/Fairview have shown a downward trend over the past two quarters. In contrast, vacancy rates in the decentralized Greenacres and Newton Park stood steady at 6% and 20% respectively. Of concern is the boom in speculative new developments, which could result in growing vacancy rates in Port Elizabeths decentralized areas (see Table 6.1).
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De centra lize d Port Elizabeth office v aca ncie s G ra de A+, A a nd B combine d

50 G r e e n a cr e s Ne wto n P a r k Ce ntr a l/P a r k D r iv e W a lm e r /Fa ir v ie w
nesburg and Durban have increased to rates of 15% and 16% respectively, they have been able to remain steady at about 10% in the Cape Town CBD.
CBD office v a cancie s G ra de A+, A and B combine d
25 Ca pe T o wn CBD P r e to r ia CBD Jo ha nne sb ur g CBD D ur ba n CBD
40
Vacancy rate (%)
30
20
20
10
0 09:3 09:4 10:1 10:2 10:3 10:4 11:1 11 :2 11:3 So ur ce o f da ta : Ro d e 's T i m e Se r ie s; Sa p o a
Vacancy (%)
15
10
As for vacancy rates in the CBDs, it is clear that Cape Town and Pretoria have the most stable rates. Pretoria has an exceptionally low vacancy rate of 2%, largely thanks to governments commitment to remain in the CBD. While vacancy rates in the CBDs of Johan-
0 99 00 01 02 03 04 So ur ce o f da ta : Sa po a 05 06 07 08 09 10 11
This chapter is concluded by the officevacancy-factor tables.
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Table 6.1 Committed new developments As in 2011:3 Source: Sapoa

Total rentable area m2 Johannesburg & Environs Braamfontein Bryanston / Epsom Downs Cresta/Blackheath to Randpark Parktown Fourways Hyde Park / Dunkeld Randburg Rosebank Sandton & Environs Sunninghill Cape Town & Environs CBD Cape Town Century City Durban & Environs Umhlanga / La Lucia Hillcrest/Gillits Westville Pretoria & Environs Brooklyn / Nieuw Muckleneuk / Groenkloof Centurion Hatfield/Hillcrest Highveld Technopark & Extensions Lynwood / Menlo Park / Presequor Park Menlyn / Faerue Glen / Ashlea Gardens Pretoria Eastern Surburbs/Route 21 Port Elizabeth & Environs Greenacres Newton Park Walmer/Fairview Area available for leasing m2 2.400 6.240 3.700 3.500 5.656 5.000 9.000 18.051 63.407 23.191 16.000 0 7.200 1.559 4.800 3.192 19.277 28.332 29.071 3.220 6.237 8.900 % unlet
Committed developments as % of existing stock 0% 3% 18% 2% 7% 6% 6% 32% 5% 7% 2% 5% 10% 5% 5% 2% 8% 36% 8% 7% 45% 54%
2.400 15.340 30.600 7.400 10.842 5.000 26.000 88.051 72.407 23.191 16.000 10.500 24.900 1.559 8.800 4.792 27.777 75.382 29.311 4.465 6.237 8.900
100% 41% 12% 47% 52% 100% 35% 21% 88% 100% 100% 0% 29% 100% 55% 67% 69% 38% 99% 72% 100% 100%
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Table 6.2 Sapoa office vacancy factors (%)

Grades A+, A & B Source: Sapoa Septem- December ber 2010 2010 March 2011 June 2011 September 2011
Bedfordview Grade A+ Grade A Grade B Total Braamfontein Grade A+ Grade A Grade B Total Bryanston / Epsom Downs Grade A+ Grade A Grade B Total Bruma Grade A+ Grade A Grade B Total CBD Johannesburg Grade A+ Grade A Grade B Total Constantia Kloof Basin Grade A+ Grade A Grade B Total Fourways Grade A+ Grade A Grade B Total Houghton/Killarney Grade A+ Grade A Grade B Total
Source of data: Sapoa
Johannesburg
N/A 12,3 17,0 14,6 N/A 13,5 15,7 14,5
N/A 11,6 17,8 14,6 N/A 11,4 14,3 12,8
N/A 11,2 17,7 14,4 N/A 15,3 13,3 14,4
N/A 11,2 17,7 14,4 N/A 11,9 1,2 6,9
N/A 13,7 25,8 17,6 N/A 14,6 14,6 14,6
N/A 9,8 27,9 11,0 N/A 0,0 18,9 12,3 0,0 6,6 26,0 14,3 N/A 8,9 11,5 9,0 N/A 13,3 11,5 13,2 N/A 3,7 1,7 3,2
N/A 11,4 28,3 12,4 N/A 2,0 18,9 13,0 0,0 6,8 20,6 12,3 N/A 10,3 12,5 10,4 N/A 8,9 15,5 9,2 N/A 2,1 10,3 4,3
N/A 11,7 28,2 12,7 N/A 2,0 18,9 13,0 0,0 6,9 20,1 12,3 N/A 10,2 4,6 9,9 N/A 10,5 0,0 10,0 N/A 1,0 12,7 4,2
N/A 7,2 33,5 8,8 N/A 2,0 18,9 13,0 0,0 7,1 22,0 13,4 N/A 8,4 4,3 8,2 N/A 10,5 0,0 10,0 N/A 2,7 13,8 5,7
N/A 6,9 26,3 8,0 N/A 3,8 15,4 10,9 0,0 8,3 23,3 14,5 N/A 8,0 9,5 8,1 N/A 9,8 0,0 9,3 N/A 0,7 6,4 2,2
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Table 6.2 (continued) Sapoa office vacancy factors (%)

Grades A+, A & B SeptemDecember ber 2010 2010 N/A 13,3 11,1 11,7 N/A 3,1 15,3 5,1 4,0 15,6 6,1 6,7 0,0 4,5 11,7 6,0 N/A 0,0 4,3 3,8 N/A 5,1 N/A 5,1 N/A 3,4 4,7 4,3 N/A 12,6 7,9 8,2 N/A 17,1 8,5 10,9 N/A 2,3 14,5 4,2 3,4 15,6 6,2 6,3 0,0 3,9 11,7 5,8 N/A 0,0 3,6 3,2 N/A 3,7 N/A 3,7 N/A 2,2 2,9 2,6 N/A 24,6 13,2 14,1 March 2011 N/A 19,2 8,5 11,5 5,0 2,1 8,6 3,2 3,1 13,2 5,3 5,5 0,0 2,8 10,9 5,1 N/A 0,0 3,5 3,0 N/A 4,3 N/A 4,3 N/A 1,1 3,2 2,4 N/A 17,9 13,4 13,7 June 2011 N/A 15,8 10,6 12,1 5,9 1,2 10,2 2,7 3,2 13,2 5,3 5,6 0,0 2,5 11,7 5,3 N/A 0,0 5,0 4,4 N/A 4,9 N/A 4,9 N/A 4,1 8,6 7,2 N/A 17,9 15,0 15,2 September 2011 N/A 11,2 13,6 12,9 5,9 1,0 12,1 2,9 1,9 11,0 8,3 4,6 0,0 3,6 10,0 5,0 N/A 0,0 5,0 4,3 N/A 6,6 N/A 6,6 N/A 3,4 13,9 10,3 N/A 8,2 14,1 13,6
Hyde Park / Dunkeld
Grade A+ Grade A Grade B Total Illovo Grade A+ Grade A Grade B Total Melrose/Waverley Grade A+ Grade A Grade B Total Midrand Grade A+ Grade A Grade B Total Milpark Grade A+ Grade A Grade B Total Morningside Grade A+ Grade A Grade B Total Parktown Grade A+ Grade A Grade B Total Randburg Grade A+ Grade A Grade B Total
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Grades A+, A & B SeptemDecemMarch ber 2010 ber 2010 2011 0,0 20,4 11,0 13,5 N/A 20,1 3,4 10,7 0,8 10,2 16,2 10,0 N/A 8,8 N/A 8,8 N/A 10,7 24,6 11,4 0,0 20,7 10,8 13,8 N/A 21,0 5,4 12,2 0,8 8,6 13,5 8,4 N/A 7,0 N/A 7,0 N/A 10,4 23,1 11,1 0,0 17,7 13,0 14,5 N/A 23,2 2,6 11,7 0,0 8,4 16,0 8,6 N/A 7,3 N/A 7,3 N/A 10,4 21,9 11,0 June 2011 0,0 13,8 12,5 12,9 N/A 16,6 3,0 9,1 0,0 8,4 15,5 8,3 N/A 7,9 N/A 7,9 N/A 9,2 24,0 9,9 September 2011 0,0 13,8 14,4 14,2 N/A 14,0 5,0 9,1 4,0 7,0 13,8 8,9 N/A 7,3 N/A 7,3 N/A 8,5 24,4 9,3
Rivonia Grade A+ Grade A Grade B Total Rosebank Grade A+ Grade A Grade B Total Sandton & environs Grade A+ Grade A Grade B Total Sunninghill Grade A+ Grade A Grade B Total Woodmead Grade A+ Grade A Grade B Total
Cape Town
Bellville (incl. Tyger V) Grade A+ Grade A Grade B Total CBD Cape Town Grade A+ Grade A Grade B Total Century City Grade A+ Grade A Grade B Total
1,4 5,8 8,7 6,2 1,9 10,3 8,7 9,3 14,6 9,8 7,6 10,2
0,2 5,5 8,5 5,9 1,1 10,8 9,2 9,7 14,6 10,1 8,3 10,5
N/A 5,5 7,8 6,2 0,0 10,8 8,8 9,8 N/A 10,7 5,9 10,2
N/A 6,3 8,1 6,8 0,0 11,6 9,0 10,4 N/A 10,6 7,4 10,2
N/A 7,2 13,9 9,2 0,0 11,5 8,5 10,2 N/A 9,3 4,4 8,7
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Grades A+, A & B SeptemDecemMarch ber 2010 ber 2010 2011 N/A 17,0 4,0 14,7 N/A 7,3 1,6 6,8 N/A 6,7 4,6 6,1 0,0 5,4 10,4 3,6 N/A 17,4 4,7 15,1 N/A 6,5 1,1 6,1 N/A 4,8 9,3 6,1 0,0 4,2 8,7 2,9 N/A 14,7 3,4 12,7 N/A 5,0 1,8 4,8 N/A 4,8 8,6 5,9 0,0 4,8 15,0 3,7 June 2011 N/A 15,1 2,4 12,8 N/A 4,3 3,8 4,3 N/A 5,7 6,2 5,9 0,0 6,8 6,7 3,9 September 2011 N/A 11,9 11,8 11,9 N/A 4,3 4,8 4,3 N/A 6,5 7,6 6,8 4,3 6,4 8,8 5,7
Claremont Grade A+ Grade A Grade B Total Pinelands Grade A+ Grade A Grade B Total Rondebosch/Newlands Grade A+ Grade A Grade B Total V&A Waterfront Grade A+ Grade A Grade B Total
Berea Grade A+ Grade A Grade B Total CBD Durban Grade A+ Grade A Grade B Total Umhlanga / La Lucia Grade A+ Grade A Grade B Total Westville Grade A+ Grade A Grade B Total
Durban
N/A 1,6 23,5 14,1 N/A 18,4 7,7 12,3 3,9 3,5 2,4 3,4 N/A 2,3 6,8 4,6 N/A 4,4 25,3 16,3 N/A 18,1 6,7 11,7 2,9 4,9 6,3 5,0 N/A 2,4 6,3 4,4 N/A 4,7 24,7 16,5 N/A 19,0 8,3 13,0 2,1 8,0 6,3 7,7 N/A 2,2 5,8 4,2 N/A 4,7 22,8 14,9 N/A 19,8 11,8 15,3 2,1 6,4 7,4 6,5 N/A 1,4 5,4 3,6 N/A 17,0 20,6 18,9 N/A 19,8 12,2 15,6 2,1 7,5 2,8 6,8 N/A 4,3 8,3 6,5
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Grades A+, A & B SeptemDecember ber 2010 2010 March 2011 June 2011 September 2011
Arcadia Grade A+ Grade A Grade B Total Brooklyn Grade A+ Grade A Grade B Total CBD Pretoria Grade A+ Grade A Grade B Total Centurion Grade A+ Grade A Grade B Total Hatfield/Hillcrest Grade A+ Grade A Grade B Total Highveld Technopark Grade A+ Grade A Grade B Total Menlyn Grade A+ Grade A Grade B Total
Pretoria
N/A 3,3 6,0 4,0 3,7 2,0 0,7 1,9 N/A 0,7 2,4 1,8 N/A 6,3 7,7 7,1 N/A 3,0 12,6 8,9 N/A 7,0 4,2 6,4 N/A 4,4 18,0 7,5
N/A 4,9 8,0 5,7 1,4 2,1 3,6 2,3 N/A 0,7 2,4 1,8 N/A 6,7 13,8 10,9 N/A 2,2 8,9 6,1 N/A 4,1 4,2 4,1 N/A 3,3 16,6 6,3
N/A 5,0 3,8 4,7 N/A 1,2 4,2 1,9 N/A 0,7 2,4 1,8 N/A 6,2 9,1 7,9 N/A 5,8 14,8 11,3 N/A 7,6 8,2 7,7 N/A 5,0 19,3 8,3
N/A 5,0 3,8 4,7 N/A 1,5 3,4 2,0 N/A 0,7 2,4 1,8 N/A 8,2 11,3 9,9 N/A 7,7 12,8 10,7 N/A 9,0 10,5 9,4 N/A 4,0 25,4 10,1
N/A 5,1 6,7 5,5 N/A 1,8 5,8 2,7 N/A 0,9 2,6 2,0 N/A 9,4 12,4 11,1 N/A 8,9 13,7 11,8 N/A 7,1 8,5 7,5 N/A 4,0 9,1 5,1
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Grades A+, A & B Septem- December ber 2010 2010 Pretoria Eastern Suburbs Grade A+ Grade A Grade B Total Lynnwood Grade A+ Grade A Grade B Total N/A 9,0 5,9 7,6 N/A 4,5 6,4 5,5 N/A 13,5 6,1 10,1 N/A 4,6 6,7 5,7 March 2011 N/A 13,0 5,3 9,4 N/A 2,9 6,4 4,6 June 2011 N/A 10,5 5,3 8,3 1,3 8,2 6,6 6,5 September 2011 N/A 9,6 1,7 6,2 1,3 8,4 9,8 8,0
Greenacres Grade A+ Grade A Grade B Total Newton Park Grade A+ Grade A Grade B Total Central / Park Drive Grade A+ Grade A Grade B Total Walmer/Fairview Grade A+ Grade A Grade B Total Johannesburg central Grade A+ Grade A Grade B Total
Port Elizabeth
N/A 1,5 5,0 3,4 N/A 18,2 17,7 18,1 N/A N/A 5,9 5,9 N/A 35,2 30,5 33,7 0,0 7,8 23,2 14,0 N/A 2,08 2,99 2,6 N/A 18,25 19,84 18,5 N/A N/A 5,93 5,9 N/A 33,61 31,20 32,8 0,00 8,28 19,44 12,7 0,00 3,85 2,99 3,4 17,56 13,34 22,89 18,2 N/A N/A 12,10 12,1 N/A 13,50 28,82 18,6 0,00 8,81 18,52 12,7 0,00 0,00 6,90 5,8 17,56 13,34 22,89 18,2 N/A N/A 12,13 12,1 N/A 13,50 17,93 15,00 0,00 8,29 17,37 12,0 0,00 0,00 7,07 5,9 17,56 13,34 22,89 18,2 N/A N/A 1,22 1,2 N/A 11,04 14,92 12,3 0,00 9,78 21,39 14,5
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Grades A+, A & B Johannesburg decentralized Grade A+ Grade A Grade B Total Pretoria decentralized Grade A+ Grade A Grade B Total Durban decentralized Grade A+ Grade A Grade B Total Cape Town decentralized Grade A+ Grade A Grade B Total
1,0 9,2 9,9 9,0 1,1 6,5 8,8 6,2 3,9 2,8 10,7 5,6 4,5 8,1 7,2 7,6
0,86 8,86 10,50 9,00 1,59 8,14 7,83 6,6 2,89 4,09 11,31 6,5 4,0 7,7 7,7 7,4
0,59 8,77 10,75 9,00 1,73 8,16 8,90 7,16 2,12 6,00 10,36 7,6 0,0 7,3 7,08 7,0
0,58 7,75 12,04 8,7 1,33 9,78 9,96 8,06 2,12 4,90 9,50 6,5 0,0 7,6 6,9 7,2
1,92 7,09 12,59 8,8 1,31 8,47 9,06 7,5 2,12 7,45 9,82 8,3 4,3 7,4 11,0 8,0
National decentralised Grade A+ Grade A Grade B Total National CBDs Grade A+ Grade A Grade B Total
National summaries
1,4 8,3 9,4 8,2 0,3 8,8 14,7 12,1 1,5 8,3 9,5 8,2 0,16 9,2 12,9 11,7 1,1 8,3 10,0 8,3 0,00 9,6 12,6 11,8 0,9 7,9 10,9 8,3 0,00 9,6 12,6 11,7 1,7 7,4 11,3 8,4 0,00 10,4 14,6 13,0
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Chapter 7: Land values other than industrial
Office, shopping-centre and filling-station stand values

Updated by John S. Lottering In this chapter, we provide the reader with indicative market values of stands for various property types, excluding those for industrial stands, which are shown separately in Chapter 9.
Use the bulk that is legally permissible and economically viable.
The results of the second-quarter officeland survey are summarised in Table 7.1. The market rental rate and, related to this, the capitalization rate, are the key determinants of market value of an incomegenerating building. Hence, it follows that rental levels will also be a fundamental factor affecting land value. The accompanying graph demonstrates this relationship as in quarter 2011:3.
Office land values

In our office-stand survey, we pose the following question to respondents:
In your opinion, what is the market value (R/bulk m) of a vacant stand with an average location in the following nodes? Note:
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Bulk explained The market value of office land and shopping-centre land is generally expressed as the value per bulk square metre. Bulk square metre refers to the gross building area (GBA) of a building. According to The Sapoa Method for Measuring Floor Areas in Commercial and Industrial Buildings, GBA covers: The entire building area, but it excludes patios, plant boxes, sun-screening, escape stairs, machine rooms, parking (basements or above ground), lift-motor rooms, service rooms, caretakers flats, etc. GBA is mainly used by planning consultants in order to plan and execute a building in accordance with the permissible Floor Area Ratio (FAR) as derived from the zoning of the property. GBA is fixed for the life of the building but it should be noted that different local authorities may interpret the National Building Regulations that regulate the FAR definition in a slightly different manner.
The reader will note that we regressed the natural logs of the market-rental rates of existing prime office buildings in the various office nodes (see Chapter 5) on their corresponding land values (as reported in this article), also in natural log form. When using natural logs, the beta coefficient of the independent or predictor variable (i.e. gross market rental), is a handy tool to gauge the impact of a change in the predictor on the dependent variable (land value). The regression line (or line of best fit) has the following equation: Bulk land value = 2,342*ln(gross market rental) 2,7082 where bulk land value = land value in rands per bulk m gross market rental = gross market rental per rentable m per month achieved on existing prime office buildings in a node.
The regression equation is based on the information from 14 office nodes. Consider, for example, the case of a node where grade-A office rentals for existing buildings are currently around R90/m/month. What is the most likely office-land value for this node? First, the reader would have to calculate the natural log of R90, which is roughly equal to 4,5; and then plug this into our regression equation as below. Bulk land value = exp((2,342*4,5) 2,7082) R1549/bulk m Note that this equation should rather not be used to estimate the land values for nodes with average grade-A office rentals of less than R97/m, or greater than R132/m.
The function exp is also an Excel function, and is represented as ex on most scientific or business calculators where e ( 2,718) is the base of the natural logarithm (ln).
Rodes Report 2011:4
51
Table 7.1 Office stand values in quarter 2011:3

R/bulk m Location
Johannesburg: Sandton CBD Rosebank Illovo Illovo Boulevard Parktown Woodmead Sunninghill Bryanston Fourways Midrand Strubens Valley, greater East Rand Mall area Lakeside Mall area Pretoria: Brooklyn/Waterkloof Lynnwood Menlyn Hatfield Centurion Highveld Technopark Cape Peninsula: Cape Town CBD Westlake Century City Goodwood (N1 City) Tyger Valley area Somerset Mall area Durban: La Lucia Ridge Westville Berea Westway Durban Point
Standard deviation (SD) *Best estimate Low High *Best estimate n
Low
High
R2.598 R2.145 R2.191 R2.500 R1.697 R1.732 R2.345 R2.035 R2.449 R2.045 R1.587 R1.587 R3.000 R2.200 -
R3.600 R3.347 R3.464 R2.700 R2.449 R3.033 R2.939 R2.538 R2.993 R2.392 R1.944 R1.944 R3.500 R2.700 -
R3.450 R2.650 R2.900 R2.600 R2.300 R2.200 R2.800 R2.364 R2.884 R2.298 R1.766 R1.766 R3.200 R2.500 -
R141 R212 R283 R141 R354 R212 R354 R71 R212 R283 R283 -
R849 R707 R71 R1.202 R354 R354 R283 R283 R212 R212 -
R71 R530 R318 R424 R141 R247 R247 -
2 2 2 1 0 0 0 2 2 0 0 0 0 2 2 2 2 2 2 0 0 0 0 0 1 1 1 0 0 0
*Note that we also ask our respondents for their opinions of the best estimate. Hence, the average of their best estimate opinions can sometimes be lower than the average of their low opinions, depending on who answers what question.
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52
Shopping centres
In our shopping-centre questionnaire, we pose the following question to respondents:
In your opinion, what is the market value of vacant stands appropriately zoned and with the necessary bulk for either a regional, or community, or neighbourhood shopping centre (as the case may be)? Assume that these stands are ready for construction and that the
major external infrastructure, which municipalities normally expect the developer to pay for, is already in place; that is, assume external roads, off-ramps, bridges, and new electrical sub-stations have been installed.
Table 7.2 gives a summary of the shopping-centre land values reported by our panel of experts. This concludes our section on the land values of offices and shopping centres.
Table 7.2 National shopping-centre stand values in quarter 2011:3*

R/bulk m Type of shopping centre Regional Community Neighbourhood * Low R 1 342 R 1 026 R 992 High R 1 732 R 1 558 R 1 412 Best estimate R 1 533 R 1 400 R 1 500 Low R 566 R 153 R 275 High R 919 R 208 R 144 SD Best estimate R 536 2 3 3 N
These figures assume that external roads, off-ramps, bridges, new electrical sub-stations, and the like, are in place.
Critical assumptions: Please note that the shopping-centre questionnaire asks our respondents to make the following two assumptions: i. ii. Firstly that the land is already correctly zoned Secondly, that the external bulk infrastructure is already in place.
The latter assumption is especially important in the case of a regional shopping centre, where it is often expected of a developer to finance the construction of roads, bridges, electrical sub-stations and the like, the cost of which often amounts to millions of rands. Thus, in practice, one will find that a regional-shopping-centre developer only paid, say, R500/bulk m, but had to pay for external infrastructure amounting to, say, R1000/bulk m. Hence, in effect, this developer paid R1500/bulk m for the land. It is the latter figure that we report on.
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53
Filling stations
The market value of filling-station land, like that of shopping centres and offices, is critically dependent on the potential net income that the site can generate subsequent to development. Hence in the case of filling stations, the potential pumping capacity is at issue. The question we pose to respondents is as follows:
In your opinion, what is the market value of
an average-sized filling-station site, with a pump potential of 350.000 litres per month? Site is defined as the unimproved land, with services to its borders, that is appropriately zoned.
We are informed that in order to qualify as a filling-station site, a pumping capacity of 350.000 litres per month is what oil companies generally require as a minimum. Of course, the capacity of a site to house a 24-hour shop and, perhaps, a car wash (both of which are also related to pumping capacity), will also be important value determinants. The results of our third-quarter survey are outlined in Table 7.3 .
Table 7.3 National filling-station land survey in quarter 2011:3

R per site Low R 2.000.000 High R 3.500.00 Best estimate R 2.500.000 Low SD High Best estimate 1 n
How developers value land

Developers often use the so-called residual land value technique (implicitly or explicitly) to establish the maximum price they can afford to pay for land. This technique in turn can be divided into two methods, viz. the development residual (e.g. to calculate the market value of non-residential stands) and the township residual (e.g. to calculate the value of raw land with township potential). Put simply, the development residual technique entails the following: a) b) c) Firstly, the developer estimates the expected market value of the development upon completion. Secondly, he or she estimates the expected cost of the development and a profit margin that sufficiently compensates him or her for risk and the capital employed. Finally, he or she deducts (b) from (a), the result (residual) being the land value.
These steps are, however, not straightforward, as they include a number of assumptions (viz. rental levels, vacancies, and capitalization rates upon completion of the project; building costs; growth in building costs over the project horizon; the appropriate profit margin; leverage effect of rising rentals on residual land values, etc.). Hence land values, generally speaking, have a much broader range than, say, office rentals.
Rode's Report 2011:4
54
Industrial rentals and vacancies
Chapter 8: Industrial rentals and vacancies
Business cycle indicators losing vigour

Written by Anneke Meijers Disappointing news from an industrialproperty point of view must be the loss of steam in South Africas business cycle indicators. This is so because of the robust inverse relationship between industrial property vacancies and South Africas composite coincident business-cycle indicator1 (see graph).
Rode's national industrial property vacancy factor vs S.A. coincident business cycle indicator
r = -0,9
could have been the strong rand at that time.
4.0
160
3.5 140 Rode's vacancy factor (scale: 0 to 9) 3.0 Business cycle indicator (Index: 2000=100)
2.5
120
2.0 100 1.5 Vacancy factor (smoothed) Business cycle indicator 1.0 92 94 96 98 00 02 04 06 08 10 80
In the meantime, the composite leading business-cycle indicator2 (not shown in a graph) is signalling a possible cooling in economic activity. In September 2011, the leading index fell for a third month in a row. This was in sync with the poor performance of the composite leading business-cycle indicators of South Africa's major trading partners. Should local economic activity be dragged down by tradingpartner economic woes, the result could be weaker demand for industrial space. On the other hand, the by-now weaker rand could help to partially offset this negative. Slack in the demand for industrial space is already being displayed by the poor to moderate growth in market rentals. In the third quarter of 2011, market rentals on the Central Witwatersrand and in Durban mustered growth of 5% the best regional performance. The Cape Peninsula followed with growth of 4%, while in Port Elizabeth market rentals were actually somewhat lower (-1%) than they were a year ago.
Source of data: Rode's database; SARB
The graph shows us that during the tentative economic upswing that started in the latter half of 2009, industrial vacancies didnt come down, thereby (temporarily) discontinuing the strong inverse relationship with economic activity. Surely, the explanation for this disconnect must be the loss of confidence among economic actors misgivings that did not lift during the short-lived (?) recovery. A contributing
factor
An index published by the South African Reserve Bank that is a broad-based measurement of current economic conditions, helping economists and investors to determine the phase of the business cycle.
2 Also published by the Reserve Bank, the index is used to predict the direction of the economy's movements in the months to come. In the case of South Africa, the leading economic indicator provides a guideline for economic growth for at least six months ahead.
55
Nominal prime industrial rentals (500m units)
50 40 30 R/m (log scale) 20 Port Elizabeth Central Witwatersrand Durban Cape Peninsula
Real prime industrial rentals (500m units) 2005 rands
40 35 30 R/m (log scale) 25 20

10
15
Smoothed 90 92 94 96 98 00 02 04 06 08 10
Port Elizabeth Central Witwatersrand Durban Cape Peninsula 10 90 92 94 96 98 00 02 04
Smoothed 06 08 10
Source of data: Rode's Time Series; BER BCI
Over the same period, building-cost inflation as measured by the BER BCI is expected to have accelerated to an impressive yearly growth rate of 6% (see Chapter 12 for an explanation hereof). This, of course, implies that in real terms industrial rentals in all of these industrial areas are actually lower than they were a year ago.
In Table 8.1 we examine pioneer industrial rentals, which provide a quick-and-dirty prognosis of the short-term direction of industrial rentals. These rentals suggest that there is still great upside potential for industrial-rental growth, if only the economy would perform! The remainder of this chapter includes:
The reference to real means that nominal prices have been deflated (i.e. adjusted for inflation). In this chapter, industrial rentals are deflated by the Bureau for Economic Researchs Building Cost Index (BER BCI). By using building costs as a deflator, the reader can interpret the graphs from a developers point of view, i.e. they can serve as a proxy for the viability of new developments over time, holding constant capitalization rates and operating expenses.
the summary rental-change table, mean prime township, industrial rentals by
the standard deviations from these mean rentals, market rentals for office ancillary to industrial space, indicative operating costs, and the predominant escalation rates. space
This concludes our section on industrial rentals and vacancies. Note that the industrial tables follow.
56
Highest gross rental rates achieved (1.000m units) Rands per rentable square m (excl VAT) Pioneer Normal Prime Difference (%) Central Witwatersrand 56,00 34,26 63% West Rand 38,75 29,29 32% East Rand 48,00 33,16 45% Far East Rand 40,00 26,44 51% Pretoria 56,50 32,43 74% Durban 61,00 36,32 68% Polokwane 45,00 33,00 36% Cape Peninsula 50,00 30,53 64% Port Elizabeth 39,00 24,48 59% Bloemfontein 45,00 24,44 84% Nelspruit 50,00 37,25 34%
Table 8.1 Pioneer rental rates for new, state-of-the-art industrial developments during quarter 2011:3
Table 8.2 Mean prime industrial market rentals as in quarter 2011:3

(R/m p.m.; gross lease; excl VAT)
Area size leased in m 250 500 1.000 2.500 5.000 Vacancy a b r
Central Witwatersrand 50,00 32,08 42,33 39,60 32,50 30,00 35,00 35,00 29,00 20,00 20,00 28,67 30,00 25,00 30,33 30,00 30,00 20,00 15,00 45,00 45,00 35,00 47,25 15,00 44,50 43,25 35,00 47,25 20,00 30,00 30,00 25,00 25,00 19,00 16,50 40,67 41,67 30,00 43,50 29,33 28,33 25,00 25,00 30,00 30,00 30,00 25,00 27,83 25,00 25,00 21,50 19,00 39,00 38,33 30,00 44,75 30,00 29,25 26,50 28,00 27,50 25,00 20,00 25,00 24,00 22,50 24,67 24,50 25,00 26,00 25,00 25,00 20,50 20,00 38,33 38,33 30,00 44,25 20,00 22,50 23,50 30,00 29,00 25,00 20,00 20,00 33,00 35,00 35,00 33,00 1,0 2,0 1,5 2,5 5,5 1,5 1,0 1,0 1,5 1,0 2,8 3,0 2,7 2,3 2,7 1,0 3,0 30,00 33,00 31,50 34,00 3,0 30,00 30,00 28,00 27,00 2,0 30,00 32,50 26,00 27,50 2,5 3,841 3,629 3,492 3,584 4,227 2,240 2,726 3,671 3,824 3,219 3,674 3,789 3,727 2,882 2,078 4,140 4,128 3,883 3,981 39,67 37,00 35,67 30,33 3,0 4,183 42,33 39,67 37,33 38,33 2,3 3,988 31,75 30,67 28,33 29,17 2,5 3,697 -0,041 -0,043 -0,085 -0,065 -0,038 -0,001 -0,007 -0,148 0,128 0,054 -0,055 -0,070 0,000 -0,047 -0,071 -0,093 0,018 0,108 -0,059 -0,058 -0,060 -0,024 50,00 50,00 46,67 45,00 1,0 4,140 -0,037 -0,91 -0,91 -0,91 -0,92 -0,78 -0,91 -0,02 -0,28 -0,96 0,92 0,63 -0,97 -0,94 -0,97 -0,86 -0,96 0,47 0,97 -0,97 -0,98 -0,86 -0,74
Cambridge Park
Wynberg Proper
Strijdom Park
Kya Sand
Clayville/Olifantsfontein
Chloorkop
Amalgam
Crown Mines
57
Industria
Booysens/Booysens Reserve/Ophirton
Village Main/Village Deep/New Centre
Benrose
Steeledale/Electron/Tulisa Park
Aeroton
Devland/Nancefield
Cleveland/Heriotdale
Newlands/Martindale
Kew/Wynberg East
Bramley View/Lombardy West
Marlboro
Halfway House: hi-tech strip
Halfway House: Richards Drive
Commercia
Kramerville/Eastgate Ext12 & Ext13
Table 8.2 (continued) Mean prime industrial market rentals as in quarter 2011:3
50,00 44,50
49,50 44,50
48,75 45,75
48,75 45,12
42,00 50,00 42,88
1,0 1,6 1,7
3,913 3,854
-0,002 -0,008
-0,18 -0,41
58
36,25 45,00 50,00 50,00 37,50 33,00 25,00 19,33 34,75 53,33 30,00 30,00 25,00 35,71 30,00 40,00 32,50 27,50 27,50 30,00 40,00 30,00 25,00 27,50 31,50 45,00 30,00 26,00 26,00 28,00 40,00 28,00 21,00 21,00 25,00 35,00 25,00 19,00 19,00 2,5 3,0 3,5 1,5 2,5 3,770 3,944 3,913 4,008 4,117
33,25 50,00 47,50 47,50 3750 33,00 25,00 19,33 33,00 51,67 30,00 30,00 25,00 35,08
32,88 50,00 47,50 42,50 32,50 32,00 25,00 20,33 33,50 50,00 30,00 30,00 25,00 34,26
36,00 50,00 50,00 42,50 33,00 31,00 23,00 19,00 30,00 48,33 30,00 27,00 22,00 33,24
35,00 50,00 46,50 42,50 29,50 30,00 20,00 18,33 28,00 48,33 28,00 22,00 20,00 32,57
1,3 3,0 1,5 1,0 1,0 1,0 2,3 1,5 1,3 1,0 1,0 2,1
3,524 3,703 3,956 4,199 4,075 3,693 3,651 3,078 3,949 4,160 3,514 3,993 3,686
0,003 0,027 -0,011 -0,056 -0,079 -0,033 -0,070 -0,017 -0,070 -0,035 -0,018 -0,096 -0,077
0,08 0,69 -0,41 -0,88 -0,93 -0,97 -0,87 -0,55 -0,95 -0,97 -0,71 -0,86 -0,91
Centurion Linbro Park Wesco Park/Eastgate Ext3, Ext11, Ext6, Ext8/Malboro North (New) City Deep North Riding Samrand Centurion Barbeque Downs Selby Ext 12/13/15/19/20/24/City West Selby Ext 5/10/14/18 Selby Ext 11 Selby Ext 3/4/6 Denver (Old) Denver (New) Kyalami Business Park Reuven Selby (Old)/Selby Ext2/Park Central Robertsham Fordsburg/Mayfair Central Witwatersrand West Rand Lea Glen Honeydew X19, 20, 21 & 22 Stormill Chamdor Factoria -0,058 -0,037 -0,078 -0,122 -0,135
-0,78 -0,50 -0,96 -0,94 -0,95
30,00 30,00 30,00 31,00 35,00 40,00 31,57
30,00 30,00 30,00 31,00 32,50 40,00 30,71
25,00 25,00 25,00 27,50 28,00 40,00 29,29
20,00 25,00 25,00 26,50 27,50 30,00 26,12
18,00 18,00 25,00 23,00 22,00 38,00 23,53
2,0 2,0 1,0 2,0 3,0 2,5 2,5
4,505 4,327 3,789 4,011 4,354 4,003
-0,189 -0,157 -0,071 -0,099 -0,143 -0,055
-0,98 -0,91 -0,86 -0,96 -0,96 -0,53
59
33,50 47,67 47,50 35,75 43,00 35,00 34,25 32,25 36,33 36,20 38,50 36,75 28,75 25,00 35,00 43,60 36,00 38,50 38,40 37,50 25,00 30,00 43,60 32,20 38,50 37,20 37,40 25,00 25,00 42,60 31,60 36,00 37,33 26,80 25,00 25,00 42,20 33,33 37,50 26,20 24,67 25,00 39,33 3,2 3,0 3,5 1,5 2,0 3,0 1,8 -
32,50 47,67 45,67 35,75 40,50 35,00 34,00 31,75 35,67
31,50 45,67 45,00 34,33 39,50 35,00 31,25 30,00 33,33
26,50 40,00 45,00 35,00 35,00 30,00 30,00 27,67 31,00
25,00 41,00 45,00 33,33 35,00 30,00 30,00 25,00 -
2,5 2,0 1,5 1,3 3,0 1,0 2,3 2,3 2,3
4,124 4,238 3,938 3,696 4,168 3,931 3,820 3,972 3,790 3,613 3,501 3,241 4,095 3,963 3,757
-0,105 -0,064 -0,016 -0,021 -0,074 -0,062 -0,051 -0,085 -0,039 0,001 -0,028 -0,003 -0,110 -0,031 -0,091
-0,97 -0,92 -0,87 -0,84 -0,97 -0,89 -0,94 -0,97 -0,74 0,11 -0,96 -0,71 -0,87 -0,89 -0,93
Randfontein: Delporton/ Aureus Boltonia Roodepoort: Industria North Robertville Laserpark West Rand East Rand Elandsfontein Tunney/Greenhills Henville Meadowbrook/Wilbart Sunnyrock Rustivia/Activia Park Eastleigh Sebenza Ext 14 Spartan Ext 16 (Sebenza Link) + Ext 1,3,7 Isando Isando 3 Jet Park Alrode & Xs Alrode South Alberton Aeroport/ Spartan Ext 2 Rustivia
Delville 26,00 29,86 41,25 27,17 34,00 25,00 34,75 40,75 48,33 35,07 30,00 35,00 30,00 25,00 25,00 35,00 30,00 40,00 31,11 25,00 30,00 30,00 25,00 33,00 35,00 30,00 35,00 30,00 25,00 35,00 26,44 20,00 26,00 25,00 20,00 25,00 20,00 30,00 25,00 20,00 20,00 20,00 30,00 25,00 35,00 26,67 20,00 35,00 28,00 30,00 27,50 27,50 30,00 27,50 20,00 20,00 20,00 20,00 20,00 18,00 30,00 22,56 19,00 34,89 33,16 31,87 30,86 50,00 50,00 50,67 51,00 1,2 2,1 1,5 1,0 3,0 2,0 2,0 1,0 1,0 1,0 1,6 2,0 2,0 3,778 -0,100 3,417 4,526 4,333 3,694 3,694 4,547 4,327 4,072 -0,010 -0,165 -0,161 -0,087 -0,087 -0,167 -0,157 -0,074 40,75 40,00 40,00 40,00 1,7 34,75 32,25 30,50 31,67 2,5 25,25 23,00 22,00 20,50 1,7 33,20 30,50 31,12 28,00 2,0 3,631 3,781 3,747 3,802 3,240 26,67 24,67 24,20 21,33 1,7 3,880 40,75 38,50 37,50 42,50 3,0 3,740 28,71 27,00 25,86 26,00 1,0 3,712 -0,003 -0,076 -0,063 -0,070 -0,042 -0,007 0,016 0,056 26,00 24,25 24,67 23,00 1,7 3,662 -0,050
24,67
25,25
24,00
20,50
19,50
1,3
3,479
-0,039
-0,90 -0,96 -0,07 -0,95 -0,97 -0,97 -0,87 -0,86 0,91 0,91
Roodekop
Wadeville: Industrial zoning
Route 24/ Meadowdale
Germiston S/ Industries E
Driehoek/ Industries W
Knights
Spartan Proper
Founders View
60
Longmeadow
East Rand
Far East Rand -0,25 -0,87 -0,96 -0,86 -0,86 -0,87 -0,91 -0,88
Boksburg North & East
Benoni South
New Era/ Vulcania
Nuffield
Fulcrum
Apex
Labore Brakpan
Morehill Ext 8 Benoni
Far East Rand
Pretoria -0,91 -
Mitchell St
Pretoria Industrial Township
Koedoespoort
Waltloo/ Despatch 37,50 35,00 35,00 45,00 45,00 35,00 30,00 35,00 25,00 27,50 33,33 42,00 43,00 45,00 40,00 45,00 42,00 42,83 35,00 45,00 37,33 35,00 37,00 37,00 32,00 32,00 30,00 30,00 42,00 33,00 35,00 32,00 25,00 25,00 28,00 22,00 30,00 40,00 28,33 34,06 32,43 31,87 25,00 22,50 20,00 25,00 20,00 20,00 20,00 20,00 27,55 40,00 37,50 25,00 20,00 20,00 20,00 3,0 3,0 4,0 4,0 3,0 2,0 2,0 2,0 2,0 2,0 2,0 2,0 35,00 37,50 30,00 30,00 2,0 50,00 45,00 45,00 35,00 3,0 45,00 40,00 40,00 35,00 4,0 35,00 30,00 4,276 4,339 3,952 4,055 3,694 3,919 35,00 30,00 30,00 35,00 35,00 32,50 25,00 3,0 4,165 35,00 35,00 40,00 40,00 3,0 3,230 0,054 -0,099 -0,081 -0,080 -0,064 -0,133 -0,087 -0,113 37,50 37,50 38,00 3,0 -
30,00
30,00
30,00
45,00
40,00
3,0
2,606
0,133
0,83 0,89 -0,82 -0,93 -0,73 -0,76 -0,87 -0,86 -0,97
Silverton/ Silvertondale
Samcor Park
Sunderland Ridge
Hermanstad
Kirkney
Hennopspark X15 & X7
Gateway
Lyttleton Manor X4/X6
Pretoria North
61
Silvertondale X1
Brits
Klerksoord
Rosslyn
Pretoria
Polokwane -
Lebowakgomo
Superbia
Industria
Ladine
Futura
Laboria
Magna Via
Seshego
Polokwane
Nelspruit 42,00 42,00 37,00 55,00 44,00 41,67 30,00 31,00 41,50 44,00 36,50 35,00 36,83 35,00 37,50 41,00 39,75 37,67 37,50 40,00 40,50 31,50 37,50 40,00 40,50 31,50 35,50 39,00 39,50 39,50 37,50 34,25 37,50 40,00 40,00 28,00 37,33 37,33 35,00 35,00 36,83 36,67 36,00 36,00 37,33 38,50 37,75 34,00 37,50 40,00 40,00 28,00 35,00 35,00 37,50 36,50 36,50 36,50 44,00 42,50 40,67 40,00 35,00 37,50 36,00 36,00 37,67 38,50 37,25 33,75 37,50 40,00 40,50 28,00 41,00 41,00 40,00 40,00 31,33 31,33 30,67 29,33 3,7 3,0 3,3 3,0 4,0 4,0 3,3 3,3 3,5 3,8 4,3 3,0 2,5 4,0 2,5 32,00 31,50 31,00 30,00 3,0 41,67 39,50 38,33 37,00 4,0 39,00 37,25 32,75 29,50 3,0 3,974 3,464 3,549 3,666 3,387 3,661 3,614 3,813 3,790 3,793 3,689 3,707 3,701 -0,042 -0,005 -0,018 -0,011 0,028 -0,009 0,001 -0,020 -0,021 -0,034 0,000 -0,002 -0,046 -0,98 -0,20 -0,78 -0,71 0,89 -0,93 0,36 -0,93 -0,90 -0,90 -0,28 -0,86 45,00 42,00 38,00 35,00 4,0 4,730 36,00 35,00 30,00 26,00 2,0 4,307 40,00 40,00 38,00 35,00 2,0 4,045 -0,055 -0,118 -0,140 35,00 32,00 25,00 22,00 4,0 4,918 -0,215 -1,00 -0,95 -0,95 -0,97
Nelspruit East
Nelspruit West
Rocky's Drift
Riverside Park
Nelspruit
Durban
Springfield Park
Mayville
62
Phoenix
North Coast Rd / Briardene
Briardene Industrial Park
Umgeni Rd/ Stamford Hill
Umbilo/ Sydney Rd/ Gale St
Jacobs
Mobeni
Prospecton
Ithala Industrial Estate
Pinetown Central
New Germany
Isipingo
Rossburgh/ South Coast Rd
Edwin Swales Drive
Glen Anil
Brickfield Rd
Verulam 35,50 41,00 40,25 32,00 41,00 40,00 37,00 51,67 41,00 40,00 25,00 24,00 38,34 35,00 50,00 42,50 35,67 28,00 45,00 36,50 33,67 37,69 36,32 25,00 35,00 30,00 32,50 24,00 23,33 25,00 23,13 40,00 40,00 22,50 23,75 35,77 25,00 25,00 33,25 40,00 39,00 38,00 40,00 38,00 38,00 40,33 39,33 39,33 39,33 38,00 38,00 22,25 23,75 35,51 51,67 49,67 49,67 48,00 36,50 35,50 35,00 34,50 3,0 3,7 3,7 3,0 3,0 2,0 4,0 3,0 3,4 3,0 1,0 2,0 2,7 38,00 38,00 40,00 40,00 3,0 40,00 40,00 2,0 40,50 39,00 38,25 37,75 2,3 33,50 34,00 33,33 31,00 2,7 3,556 3,875 3,741 4,085 3,783 3,798 3,470 3,195 39,00 37,25 37,00 36,75 4,0 3,851 39,50 38,25 37,75 38,25 3,3 3,829 35,50 33,00 31,00 31,00 2,0 3,877 -0,054 -0,024 -0,030 -0,010 -0,029 -0,024 -0,024 -0,014 -0,020 -0,044 -0,004 2,5 -
2,5
-0,95 -0,86 -0,93 -0,30 -0,98 -0,99 -0,94 -0,88 -0,86 -0,95 -0,40
Canelands
Tongaat
New Westmead/ Mahogany
Westmead
Mariann Park/ Southmead
Maxmead
Ringroad Industrial Park
Avoca/ Red Hill/ Northgate
63
Falcon Park
River Horse Valley Business
Mount Edgecombe
Umbogintwini/ Southgate
Southgate Industrial Park
Umgeni Park
Hammersdale
Cato Ridge
Durban
Lower Umfolozi -
Empangeni
Richards Bay
Richards Bay CBD (Dollar Drive)
Lower Umfolozi
Cape Peninsula -
Viking Place
Glosderry 37,25 35,00 39,60 29,50 28,75 18,00 33,00 30,00 31,00 37,00 36,50 43,50 43,50 30,00 44,00 41,00 31,33 36,00 36,00 31,33 38,40 24,92 31,00 35,00 30,20 37,00 24,62 30,17 34,00 31,00 40,00 37,50 27,33 32,00 33,20 27,90 34,00 23,25 29,20 42,50 41,50 30,00 30,00 42,50 40,50 40,00 25,00 40,00 37,50 30,00 31,75 25,38 33,00 21,33 24,67 42,50 41,50 38,00 35,50 35,50 33,00 36,00 35,33 32,67 30,00 30,00 40,00 25,00 40,00 30,00 27,50 25,12 32,67 22,00 24,33 31,00 31,00 30,00 30,00 4,5 3,7 3,0 2,5 3,5 2,5 5,5 3,7 2,5 3,2 4,2 1,7 4,2 3,8 30,00 30,00 25,00 25,00 5,0 33,00 35,00 3,0 18,00 16,00 16,00 16,00 3,845 3,514 4,008 3,958 3,928 3,845 3,959 3,926 4,067 3,897 3,954 3,509 3,963 28,25 24,67 24,67 25,00 5,0 3,642 3,141 29,40 28,33 27,67 27,00 4,0 3,564 37,67 37,67 35,00 32,50 1,3 4,028 34,50 33,00 33,25 30,50 3,2 3,787 -0,041 -0,062 -0,031 -0,054 -0,046 -0,074 -0,013 -0,068 -0,062 -0,030 -0,074 -0,033 -0,064 -0,084 -0,081 -0,057 -0,052 -0,092 36,80 35,00 34,00 31,00 2,3 3,958 -0,059
43,00
43,00
39,67
37,00
1,5
-0,96 -0,91 -0,97 -0,98 -0,84 -0,86 -0,89 -0,89 -0,96 -0,93 -0,93 -0,89 -0,97 -0,97 -0,95 -0,98 -0,96 -0,92 -0,96
Paarden Eiland/ Metro
Montague Gardens
Marconi Beam
Killarney Gardens
Racing Park
Atlantis
Woodstock/ Salt River/ Observatory
Athlone 1 & 2
64
Lansdowne Nerissa
Sand Industria
Ottery Hillstar
Ottery Sunset
Diep River
Elfindale
Monwood/ Philippi East
Retreat/ Steenberg
Capricorn Park
Maitland
Ndabeni
Airport
Epping 1 & 2
WP Park
Elsies River (excl. Central Park)
Parow Beaconvale
Tygerberg Business Park 31,00 32,75 35,00 34,25 29,33 28,75 28,00 30,00 35,50 33,00 28,00 31,00 35,67 33,57 2,00 2,00 25,00 27,75 2,00 23,75 25,75 2,00 32,32 30,67 2,00 2,00 22,25 24,25 28,64 1,00 1,00 20,00 21,00 32,50 27,00 27,00 30,00 26,50 25,50 25,00 22,00 22,00 20,00 26,00 27,00 27,46 1,00 1,00 20,00 21,00 25,50 24,50 24,50 23,00 32,50 28,00 27,00 27,00 2,0 2,0 1,0 2,0 2,0 3,0 2,0 2,0 4,0 3,5 3,668 3,875 -0,082 -0,101 2,381 -0,281 29,50 26,00 25,50 25,00 2,0 28,00 25,00 25,00 23,00 1,0 26,33 24,33 22,50 22,50 3,0 26,50 25,50 24,50 22,50 2,0 3,797 3,804 3,710 3,766 4,062 3,938 3,871 3,792 4,060 32,00 30,00 28,00 28,00 2,0 3,906 35,00 30,00 30,00 1,0 -0,070 -0,079 -0,085 -0,066 -0,067 -0,095 -0,098 -0,104 -0,067 -0,096 29,25 27,00 25,50 25,00 2,5 3,942 -0,088 27,75 26,50 24,33 23,00 4 3,941 -0,096
34,60
31,00
29,33
26,67
26,67
3,3
4,001
-0,088
-0,97 -0,99 -0,96 -0,97 -0,98 -0,97 -0,94 -0,93 -0,93 -0,84 -0,95 -0,91 -0,88 -
Parow Industria
Parow East
Bellville Oakdale
Bellville Stikland/ Kaymor
Bellville Triangle
Bellville South/ Sacks Circle
Kraaifontein
Brackenfell Industria
65
Everite Brackenfell
Kuils River
Blackheath
Saxenburg Industrial Park
Okavango Park
Firgrove
The Interchange (Somerset
Strand Halt
Broadlands
Cape Peninsula
George -0,89
George
George
Port Elizabeth -0,98 -0,98
Deal Party
North End
Korsten/ Neave/ Sidwell/ Sydenham 21,00 27,50 17,50 17,50 17,50 20,00 20,00 3,0 2,537 27,50 27,50 25,00 25,00 1,0 3,546 -0,039 0,054 21,00 21,00 20,00 20,00 2,0 3,163 -0,020
24,00
24,00
22,50
19,00
19,00
3,2
3,727
-0,094
-0,95 -0,89 -0,89 0,89
South End Walmer
Uitenhage: Volkswagen area/Nelson Mandela Bay Logistics Park
Uitenhage: Hella/Kruisrivier
66
15,00 28,00 36,50 30,00 40,25 27,88 30,00 35,00 35,00 28,00 22,00 20,00 45,00 30,71 38,00 30,00 50,00 40,00 39,50 38,00 30,00 50,00 40,00 39,50 35,00 30,00 45,00 38,00 37,00 30,00 30,00 45,00 35,00 35,00 27,00 36,00 30,00 30,00 20,00 18,00 40,00 29,67 25,00 31,50 25,00 20,00 15,00 12,00 35,00 24,44 20,00 22,00 19,00 15,00 12,00 10,00 30,00 18,38 18,00 15,00 15,00 12,00 10,00 9,00 25,00 14,86 30,00 30,00 40,00 30,00 32,50 2,0 1,8 1,8 2,5 2,5 2,5 1,0 2,1 2,0 4,0 1,0 1,0 2,0
17,25 13,75 24,75 36,50 29,00 40,25 25,52
16,25 13,75 23,25 35,00 29,00 37,75 24,48
15,25 12,25 23,25 33,50 29,00 35,00 22,32
14,00 11,00 21,50 32,00 25,25 35,00 20,82
4,2 5,5 1,5 1,5 3,2 1,0 2,9
3,251 3,714 3,868 3,661 4,016
-0,097 -0,076 -0,046 -0,045 -0,056
-0,97 -0,93 -0,97 -0,80 -0,96
Struandale Markman Township Perseverance Walmer Greenbushes Fairview Port Elizabeth Bloemfontein Hilton East End Harvey Road Old Industrial Hamilton: Mill St Hamilton: G Lubbe St Estoir Bloemfontein
4,384 5,313 5,150 5,193 4,639 4,578 4,880
-0,175 -0,291 -0,284 -0,316 -0,275 -0,286 -0,192
-0,99 -0,94 -1,00 -0,96 -0,99 -0,97 -1,00
Windhoek 4,188 3,401 4,329 4,251 -0,095 0,000 -0,072 -0,094 -0,95 -0,93 -0,93
North
Lafrenz
South
Prosperita
Windhoek
Table 8.3 Standard deviation from mean prime industrial market rentals as in 2011:3
Area size leased in m 250 500 1.000 2.500 5.000 Contributor codes
Central Witwatersrand 0,00 5,09 2,05 4,11 7,50 5,00 5,00 0,94 2,00 3,30 0,00 0,00 0,00 3,54 0,00 0,00 0,00 3,64 2,05 2,00 1,89 1,25 2,59 1,00 1,50 0,94 2,36 2,00 2,75 1,50 1,84 1,60 3,50 1,00 2,94 2,36 0,00 0,71 0,00 5,00 0,00 1,00 2,50 0,70 0,50 1,41 2,41 4,50 0,00 2,36 2,36 5,00 2,50 1,50 10,00 AP AP, BM AP, BM AP, GB, RO AP, GB, RO AP AP AP, GB, RF AP AP, AW, GB, MR, RO AP, GB AP, GB, RO AP, AW, BM, MR AP, AW, BM, MR AP AP 1,50 1,00 AP, BM AP 5,00 2,50 4,00 2,50 AP, BM 4,11 5,10 4,03 6,94 AP, BM, RA 2,05 3,30 3,30 2,87 AP, BM, RA 5,27 4,71 5,53 5,34 AP, AW, BM, GB, MR, RA 0,00 0,00 2,36 0,00 AP, MR, RA
Cambridge Park
Wynberg proper
Strijdom Park
Kya Sand
Clayville/ Olifantsfontein
Chloorkop
Amalgam
Crown Mines
67
Industria
Booysens/ Booysens Reserve/ Ophirton
Village Main/ Village Deep/ New Centre
Benrose
Steeledale/ Electron/ Tulisa
Aeroton
Devland/ Nancefield
Cleveland/ Heriotdale
Newlands/ Martindale
Kew/ Wynberg East
Bramley View/ Lombardy West
Marlboro South (Alexandra)
Commercia
Table 8.3 (continued) Standard deviation from mean prime industrial market rentals as in 2011:3
Kramerville/ Eastgate X12 & X13 3,54 2,87 5,85 0,00 7,50 0,94 3,56 2,36 0,00 2,50 2,50 0,00 0,00 0,00 3,50 0,00 4,00 2,36 0,00 1,87 1,50 0,00 2,36 0,00 0,00 1,00 0,94 3,30 4,32 4,78 0,00 2,36 0,00 0,00 1,00 AP AP AP, RO AP AP, RO AP, RO 7,50 7,50 7,00 5,50 AP AP AP AP, BM, GB, RO AP, BM, GB, RO AP, AW, MR AP 2,50 2,50 2,50 2,50 AP, AW AP, RA 2,50 2,50 0,00 1,50 AP, BM AP 3,42 2,92 1,41 2,45 AP, BM, GB, RO 2,87 1,30 1,95 1,88 AP, GB, MR, RA 3,64 2,17 2,17 3,54 AP, BM, GB, MR, RA BM
2,17
2,17
2,06
0,43
0,83
AP, AW, GB, RA
Centurion
Linbro Park
Wesco Park/ Eastgate X3,X11,X6,X8/ Marlboro North (New)
City Deep
North Riding
Samrand Centurion
Barbeque Downs
68
Selby Ext 12/ 13/ 15/ 19/ 20/ 24/ City West
Selby Ext 5/ 10/ 14/ 18
Selby Ext 11
Selby Ext 3/ 4/ 6
Denver (Old)
Denver (New)
Kyalami Business Park
Reuven
Selby (Old)/ Selby X2/ Park Central
Robertsham
Fordsburg/ Mayfair
West Rand
Lea Glen
Honeydew X19, 20, 21 & 22
Stormill
Chamdor
Factoria 1,00 5,00 1,50 2,05 2,50 3,77 1,41 1,30 2,28 2,62 2,14 3,50 3,56 2,59 0,00 3,14 3,61 1,80 0,00 3,14 3,50 2,10 3,30 4,71 2,71 3,50 3,19 2,24 0,00 3,01 2,05 1,41 1,22 2,17 0,00 2,05 2,94 2,87 6,00 3,30 2,14 0,00 3,43 1,66 0,87 0,00 3,77 0,94 0,00 2,36 2,36 2,50 2,14 0,47 4,19 3,30 4,00 2,05 3,30 4,08 2,94 2,50 3,50 1,50 0,00 AP, DO AP, BM, MR, RO AP, BM, MR AP, BM, MR, RO AP, BM, DO, MR, RO AP AP, DO, MR, RO AP, BM, MR, RO AP, DO, RO AP, BM, DO, MR, RO AP, RO AP, BM, DO, MR, RO AP, BM, GB, REW, RO AP, BM, GB AP AP, BM, DO, AP 2,50 0,00 2,50 0,00 AP, RO 1,00 0,50 1,50 5,00 AP, RO AP AP AP
2,50
2,50
4,00
1,00
1,00
AP, RO
Randfontein: Delporton/ Aureus
Boltonia
Roodepoort:
Industria North
Robertville
Laserpark
East Rand
Elandsfontein
69
Tunney/Greenhills
Henville
Meadowbrook/Wilbart
Sunnyrock
Rustivia/Activia Park
Eastleigh
Sebenza Ext 14
Spartan Ext 16 (Sebenza Link) + Ext 1,3,7
Isando
Isando 3
Jet Park
Alrode & Xs
Alrode South
Alberton
Aeroport/ Spartan Ext 2
Rustivia
Delville 1,41 2,42 2,17 2,54 2,61 1,63 0,43 4,38 4,71 10,00 7,50 7,50 5,00 2,50 1,00 AI, AP AP AP 5,00 3,54 0,94 1,00 4,38 0,00 0,00 0,00 0,43 1,79 0,87 2,36 1,79 1,63 1,41 2,50 2,71 0,87 1,24 1,63 AP, BN, MR, RO AP, BM, BN, MR, RO AP, GB, MR, RO AP, BM, GB, MR, RO AP, BM AP AP AP AP AP AP AP 2,29 3,54 3,82 3,40 AP, BM, BN, GB, HN AP, BM, BN, MR, RO 2,59 2,18 2,89 2,50 AP, BM, BN, MR, RO 1,75 1,69 1,88 2,00 1,41 1,30 0,47 2,16 AP, BM, GB, MR, RO
2,05
2,17
2,92
0,50
0,50
AP, HN, MR, RF AP, BM, BN, GB, HN, MR, REW, RO
Roodekop
Knights
Spartan Proper
Founders View
70
Longmeadow
Far East Rand
Benoni South
New Era/ Vulcania
Nuffield
Fulcrum
Apex
Labore Brakpan
Pretoria
Mitchell St
Koedoespoort
Waltloo/ Despatch
Silverton/ Silvertondale 2,50 0,00 2,50 0,00 AP AI, AP ES ES ES ES ES ES ES ES HH HH 5,00 2,50 AP AI, AP 7,50 AI, AP 5,00 5,00 AI, AP AI, AP AI AI 5,00 2,50 AI, AP AI, AP
2,50
2,50
2,50
AI, AP
Samcor Park
Sunderland Ridge
Hermanstad
Kirkney
Gateway
Pretoria North
71
Silvertondale X1
Brits
Klerksoord
Rosslyn
Polokwane
Lebowakgomo
Superbia
Industria
Ladine
Futura
Laboria
Magna Via
Seshego
Nelspruit
Nelspruit East
Nelspruit West
Rockys Drift 2,89 1,41 2,12 1,73 2,12 0,00 1,61 0,00 3,54 1,41 3,86 2,52 3,54 7,07 6,36 4,95 7,07 6,36 4,95 3,54 3,54 7,07 7,07 1,73 1,71 4,24 2,08 3,54 3,54 4,95 2,63 1,41 3,54 7,07 7,07 2,52 2,52 2,52 0,00 0,00 1,73 1,73 2,52 4,95 3,20 1,50 3,54 7,07 6,36 CR, ML 1,61 1,53 1,73 1,73 0,00 0,00 3,54 3,54 2,12 2,12 2,12 CR, PC CR, PC CR, ML, PC CR, ML, PC CR, ML, PC CRM PC CR, LS, ML, PC CR, LS, ML, PC CR CR, ML CR, MI CR, PC CR, PC CR, PC 1,73 0,50 1,15 2,00 1,41 1,41 0,00 0,00 CR, PC CR, ML, PC 1,15 1,15 1,15 1,15 CR, MI, PC 2,83 2,12 1,41 CR, PC 2,89 3,28 2,89 1,73 CR, ML, PC HH
HH
Riverside Park
Durban
Springfield Park
Mayville
Phoenix
72
Jacobs
Mobeni
Prospecton
Ithala Industrial Estate
Pinetown Central
New Germany
Isipingo
Edwin Swales Drive
Glen Anil
Brickfield Rd
Verulam
Canelands
Tongaat
New Westmead/ Mahogany 3,30 2,71 5,77 3,61 7,07 8,49 3,50 2,16 0,00 3,16 1,00 3,50 2,16 0,83 1,20 2,50 4,50 0,47 2,00 2,05 2,50 8,49 7,64 6,29 3,00 1,00 2,05 3,50 7,07 5,01 5,26 5,32 6,29 1,00 2,50 4,50 PC PC PC CR, LS, ML PC CR, LS, ML, PC FO FO FO BR, DN, QS GB, QS, SWA AN, BR, DL, LE, QS AN, BR, DL, DN, LE, QS AN, BR, DL, DN, LE 4,04 2,31 2,31 2,31 5,77 6,81 6,81 5,29 CR, MI, PC CR, MI, PC 0,71 0,71 0,00 0,71 LS, PC PC PC 3,32 2,58 2,87 3,10 CR, LS, ML, PC 2,12 1,73 2,89 1,41 LS, ML, PC 4,24 3,30 3,37 3,50 CR, LS, ML, PC
2,71
4,04
3,30
3,10
2,87
CR, LS, MC, PC
Westmead
Maxmead
Falcon Park
River Horse Valley Business
Mount Edgecombe
73
Umgeni Park
Hammersdale
Cato Ridge
Lower Umfolozi
Empangeni
Richards Bay
Richards Bay CBD (Dollar Drive)
Cape Peninsula
Viking Place
Glosderry
Montague Gardens
Marconi Beam
Killarney Gardens 0,00 1,00 1,41 1,50 1,50 1,50 1,41 4,00 1,89 1,00 1,60 0,98 2,50 0,98 1,00 0,80 1,09 0,50 0,82 1,34 0,82 0,49 1,00 3,74 3,77 2,50 1,41 0,00 1,25 0,98 0,94 5,00 7,50 2,50 3,50 7,50 2,05 0,47 0,50 2,00 2,05 1,89 5,50 0,47 0,00 2,00 1,70 1,89 GB, QS, WS GB, QS DN, GY, QS GY, QS AN, BR, DL, DN, GY, LE, QS AN, BR, DL, DN, GY, LE, QS AN, BR, DL, GY, LE AN, BR, DL, DN, GY, LE AN, DL, DN, GY, LE, QS AN, DL, DN, GY, LE 2,50 4,50 2,50 3,50 2,00 0,50 0,50 2,00 1,41 0,47 2,05 GB, WS GB, WS GB, WS GB GB, QS, WS 1,00 1,00 0,00 0,00 GB, WS GB QS BR 0,94 0,50 0,50 AN, BR, DL, DN, LE, QS
0,00
1,79
1,50
2,50
AN, BR, DL, LE, QS
Racing Park
Atlantis
Athlone 1 & 2
Lansdowne Nerissa
Sand Industria
Ottery Hillstar
Ottery Sunset
74
Diep River
Elfindale
Philippi West (west of Vanguard
Gugulethu Industrial (Brown Farm)
Retreat/ Steenberg
Capricorn Park
Maitland
Ndabeni
Airport
Epping 1 & 2
WP Park
Elsies River (excl, Central Park)
Parow Beaconvale
Tygerberg Business Park
Parow Industria 1,30 1,30 0,94 1,30 0,00 0,00 0,50 2,12 0,00 1,00 0,47 0,00 0,25 4,00 1,25 2,25 4,00 0,25 0,75 2,50 0,00 1,00 1,00 2,50 1,00 1,00 2,00 1,50 1,50 0,00 1,00 1,00 ZB MJ, PS MJ, PS MJ, PS MJ 1,50 0,50 0,50 2,50 2,00 1,00 0,87 1,00 1,50 AN, DL, LE AN, DL, DN, LE AN, DL, DN, LE AN, DL, DN, LE AN, DL, LE AN, DL, DN, LE AN, DL, DN, LE 1,70 3,30 2,50 2,50 AN, DL 1,50 0,50 0,50 0,50 AN, DL, DN, LE 2,00 0,00 0,00 0,00 AN, DL, DN, LE DN 1,30 2,00 1,50 1,00 DL, DN, GY, LE
1,00
1,34
0,98
2,05
1,70
AN, DL, DN, GY, LE
Parow East
Bellville Oakdale
Bellville Triangle
Kraaifontein
Everite Brackenfell
75
Kuils River
Blackheath
Okavango Park
Firgrove
The Interchange (Somerset
Strand Halt
Broadlands
George
George
Port Elizabeth
Deal Party
North End
Korsten/ Neave/ Sidwell/ Sydenham
South End Walmer
Uitenhage: Volkswagen area/Nelson Mandela Bay/Logistics Park 1,50 2,25 25,00 70,00 40,00 10,00 2,25 0,25 MJ, PS CC, EK CC, EK CC, EK CC, EK CC, EK CC, EK CC, EK CC, EK TE TE TE TE 1,00 1,00 1,00 2,75 MJ, PS 1,50 0,00 1,50 MJ, PS 3,25 1,75 1,75 3,50 MJ, PS 1,25 1,25 0,25 1,00 MJ, PS 4,75 3,75 2,75 4,0 MJ, PS MJ MJ
Uitenhage: Hella/Kruisrivier
Struandale
Markman Township
Perseverance
Walmer
Greenbushes
Fairview
76
Bloemfontein
Hilton
East End
Struandale
Harvey Road
Old Industrial
Hamilton: Mill St
Hamilton: G Lubbe St
Estoir
Windhoek
North
Lafrenz
South
Prosperita
77
Notes to the industrial rental tables

1. The rentals are the achievable or market rates for the quarter shown in the table heading, and apply to industrial and warehouse space for the area sizes indicated. The rentals are the averages of the rates as per our panels of experts in the various cities. The rental rates assume gross leases, market escalation rates and leases of 3 to 5 years. In terms of a gross lease, the tenant in a stand-alone building typically pays only for his refuse removal, water and electricity, as well as internal maintenance and increases in rates and taxes. He provides and pays for his own security. All other expenses are for the account of the landlord. In a park the tenant pays, in addition to his gross rental, his pro rata share of security costs, security lighting and landscaping. The rental rates also apply to the office portion, where this is less than 10% of the total building area. For larger office portions, the office rental is, as a rule of thumb, about 150% of the industrial rental rate. Prime space is space that is easily lettable because it satisfies each of the following prerequisites: a. generally in a good condition; b. satisfactory macro access (i.e. access to freeway); c. satisfactory micro access (i.e. from street to building); d. proper loading facilities; e. eaves >4,0m (excluding micro/mini units); f. on ground level; g. adequate three-phase electrical power; h. clear spans. The eight conditions above are prerequisites for space to be considered prime. However, a building may possess additional enhancements that could improve lettability through increasing the size of the potential tenant pool. Such enhancements could include sufficient office accommodation, adequate parking, sprinkler systems, masonry up to sill height, adequate floor loadings, roof insulation, sufficient yardspace and a good location (as opposed to access). 6. Secondary space is space which is not classifiable as prime because it does not satisfy all eight prerequisites for prime space listed above. Such space is typically old buildings or structures which have been haphazardly renovated. They would have poor access, too little yardspace or office accommodation, inadequate goods lifts, no three-phase power and obsolete electrics and ablution facilities. Such space is often (but not exclusively) found in highly urbanised areas.
2. 3.
4.
5.
78
7.
Vacancy scale for industrial townships. The vacancy levels are based on a scale of 0 to 9 as shown below: 0 Nil 1 2 3 Low 4 5 6 Medium 7 8 9 High
The scale should be interpreted as follows: 0 = no vacancy 1 = low vacancy; 2 = low vacancy 3 = low+ vacancy 4 = medium vacancy; 5 = medium vacancy 6 = medium+ vacancy 7 = high vacancy; 8 = high vacancy 9 = high+ vacancy where: low = <10% vacancy; medium = 10% - 20% vacancy; high = >20% vacancy. 8. For notes on how to use a regression equation in order to interpolate a rental rate, see Annexure 3.
79
Table 8.4 Predominant market escalation rates (%) for industrial leases
Average as in quarter 2011:3 5-year leases Mean Central Witwatersrand West Rand East Rand Far East Rand Pretoria Vereeniging Polokwane Nelspruit Klerksdorp Durban Pietermaritzburg Ladysmith Newcastle Isithebe Lower Umfolozi Cape Peninsula George Port Elizabeth East London Bloemfontein Windhoek
Notes: 1. These are the averages of the predominant i.e. most often achieved market escalation rates as reported by our panel of experts.
SD 1,3 1,4 1,3 0,5 0,25 0,5 1,0 -
N 6 4 7 3 1 2 1 4 1 1 8 2 2 1
9,5 9,9 9,2 9,7 10,0 8,5 8,0 8,75 9,0 8,0 8,5 8,0 9,0 10,0
80
Table 8.5 Indicative operating expenses for industrial buildings

As in quarter 2011:3 in rands per m per month Stand-alone R/m Central Witwatersrand West Rand East Rand Far East Rand Pretoria Vereeniging Polokwane Nelspruit Klerksdorp Durban Pietermaritzburg Ladysmith Newcastle Isithebe Lower Umfolozi Cape Peninsula George Port Elizabeth East London Bloemfontein Windhoek 5,60 5,38 4,84 4,00 4,50 5,50 7,00 9,88 2,40 5,00 2,50 15,00 4,75 10,00 SD 1,16 1,52 0,21 0 1,67 1,15 4,75 N 5 4 5 2 1 1 1 4 1 6 1 1 2 1 R/m 8,42 6,83 7,88 5,75 8,00 9,00 10,00 11,85 3,50 6,88 2,20 0,00 10,00 Park SD 0,93 1,31 0,22 0,75 1,65 0,89 N 6 3 4 2 1 1 1 3 1 6 1 1 1
Notes: The operating expenses are estimates for the past 12 months and are as per our expert panellists in the various cities, The following items are included: stand-alone buildings: rates and taxes and insurance (incl, Sasria) and park buildings: as above, plus security, security lighting, landscaping and management,
81
Industrial stand values
Chapter 9: Industrial stand values
Values of industrial stands are struggling

Written by Anneke Meijers Similar to industrial rentals, the market values of serviced industrial stands are showing poor to moderate growth.
Growth in stand values vs growth in rentals (National)
100 Stand value Rental r = 0,7
As for trends in the countrys foremost industrial regions, stand values in Durban (+9%) showed the strongest growth in the third quarter of 2011.
Nominal industrial stand values (1.000m units)
80
1400 1200 1000 800 600 R/m (log scale)
Port Elizabeth Central Witwatersrand Durban Cape Peninsula
Growth (%; y-o-y)
60
400
40
20
200
Smoothed
-20 92 94 96 98 00 02 04 06 08 10 Source of data: Rode's Time Series
96
98
00
02
04
06
08
10
The tendency for the growth in the industrial stand values to follow the growth in rentals is depicted in the graph that follows. Evident from it is the robust relationship between the former and the latter, with rentals over time explaining roughly 70% (r = 0,7) of the change in stand values. Also illustrated in the graph is how during the industrial-property boom years between 2006 and 2008 stand values accelerated much faster than industrial rentals. However, since 2008 when economic uncertainty and weakness reared their heads stand values have decelerated faster. Stand values are evidently more volatile than rentals.
This was followed by the Central Witwatersrand, where the market values of stands were up by about 1%. In the Cape Peninsula (-3%) and Port Elizabeth (-14%) stand values were actually lower than they were a year ago.
Real industrial stand values (1.000m units) 2005 rands
1000 800 600 R/m (log scale) 400
Port Elizabeth Central Witwatersrand Durban Cape Peninsula
200
Smoothed
96
98
00
02
04
06
08
10
82
Over the same period, building-cost inflation as measured by the BER BCI is expected to have accelerated to a yearly rate of 6% (see Chapter 12 for an explanation hereof). This, of course, implies that in real terms industrial rentals in all of these industrial areas are actually lower than they were a year ago. Naturally, a strong recovery in stand values will only come on the back of a sustained improvement in industrial rentals. This is so given the strong tendency for these two variables to move together over time. For now, however, prospects for industrial rentals remain weak as a result of an economy struggling to find its feet amidst uncertain global economic conditions not to mention the adverse impact that the current slowdown in manufacturing output is likely to have on the demand for industrial property.
The remainder of this chapter includes market values for level, serviced stands in named industrial townships. The industrialland-value tables contain regression parameters in order to allow readers to interpolate land values for area sizes other than those given in the tables. This is necessary because the relationship between price and stand size is not linear. For more details on how to use these equations, refer to Annexure 3 (annexure-page XII). This concludes our chapter on industrial stand values.
PS: If you do not understand a term used in this article, please consult the Glossary (Annexure 1).
Table 9.1 Mean market values for serviced and level industrial stands in quarter 2011:3 (R/m excl VAT)
Area size in m 1.000 2.000 5.000 10.000
Vacancy grade
Central Witwatersrand 1.550 475 1.000 675 500 500 700 1.000 800 900 633 725 800 400 695 475 250 183 525 525 450 475 250 183 525 525 450 695 400 850 600 350 657 450 225 167 475 475 450 700 690 633 633 800 700 750 700 650 700 650 630 350 625 400 275 167 425 425 350 1.000 900 900 2,0 1,0 0,0 1,0 1,0 2,0 1,0 1,5 1,5 2,0 1,3 1,5 2,0 700 700 700 1,0 500 500 500 3,0 467 467 417 3,5 675 675 625 3,5 6,728 6,685 6,215 6,551 7,300 7,294 7,567 6,379 6,972 6,489 6,891 6,691 5,358 5,566 6,944 6,944 6,806 1.000 1.000 850 1,7 7,358 450 450 450 0,5 6,286 1.550 1.550 1.550 0,0 7,346 0,000 -0,002 -0,017 -0,006 -0,008 0,000 0,000 -0,012 -0,015 -0,019 0,002 -0,010 -0,058 -0,006 -0,008 -0,009 0,003 -0,002 -0,012 -0,012 -0,011 -0,58 -0,91 -0,91 -0,94 -0,86 -0,96 -0,82 0,91 -0,98 -0,91 -0,86 -0,99 -0,99 0,51 -0,86 -0,99 -0,99 -0,91
Cambridge Park
Wynberg proper
Strijdom Park
Kya Sand
Chloorkop
Amalgam
Crown Mines
83
Industria
Benrose
Steeledale/ Electron/ Tulisa Park
Aeroton
Devland/ Nancefield
Kew/ Wynberg East
Commercia
Table 9.1 (continued) Mean market values for serviced and level industrial stands in quarter 2011:3 (R/m excl VAT)
Area size in m 1.000 2.000 5.000 10.000
Vacancy grade
Kramerville/ Eastgate X12 & X13 1.200 1.100 1.000 775 800 800 650 1.000 800 900 650 725 725 1.000 900 800 900 450 725 500 1.200 725 775 800 450 718 500 1.200 675 800 1.000 725 690 1.000 750 650 750 450 681 487 1.200 625 725 690 600 550 850 800 650 500 680 680 950 650 625 700 450 647 465 1.000 550 750 700 600 975 850 775 650 600 600 1,0 1,0 1,0 0,0 1,0 1,0 1,0 0,0 1,0 0,5 0,0 1,0 1,4 1,3 1,0 3,0 6,440 7,595 7,389 -0,004 -0,022 -0,018 800 700 700 3,0 750 700 600 1,5 750 733 650 2,0 7,145 7,515 7,182 6,775 7,732 7,515 7,733 7,247 6,417 6,811 7,050 7,707 7,520 7,501 6,109 1.000 1.000 950 1,0 7,050 1.075 1.000 950 2,0 7,467 1.200 1.200 1.200 1,0 7,090 0,000 -0,017 -0,006 -0,013 -0,021 -0,012 -0,006 -0,026 -0,021 -0,027 -0,015 -0,006 -0,005 -0,006 -0,024 -0,020 -0,019 0,000
950
950
950
950
1,5
6,856
0,000
-0,97 -0,91 -0,98 -0,99 -0,86 -0,86 -0,97 -0,99 -0,99 -0,96 -0,95 -0,93 -0,91 -0,95 -0,92 -0,89 -
Centurion
Linbro Park
Wesco Park/ Eastgate X3,X11,X6,X8/ Marlboro North (New)
City Deep
North Riding
Samrand Centurion
Barbeque Downs
84
Selby Ext 5/ 10/ 14/ 18
Selby Ext 11
Selby Ext 3/ 4/ 6
Denver (Old)
Denver (New)
Reuven
Robertsham
Fordsburg/ Mayfair
Central Witwatersrand
West Rand -0,99 -0,91 -0,98
Lea Glen
Honeydew X19, 20, 21 & 22
Stormill
Area size in m 1.000 2.000 5.000 10.000
Vacancy grade
Spartan Ext 16 (Sebenza Link) + Ext 1, 3, 7 800 575 800 575 575 900 445 450 517 1.000 418 650 415 750 900 1.050 700 711 850 700 750 867 1.300 700 731 800 650 390 650 383 393 540 375 700 900 1.350 775 697 750 600 1.000 900 537 467 400 375 350 462 900 300 475 360 700 900 1.350 750 689 700 600 1,1 1,0 1,0 7,314 7,017 -0,015 -0,010 415 392 365 1,0 1,0 1,2 1,0 1,5 1,0 1,0 0,0 1,5 2,0 900 850 800 0,0 500 500 1,0 450 450 437 4,0 7,183 6,666 6,808 6,709 7,300 6,890 7,523 6,429 6,877 6,748 6,331 6,263 575 550 510 1,7 6,729 6,364 800 750 850 0,5 6,578 575 550 510 1,7 6,877 800 800 800 0,5 6,685 0,000 -0,006 0,005 -0,008 -0,003 0,000 -0,012 -0,008 -0,009 -0,008 -0,012 -0,012 -0,021 -0,005 -0,006 0,002 0,024 0,006
750
750
650
650
1,0
7,153
-0,012
-0,86 -0,86 0,51 -0,99 -0,82 -0,99 -0,95 -0,89 -0,83 -0,86 -0,93 -0,97 -0,91 -0,86 0,41 0,67 0,69
Isando
Isando 3
Jet Park
Alrode & Xs
Alrode South
Alberton
Rustivia
85
Delville
Roodekop
Knights
Spartan Proper
Founders View
Longmeadow
Panorama/ Kempton Park
East Rand
Far East Rand -0,96 -0,82
Benoni South
Area size in m 1.000 2.000 5.000 10.000
Vacancy grade
New Era/ Vulcania 350 350 650 350 850 556 800 800 800 600 450 600 550 400 1.000 1.000 1.000 450 500 1.000 750 1.000 425 500 425 450 550 500 400 1.000 1.000 1.000 450 500 600 600 550 450 625 600 800 800 800 600 450 600 475 400 800 800 800.00 450 500 800 800 800 800 800 800 0,0 0,0 1,0 3,0 3,0 1,0 3,0 1,0 1,0 1,0 2,0 3,0 512 475 444 2,9 6,685 6,685 6,685 6,456 6,401 6,397 6,807 6,080 7,526 7,526 7,526 6,026 6,215 0,000 0,000 0,000 -0,001 -0,005 0,000 -0,009 -0,001 -0,022 -0,022 -0,022 0,001 0,000 800 750 700 1,0 300 275 250 3,0 6,796 7,314 650 600 550 5,0 7,016 300 275 250 4,0 6,796 300 275 250 4,0 6,796 -0,009 -0,009 -0,012 -0,009 -0,015
350
300
275
250
4,0
6,796
-0,009
-0,89 -0,89 -0,89 -0,99 -0,89 -0,96
Nuffield
Fulcrum
Apex
Labore Brakpan
Far East Rand
Pretoria -0,41 -0,41 -0,96 -0,41 -0,91 -0,91 -0,91 0,41 -
Mitchell St
86
Koedoespoort
Waltloo/ Despatch
Samcor Park
Sunderland Ridge
Hermanstad
Kirkney
Gateway
Pretoria North
Silvertondale X1
Brits
Klerksoord
Area size in m 1.000 2.000 5.000 10.000
Vacancy grade
Rosslyn 675 1.000 1.000 600 1.000 900 1.550 1.200 1.375 895 1.550 1.200 1.375 1.000 580 1.000 800 550 950 775 1.450 975 1.500 1.000 800 500 500 500 850 587 1.450 975 1.500 1,0 1,0 4,0 5,0 2,8 1,5 2,5 2,0 7,594 7,863 -0,035 -0,109 9,041 9,041 6,936 7,407 -0,058 -0,058 -0,011 -0,017 619 671 627 1,7 -
500
475
500
500
3,0
6,140
0,001
0,41
Pretoria
Polokwane -
Lebowakgomo
Superbia
Industria
Ladine
Futura
Laboria
87
Magna Via
Seshego
Polokwane
Nelspruit -0,99 -0,99 -1,00 -0,99
Nelspruit East
Nelspruit West
Rocky's Drift
Riverside Park
Nelspruit
Durban -0,92 -0,92 -
Springfield Park
Mayville
Phoenix
Area size in m 1.000 2.000 5.000 10.000
Vacancy grade
Briardene Industrial Park 1.700 1.167 1.433 1.300 1.033 1.300 1.400 1.333 1000 1.366 1.000 800 1.317 1.250 850 1.333 600 450 1.267 1.200 817 1.267 1.167 1.000 967 1,5 1,0 1,0 1,0 1,0 1,0 1,0 3,5 3,5 1.333 1.267 1.200 2,0 1.250 1,0 8,331 7,730 7,657 7,466 7,731 7,291 -0,138 -0,094 -0,056 -0,040 -0,112 -0,013 -
1.600
1.600
1.600
1.600
3,0
-0,91 -0,95 -0,99 -0,87 -0,97 -0,42 -
Jacobs
Mobeni
Prospecton
Pinetown Central
New Germany
Kwa Debeka Industrial Park
88
Isipingo
Edwin Swales Drive
Glen Anil
Brickfield Rd
Verulam
Canelands
Tongaat
New Westmead/ Mahogany Ridge
Westmead
Maxmead
Falcon Park
Area size in m 1.000 2.000 5.000 10.000
Vacancy grade
River Horse Valley Business Estate 1600 450 500 1.235 1.500 2.250 1.750 2.000 1.150 667 1.000 1.000 1.000 1.000 500 1.050 1.000 500 1.000 1.000 2.000 1.800 1.500 1.250 2.000 1.750 1.800 1.500 1.800 1.000 500 1.000 1.000 1.500 1.500 1.500 0,0 1,0 1,0 1,0 1,5 4,5 1,0 1,0 1.143 1.090 1.032 2,2 500 483 483 4,5 383 367 350 5,0 6,768 6,341 1.000 1.000 900 1,0 -0,101 -0,018 1600 1800 1700 2,0 7,098 0,040
1.000
1.000
1,0
0,72 -0,93 -0,92
Mount Edgecombe
Umgeni Park
Hammersdale
Cato Ridge
Durban
Cape Peninsula 7,090 7,313 8,316 8,082 7,993 7,166 7,059 6,908 6,908 0,000 0,000 -0,042 -0,026 -0,024 -0,003 -0,012 0,000 0,000 -0,91 -0,49 -0,86 -0,38 -0,94 -
89
Viking Place
Glosderry
Montague Gardens
Marconi Beam
Killarney Gardens
Racing Park
Atlantis
Athlone 1 & 2
Lansdowne Nerissa
Sand Industria
Ottery Hillstar
Ottery Sunset
Diep River
Elfindale
Area size in m 1.000 2.000 5.000 10.000
Vacancy grade
Monwood/ Philippi East 850 1.400 1.500 1.300 1.300 1.450 825 1.200 1.267 1.333 1.200 1.200 925 1.000 650 1.000 1.050 750 625 1.100 1.100 875 900 650 925 1.000 700 575 1.000 1.100 1.067 975 950 1.200 750 750 325 875 950 650 500 900 1.167 9.83 1.067 975 800 725 700 800 900 800 900 1.000 700 650 550 700 800 500 500 700 1.425 1.000 900 1.200 1.100 925 1,5 1,0 1,5 2,3 2,3 2,3 1,0 3,0 2,0 2,0 1,0 1,0 3,0 3,5 1.275 1.217 1.100 3,7 1.300 1.100 925 1,5 1.250 1.000 900 2,0 850 700 650 6,0 8,525 7,426 7,584 8,140 7,249 7,906 7,905 8,054 7,984 7,469 7,721 8,223 6,977 7,910 7,735 7,780 7,148 8,117 8,625 7,674 -0,024 -0,053 -0,050 -0,014 -0,021 -0,037 -0,014 -0,029 -0,028 -0,036 -0,031 -0,017 -0,024 -0,037 -0,011 -0,031 -0,027 -0,027 -0,013 -0,036
500
500
400
400
9,0
7,046
-0,012
-0,86 -0,94 -0,93 -0,91 -0,98 -0,99 -0,92 -0,94 -0,92 -0,85 -1,00 -0,91 -0,73 -0,94 -0,96 -0,98 -0,99 -0,99 -0,99 -0,84 -0,98
Philippi West (west of Vanguard Dr)
Gugulethu Industrial (Brown Farms)
Retreat/ Steenberg
Capricorn Park
Maitland
Ndabeni
Airport
Epping 1 & 2
90
WP Park
Elsies River (excl. Central Park)
Parow Beaconvale
Parow Industria
Parow East
Bellville Oakdale
Bellville Triangle
Kraaifontein
Everite Brackenfell
Kuils River
Blackheath
Area size in m 1.000 2.000 5.000 10.000
Vacancy grade
Okavango Park 1.144 825 950 850 1.000 400 150 500 162 525 1.100 375 850 657 150 500 162 525 1.100 375 850 665 400 925 875 300 100 500 162 515 1.025 262 800 606 800 775 950 825 775 675 675 825 775 875 300 50 400 150 490 975 250 800 590 1,0 1,0 1,0 0,5 6,0 2,5 1,0 4,0 1,0 2,0 7,372 7,382 7,001 7,292 7,063 8,442 6,833 5,313 6,473 7,405 7,390 6,971 -0,016 -0,015 -0,007 -0,011 -0,012 -0,012 -0,011 -0,001 -0,004 -0,015 -0,015 -0,006 1.083 976 907 2,4 -
1.000
1.000
900
800
1,0
7,627
-0,023
-0,99 -
Firgrove
The Interchange (Somerset West)
Strand Halt
Broadlands
Cape Peninsula
George -
George
George
91
Port Elizabeth -0,85 -0,86 -0,76 -0,79 -0,86 -0,99 -0,91 -0,91 -0,99 -0,98 -0,89 -0,86
Deal Party
North End
South End Walmer
Uitenhage: Volkswagen area/ Nelson Mandela Bay Logistics Park
Uitenhage:Hella/ Kruisrivier
Struandale
Markman Township
Perseverance
Walmer
Greenbushes
Fairview
Port Elizabeth
Area size in m 1.000 2.000 5.000 10.000
Vacancy grade
Bloemfontein 300 375 250 200 180 450 304 1.700 1.250 3.000 1.700 1.912 1.912 1.912 1.700 1.700 3.000 3.000 1.250 1.250 1.700 1.700 1.500 1.000 2.700 1.500 1.675 290 237 157 1,5 3,0 4,0 1,0 1,0 2,2 7,785 7,749 8,298 7,785 -0,022 -0,028 -0,034 -0,022 -0,91 -0,91 -0,91 -0,91 420 400 300 2,0 160 130 60 2,0 180 180 80 1,0 275 180 150 1,0 7,389 7,785 8,377 7,245 360 280 200 2,0 7,888 290 250 150 1,0 7,749 -0,017 -0,020 -0,013 -0,013 -0,013 -0,016 -0,99 -0,99 -0,91 -0,94 -1,00 -0,98
Hilton
East End
Harvey Road
Old Industrial
Hamilton: Mill St
Estoir
Bloemfontein
92
Windhoek
North
Lafrenz
South
Prosperita
Windhoek
Table 9.2 Standard deviation from mean market values for serviced and level industrial stands in quarter 2011:3
(R/m excl VAT) Area size in m 1.000 50,00 AP, RA AP, RA AP, GB, RA AP, RA AP, BM, MR AP AP 50,00 70,00 42,50 25,00 50,00 23,57 75,00 75,00 50,00 25,00 47,14 25,00 25,00 25,00 47,14 75,00 AP, GB AP, AP AP, GB, RA AP, AW, MR AP AP AP AP AP, BL, RO AP, RO AP AP AP, RO 25,00 100,00 25,00 50,00 47,14 125,00 55,00 25,00 50,00 23,57 55,00 100,00 47,14 47,14 110,00 62,36 62,36 102,74 25,00 25,00 25,00 100,00 100,00 50,00 50,00 50,00 50,00 2.000 5.000 10.000 Contributors
Central Witwatersrand
Cambridge Park
Wynberg proper
Strijdom Park
Kya Sand
Chloorkop
Amalgam
93
Crown Mines
Industria
Benrose
Steeledale/ Electron/ Tulisa Park
Aeroton
Devland/ Nancefield
Kew/ Wynberg East
Halfway House: hi-techstrip
Table 9.2 (continued) Standard deviation from mean market values for serviced and level industrial stands in quarter 2011:3
(R/m excl VAT) Area size in m 1.000 75,00 AP, AW AP AP, GB AP AP, BM, GB, MR, RA AP, GB, RA AP, MR, RO AP, MR 125,00 40,00 25,00 225,00 10,00 150,00 25,00 20,00 125,00 AP AP AP, RA AP AP AP AP, RO AP, RO AP 200,00 AP AP, RA AP AP 50,00 81,65 0,00 25,00 200,00 25,00 25,00 25,00 225,00 150,00 50,00 0,00 40,82 23,57 108,01 100,00 0,00 0,00 50,00 82,92 70,71 111,80 50,00 50,00 50,00 75,00 25,00 75,00 2.000 5.000 10.000 Contributors
Commercia
Kramerville/ Eastgate X12 & X13
Centurion
Linbro Park
Wesco Park/ Eastgate X3, X11, X6, X8/ Marlboro North (New)
City Deep
94
North Riding
Samrand Centurion
Barbeque Downs
Selby Ext 5/ 10/ 14/ 18
Selby Ext 11
Selby Ext 3/ 4/ 6
Denver (Old)
Denver (New)
Reuven
Robertsham
Fordsburg/ Mayfair
Table 9.2(continued) Standard deviation from mean market values for serviced and level industrial stands in quarter 2011:3
(R/m excl VAT) Area size in m 1.000 100,00 AP, RO AP AP, RO AP AP AP AP 75,00 150,00 0,00 75,00 0,00 25,00 0,00 25,00 89,27 25,00 25,00 15,00 50,00 70,71 25,00 25,00 AP AP AP, RO AP AP, BM AP, MR, RO AP AP, BM, MR, RO AP AP AP, GB AP, MR, RO AP, MR, RO AP, RO 25,00 25,00 150,00 150,00 75,00 25,00 150,00 25,00 75,00 75,00 125,00 150,00 100,00 87,50 85,00 2.000 5.000 10.000 Contributors
West Rand
Lea Glen
Honeydew X 19, 20, 21 & 22
Stormill
Chamdor
Factoria
Randfontein: Delporton/ Aureus
Boltonia
95
Roodepoort: Technikon/ Manufacta
Industria North
Robertville
Laserpark
East Rand
Elandsfontein
Tunney/ Greenhills
Henville
Meadowbrook/ Wilbart
Sunnyrock
Rustivia/ Activia Park
Eastleigh
Sebenza Ext 14
Spartan Ext 16 (Sebenza Link) + Ext 1, 3, 7
Isando
(R/m excl VAT) Area size in m 1.000 AP AP, MR, RO AP, BM, RO AP, BM AP AP AP 75,00 25,00 5,00 84,98 51,69 50,00 35,00 100,00 150,00 94,28 141,42 10,00 50,00 62,36 22,48 40,00 25,00 100,00 150,00 81,65 12,50 47,14 15,00 17,50 15,00 12,50 50,00 75,00 40,00 100,00 150,00 50,00 50,00 62,50 75,00 70,71 53,54 2.000 5.000 10.000 Contributors
Isando 3
Jet Park
Alrode & Xs
Alrode South
Alberton
Rustivia
96
Delville
AP, MR, RO AP, RO AP, MR, RO AP, RO AP, MR, RO AP, RO AP, RO AP AP, GB, MR AP, GB, MR, RO AP AP AP AP
Roodekop
Knights
Spartan Proper
Founders View
Longmeadow
Far East Rand
Benoni South
New Era/ Vulcania
Nuffield
(R/m excl VAT) Area size in m 1.000 AP AP AP AP AP AP 25,00 25,00 AI, AP AI, AP AP AI, AP AI, AP AI AP AI AI, AP AP AI, AP AP 25,00 100,00 25,00 2.000 5.000 10.000 Contributors
Fulcrum
Apex
Labore Brakpan
Pretoria
Mitchell St
97
Koedoespoort
Waltloo/ Despatch
Samcor Park
Sunderland Ridge
Hermanstad
Kirkney
Gateway
Lyttleton Manor X4/ X6
Pretoria North
Silvertondale X1
Brits
Klerksoord
Rosslyn
(R/m excl VAT) Area size in m 1.000 ES ES ES ES ES ES ES 175,00 ES HH HH HH HH CR, ML, PC CR, PC CR, MI, PC CR, PC CR, ML, PC CR, PC CR, PC 2.000 5.000 10.000 Contributors
Polokwane
Lebowakgomo
Superbia
Industria
Ladine
Futura
Laboria
Magna Via
98
Seshego
Nelspruit
Nelspruit East
Nelspruit West
Rocky's Drift
Riverside Park
Durban
Springfield Park
Mayville
Phoenix
North Coast Rd/ Briardene
(R/m excl VAT) Area size in m 1.000 250,00 124,72 169,97 300,00 94,28 300,00 235,70 81,65 262,47 141,42 131,23 250,00 70,71 249,44 200,00 94,28 200,00 62,36 205,48 100,00 PC CR, ML CR, MI CR, PC CR, PC CR PC CR, ML CR, LS, ML, PC CR, LS, ML, PC LS, ML, PC CR, LC, ML, PC PC PC LS, PC CR, PC, MI CR, PC, MI 124,72 163,30 124,72 235,70 205,48 200,00 CR, ML, PC CR, LS, ML, PC CR, LS, ML, PC CR, ML, PC CR, ML, PC 2.000 5.000 10.000 Contributors
Jacobs
Mobeni
Prospecton
Pinetown Central
New Germany
Isipingo
Edwin Swales Drive
99
Glen Anil
Brickfield Rd
Verulam
Canelands
Tongaat
New Westmead/ Mahogany Ridge
Westmead
Maxmead
Ring road Industrial Park
Falcon Park
River Horse Valley Business Estate
Mount Edgecombe
(R/m excl VAT) Area size in m 1.000 50,00 100,00 250,00 250,00 50,00 117,85 50,00 0,00 250,00 0,00 250,00 AW GB GB BR GB AN, BR, DN AN, BR, DN AN, BR AN, BR, DN AN, BR, DL, DN, LE 100,00 62,36 62,36 102,74 84,98 70,71 PC CR, LS, ML, PC CR, LS, ML, PC PC 2.000 5.000 10.000 Contributors
Umgeni Park
Hammersdale
Cato Ridge
Cape Peninsula
Viking Place
100
Glosderry
Montague Gardens
Marconi Beam
Killarney Gardens
Racing Park
Atlantis
Woodstock/ SaltRiver/ Observatory
Athlone 1 & 2
Lansdowne Nerissa
Sand Industria
Ottery Hillstar
Ottery Sunset
Diep River
Elfindale
Philippi West (west of Vanguard Dr)
(R/m excl VAT) Area size in m 1.000 GB, WA GY GY AN, BR, DN, GY AW, BR, GY AN, BR, GY AN, GY 0,00 0,00 100,00 50,00 75,00 0,00 25,00 100,00 75,00 0,00 25,00 125,00 50,00 0,00 AN, DN, GY AN, DN, GY AN, DN, GY GY AN, DN AN, DN AN, DN AN AN, DN AN, DN AN, DN AN AN, DN AN, DN 100,00 50,00 125,00 0,00 94,28 94,28 0,00 75,00 50,00 100,00 50,00 25,00 100,00 94,28 25,00 47,14 0,00 94,28 23,57 100,00 125,00 100,00 75,00 100,00 75,00 75,00 23,57 100,00 50,00 2.000 5.000 10.000 Contributors
Gugulethu Industrial(Brown Farms)
Retreat/ Steenberg
Capricorn Park
Maitland
Ndabeni
Airport
Epping 1 & 2
WP Park
101
Elsies River(excl. Central Park)
Parow Beaconvale
Parow Industria
Parow East
Bellville Oakdale
Bellville Triangle
Bellville South/Sacks Circle
Kraaifontein
Everite Brackenfell
Kuils River
Blackheath
(R/m excl VAT) Area size in m 1.000 AN ZB 2.000 5.000 10.000 Contributors
Okavango Park
Firgrove
The Interchange (Somerset West)
Strand Halt
Broadlands
George
George 329,06 50,00 37,50 175,00 100,00 125,00 150,00 25,00 37,50 17,00 100,00 125,00 150,00 10,00 40,00 37,50 165,00 175,00 137,50 200,00 75,00 75,00 50,00 25,00 125,00 175,00 175,00 25,00 75,00 50,00 190,00 225,00 150,00 200,00 315,71 312,58 321,39
102
Port Elizabeth MJ, PS MJ, PS MJ, PS MJ MJ MJ MJ MJ, PS MJ, PS MJ, PS MJ, PS MJ, PS CC, EK CC, EK
Deal Party
North End
South End Walmer
Uitenhage: Volkswagenarea/ Nelson Bay Logistics Park
Uitenhage: Hella/ Kruisrivier
Struandale
Markman Township
Perseverance
Walmer
Greenbushes
Fairview
Bloemfontein
Hilton
East End
(R/m excl VAT) Area size in m 1.000 CC, EK CC, EK CC, EK CC, EK CC, EK TE 75,00 2.000 5.000 10.000 Contributors
Harvey Road
Old Industrial
Hamilton: Mill St
Estoir
Windhoek
Lafrenz
103
South
TE TE TE
Prosperita
North
Rodes Report 2011:4
104
Flats market
Chapter 10: Flats market
Whats up? Residential rentals stutter while retail sales are booming
Written by Anneke Meijers In this chapter we analyse the curious relationship between residential rentals and retail sales.
Index (2005:1=100) (log scal e)
Movement in nominal flat rentals (all sizes) (based on matched pair methodology)
160 150 140 130 120 Johannesburg Pretoria Durban Cape Town
We first consider the most recent trends in residential rentals. Nationally, these continue to cruise along, showing mediocre growth of below consumer inflation.
National residential rentals
140
110
100
90
130
2005
2006
2007
2008
2009
2010
2011
Source of data: Stats SA; Rode
Index (2005:1=100)
120
110
100
Flats Houses Townhouses 2006 2007 2008 2009 2010 2011
Considering flat rentals for the major cities individually, we note that Cape Town (+4%) recorded the highest growth for the reporting quarter. This was followed by Pretoria (+3%), Durban (+2%) and Johannesburg (+1%). [Note on the preceding two graphs: the lines representing the rentals have been indexed to 2005= 100; thus the reader should consider the relative growths since 2005 and bear in mind that the lines do not represent absolute levels.] The graph that follows shows the fairly strong correlation between growth in flat rentals and retail sales (both inflation adjusted). The explanation for the high correlation is that they have a common driver,
90 2005 Source of data: Rode's database
Although flats are still outperforming both houses and townhouses, growth remained moderate at 2% year-on-year in the third quarter of 2011. Over the same period, rentals on townhouses showed growth of about 1%, while those on houses remained at roughly the same level as a year ago. Discouraging for investors in the buy-to-let market is that these growth rates were well below the rate of consumer inflation, which stood at 5% (excluding housing) in the third quarter of 2011.
Rodes Report 2011:4
105
Flats market
viz. the financial well-being of the consumer, but holding constant the consumers willingness to incur debt. We see the debt factor playing itself out during the hot boom years of 2005-2008 (retail sales accelerating much faster than flat rentals) and again since the end of 2009. This suggests that the current spurt in retail sales is also credit fuelled. This is confirmed by value of credit card purchases processed by banks still being up by 13% in September 2011. One can tentatively deduce from this analysis that the current quickening in retail sales might not be sustainable into 2012.
Growth in real flat rentals (national) vs growth in real retail sales
15 r = 0,8 10 Growth (%; y-o-y)
middle-class rented flat (or house or townhouse) that RR tracks in its quarterly rental surveys. Income yields of flats Table 10.1 summarizes the gross-income yields of flats. Net-income yields are the residential-property equivalent of nonresidential propertys capitalization rates. As a rule of thumb, to convert gross income yields to net, deduct 1,5 percentage points from gross. This deduction takes into account operating expenses such as insurance and maintenance, as well as assessment rates. In this regard, one should bear in mind that, in the case of sectionaltitle properties, assessment rates are nowadays paid by the owner; hence, this important amount is not included in the levy payable to the body corporate. One cannot, therefore, equate the levy with operating costs. Net yields, as determined by the market via the market value and the net market rental the property commands, can be used as a rough guide to the state of the respective segments prospects. Thus, provided the market is relatively efficient, the higher the yield, the worse the expected growth in income streams and/or the higher the perceived risk of the location. This is so because investors require a higher initial yield to compensate for an expected poorer income growth or higher potential variability of that cash flow. This section is concluded by the flat-rental tables that follow.
-5 Retail sales Flat rentals -10 2005 2006 2007 2008 2009 2010 2011
Source of data: Rode's database; Stats SA
Why would consumers on the one hand be under so much pressure that they cannot afford even moderate rental increases, but on the other splurge on debt? Heres a clue: the tenant and the reckless consumer are not exactly the same person. The consumer who spends with such gay abandon is not necessarily staying in the
The flat-rental data tends to be erratic. Therefore, all rentals in the accompanying graphs have been smoothed, and readers are advised to focus on the overall trends. The previous graphs give only a very broad picture of trends in the flats market, since the rentals reflected are averages of many different suburbs within the particular metropolitan areas. Keep in mind that all analyses were done on standard-quality flat units. Readers requiring more details are directed to the many tables, starting on p. 112, of specific rental levels in the various suburbs for the various grades of flats.
Rodes Report 2011:4
106
Flats market
Table 10.1 Gross-income yields (%): Flats

Eastern Cape Port Elizabeth * Summerstrand/Humewood/ South End * Walmer * Central / North End Queenstown Free State Bloemfontein Gauteng Boksburg Mpumalanga Ermelo Northern Cape Kuruman Western Cape Durbanville Bachelor
Quarter 2011:3
1-Bedroom
2-Bedroom
3-Bedroom
N/A 6,6% N/A 6,5%
N/A N/A 7,5% 6,6%
N/A N/A 9,0% 7,6%
5,8% N/A N/A 7,6%
11,2%
11,8%
9,9%
8,9%
N/A
9,9%
8,2%
9,1%
9,9%
9,6%
8,3%
6,1%
N/A
10,3%
10,8%
12,0%
8,6%
7,8%
8,3%
7,9%
Table 10.2 Flat rentals: standard units

Average rands per month as at quarter 2011:3 Bachelor Mean R2.470 R2.600 R781 R2.850 R3.500 R3.900 CQ, TR R3.062 R3.985 R4.514 SD Mean SD Mean SD Mean SD Broker contributors 1-Bedroom 2-Bedroom 3-Bedroom
Rodes Report 2011:4
Johannesburg average
City (incl. Joubert Park/Braamfontein/
Hillbrow/Berea/Parktown)
Yeoville/Bellevue/Highlands
Jeppestown/Fordsburg/Malvern/
Kensington/Lorentzville
North-Eastern Suburbs (incl. Kew/
Cyrildene/Fairmount/Waverley/Lyndhurst -
/Bramley/Savoy)
Maraisburg/Crosby/Brixton R3.533 R503 R3.825 R955 R4.350 R919 -
107
Meldene (Melville, Westdene, Auckland R5.075 R1.308 JL, RF, TR
Park)
Rosebank/Killarney/Illovo
Greenside/Victory R2.950 R2.500 R2.517 R2.075 R247 R2.600 R225 R3.067 R293 R141 R283 R3.300 R3.350 R495 R4.625 R4.050 R3.483 R3.450 R1.237 R636 R126 R495 R4.600 R4.900 R4.850 R3.925 R1.273 R1.202 R813 JL, TR BS, JL BS, JL, TR BS, JL
Park/Emmarentia/Linden/Parkview/
Parkhurst
Randburg: Ferndale/Fontainebleau
Randburg & Suburbs
Windsor: East/West
Craighall/Craighall Park
Sandton: North & Far North (incl. R2.800 R4.600 R6.000 R7.000 BS
Bryanston/Fourways/Lonehill/
Douglasdale)
Sandton: South to Central (incl. -
Sandown/Rivonia/Morningside/
Flats market
Sunninghill/Kyalami)
Table 10.2 (continued) Flat rentals: standard units Average rands per month as at quarter 2011:3 Bachelor Mean TR R5.600 SD Mean SD Mean SD Mean SD Broker contributors 1-Bedroom 2-Bedroom 3-Bedroom
Rodes Report 2011:4
Bedfordview
Old South (incl. Rosettenville/
Turffontein/Kenilworth) R1.400 R1.510 R1.830 R1.270 R1.480 R2.454 R2.500 R2.200 R2.467 R2.600 R2.000 R2.400 R0 R2.867 R115 R0 R2.350 R71 R173 R2.900 R100 R3.417 R2.750 R3.700 R351 R2.967 R208 R3.500 R361 R2.433 R306 R3.167 R424 R2.750 R354 R3.450 R212 R208 R141 R202 R354 R100 R2.807 R3.504 R2.260 R2.880 R2.300 R3.050 R1.830 R2.070 R2.390 R3.560 R4.066 R3.800 R3.900 R4.300 R3.750 R3.300 R4.050 R141 R141 R424 R354 R283 R71 R2.160 R2.670 R2.810 R2.129 R2.640 R2.881 PH PH PH PH R1.750 R2.200 R2.900 DV
New South (incl. Southdale/Mondeor/
Glenvista/Linmeyer)
Germiston average
Primrose
Germiston C & S
Germiston South - suburbs
Elsburg
108
Pretoria average
Akasia
HK, TR CI, HK, TR CI, HK, TR CI, HK, TR HK, TR CI, HK, TR
Pretoria North/Dorandia/Florauna
Annlin/Wonderboom/Sinoville/Montana
Die Moot/Queenswood
Eastlynne/Eersterust
Silverton/Meyerspark/La Montagne
Eastern suburbs (Menlo Park/Ashlea
Gardens/all Lynnwoods/Die Wilgers/
Faerie Glen/Garsfontein/Pretoriuspark/ Constantia/Waterkloof Glen/ R2.850 R3.250 R778 R354 R3.150 R3.700 R212 R707 R4.200 R4.650 R0 R212 R5.050 R5.200 R495 R283 HK, TR HK, TR
Erasmuskloof)
Groenkloof/Brooklyn/most Waterkloofs/
Flats market
Monumentpark/Erasmusrand
Table 10.2 (continued) Flat rentals: standard units

Average rands per month as at quarter 2011:3 Bachelor Mean SD Mean SD Mean SD Mean SD 1-Bedroom 2-Bedroom 3-Bedroom Broker contributors
Rodes Report 2011:4
South-eastern suburbs (Elarduspark/ R3.050 R2.433 R2.500 R2.400 R2.300 R2.250 R1.950 R1.600 R1.600 R2.558 R2.600 R2.100 R2.500 R2.742 R2.775 R35 R83 R3.000 R3.317 R3.350 R3.000 R141 R3.050 R71 R23 R212 R3.180 R4.000 R4.800 R3.955 R3.900 R4.000 R3.300 R4.258 R4.375 R141 R460 R530 R2.800 R3.500 R3.800 R2.800 R3.600 R3.153 R3.894 R212 R2.250 R71 R2.700 R283 R3.300 R4.951 R4.700 R4.500 R4.900 R5.800 R4.627 R4.500 R5.800 R3.500 R5.125 R5.000 R884 TR, WK WK TR TR, WK TR, WK FN FN FN FN R354 R2.550 R212 R3.133 R208 R3.900 R265 R2.617 R189 R3.217 R284 R4.033 R200 R2.800 R200 R3.633 R513 R4.067 R306 R208 R265 R424 R173 R2.933 R321 R3.700 R557 R4.067 R493 R252 R2.833 R586 R3.700 R436 R4.100 R265 R636 R3.350 R495 R4.200 R141 R4.650 R212 HK, TR CI, HK, TR CI, HK, TR CI, HK, TR CI, HK, TR CI, HK, TR HK, TR
Wingate Park/Moreletapark/Pierre van
Ryneveld/Waterkloof)
Sunnyside
Arcadia
Pretoria Central
Pretoria West
Kwaggasrand/West Park
Elandspoort/Danville
Atteridgeville/Laudium
109
Nelspruit average
Nelinda
Nelspruit CBD
West Acres and extensions
Sonheuwel and extensions
Nelspruit and extensions
Nelsville
Durban average
Upper highway: Kloof/Hillcrest
Pinetown area/Queensburgh
Westville area
Central City (incl. Lower Berea)
Berea / Morningside / Glenwood
Flats market
South and North Beach

Average rands per month as at quarter 2011:3 Bachelor Mean R2.700 R2.569 R4.025 R3.250 R3.367 R3.667 R4.050 R3.050 R2.850 R2.575 R2.900 R2.580 R2.700 R2.725 R1.650 R1.950 R2.850 R2.033 R404 R212 R2.300 R2.250 R3.500 R2.567 R247 R3.225 R400 R3.233 R401 R3.270 R217 R58 R247 R0 R451 R3.500 R106 R3.250 R424 R132 R3.633 R76 R4.367 R3.975 R4.600 R3.960 R4.188 R4.075 R3.200 R2.800 R4.350 R3.167 R71 R4.183 R671 R4.933 R636 R4.750 R354 R6.250 R354 R751 R306 R389 R497 R815 R318 R212 R306 R289 R4.583 R382 R6.300 R608 R115 R4.267 R404 R5.633 R473 R4.250 R5.500 R672 R5.450 R71 R7.400 R849 R12.000 R6.500 R8.000 R8.333 R8.600 R6.450 R4.800 R4.800 R5.800 R5.075 R4.575 R4.925 R4.050 R3.500 R5.250 R3.900 R3.234 R4.133 R5.241 R1.041 R566 R919 R491 R106 R530 R354 R424 PF, SQ, TR PF SQ, TR SQ, TR EM LA, PF, RS, TR LA, PF, RS, TR LA, TR TR TR LA, TR LA, SQ, TR SQ, TR TR R3.200 R4.000 R4.750 R3.150 R495 R3.900 R141 R4.200 R3.400 R4.000 R4.500 WK TR, WK WK SD Mean SD Mean SD Mean SD Broker contributors 1-Bedroom 2-Bedroom 3-Bedroom
Rodes Report 2011:4
Durban North/La Lucia/Umhlanga
North (Dolphin) Coast/Ballito
Montclaire/Yellowwood Park
Bluff area/Durban South
Durban South/Amanzimtoti/Warner Beach area
Cape Town average
Camps Bay/Clifton/Bantry Bay
Sea Point
110
Green Point/Three Anchor Bay
PF, SQ, TR JL, SQ, TR TR, SQ
City Bowl (excluding Higgovale)
City Centre
Waterfront
Rondebosch/Rosebank/Claremont
Kenilworth/Wynberg/Plumstead
Muizenberg/ Kalk Bay/ Fish Hoek
Hout Bay
Milnerton/Sanddrift
Tableview/Parklands
Blouberg/Melkbos
Athlone
Mitchell's Plain
Pinelands
Flats market
Brooklyn/Rugby/Maitland

Average rands per month as at quarter 2011:3 Bachelor Mean SD Mean SD Mean SD Mean SD Broker contributors 1-Bedroom 2-Bedroom 3-Bedroom
Rodes Report 2011:4
MonteVista/Goodwood/Parow/Bellville Central R2.450 R2.300 R1.900 R1.900 R1.963 R1.917 R202 R2.383 R104 R2.950 R87 R4.233 R189 R2.465 R228 R2.988 R342 R3.967 R173 R2.200 R173 R2.833 R289 R3.700 R520 R929 R681 R300 R2.475 R310 R3.238 R189 R4.125 R106 R312 R200 R2.967 R2.933 R321 R379 R3.833 R3.925 R551 R250 R4.350 R4.700 R212 R173
Tyger Valley area/Durbanville
LA, SQ, TR LA, PF, RS, TR LA, PF, RS, TR GE, LA, TR GE, LA, SQ, TR GE, LA, TR
Brackenfell/Kuils River
Somerset West
Strand
Gordon's Bay
Port Elizabeth average
R2.218 R2.925 R2.475 R2.100 R2.275 R2.050 R2.100 R1.775 R2.347 R2.500 R2.750 R2.350 R2.000
R1.483 R1.550 R1.625 R1.683 R1.300 R1.300 R340 R177 R424 R2.150 R2.250 R2.267 R2.233 R2.250 R2.230 R636 R354 R493 R462 R778
R2.605 R247 R624 R141 R601 R71 R141 R177 R2.490 R2.150 R2.450 R71 R3.075 R177 R2.375 R530 R2.075 R318 R2.400 R2.996 R3.025 R3.525 R2.850 R2.650
R2.831 R2.650 R2.800 R2.967 R2.850 R2.900 R495 R0 R611 R507 R849
R3.008 R212 R527 R333 R354 R212 R424 R3.125 R2.733 R2.725 R177 R202 R389 R566 R318 R35 R212 R2.625 R318 R3.300 R700 R4.600 R100 R5.867 R4.500 R3.500 R3.000 R3.150 R3.500 R2.500 R3.358 R3.375 R3.800 R3.050 R3.250
R3.363 R2.800 R3.750 R3.275 R3.250 R3.850
R3.587 R1.002 R212 R530 R354 R672 R919 R1.485
Summerstrand/Humewood/South End
R3.650 R2.750 R2.417 R2.750 R2.350 R2.500
CD, JP, ZB CD, JP, ZB CD, ZB CD, JP, ZB CD, JP CD, JP, ZB CD, JP LP, TR LP, TR LP, TR TR
ED, MI ED, EK, MI ED, EK, MI ED, EK, MI ED, MI
Walmer
111
Central/North End
Newton Park
Westering
Kabega
Algoa Park
East London average
Southernwood/Quigney Beach/CBD
Berea
Amalinda
Gonubie Park
Bloemfontein average
Bloemfontein
Westdene
Willows
Navalsig
Flats market
Arboretum
Table 10.3 Flat rentals: upmarket units

Average rands per month as at quarter 2011:3 Bachelor Mean R2,768 R3,846 R4,689 R5,075 SD Mean SD Mean SD Mean SD Broker contributors 1-Bedroom 2-Bedroom 3-Bedroom
Rodes Report 2011:4
Johannesburg average
North-Eastern Suburbs (incl. Kew/ Cyrildene/Fairmount/Waverley/ Lyndhurst/Bramley/Savoy)

R3.250 R4.200 R5.500 R3.450 R4.250 R4.900 JL TR -
Maraisburg/Crosby/Brixton
Meldene (Melville, Westdene, Auckland Park)
Rosebank/Killarney/Illovo
112
Greenside/Victory Park/Emmarentia/Linden/Parkview/ Parkhurst

R3.250 R2.750 R2.750 R2.175 R247 R2.825 R247 R3.625 R354 R3.400 R141 R4.375 R354 R3.625 R530 R4.867 R709 R318 R530 R3.750 R4.300 -
R4.900 R5.700 R5.450 R4.275 -
R1.131 R778 R742 -
JL BS, JL, TR BS, JL BS, JL
Randburg: Ferndale/Fontainebleau
Randburg & Suburbs
Windsor: East/West
Craighall/Craighall Park
Sandton: North & Far North (incl. Bryanston/Fourways/Lonehill/ Douglasdale)

R3.000 R5.000 R0
R6.500
R0
R8.000
BS, TR
Sandton: South to Central (incl. Sandown/Rivonia/Morningside/ Sunninghill/Kyalami)

R5.500 -
R7.500 -
TR
Bedfordview
Flats market
Old South (incl. Rosettenville/ Turffontein/Kenilworth)
Table 10.3 (continued) Flat rentals: upmarket units

Average rands per month as at quarter 2011:3 Bachelor Mean R1.575 R1.823 R2.020 R1.850 R1.620 R2.500 R2.500 R2.700 R3.400 R2.700 R3.400 R3.800 R3.800 TR R2.530 R3.390 R3.910 R2.120 R2.450 R2.690 R2.710 R3.130 R3.460 R2.440 R2.962 R3.314 PH PH PH R2.700 R1.131 R3.400 R1.556 R3.400 DV, TR SD Mean SD Mean SD Mean SD 1-Bedroom 2-Bedroom 3-Bedroom Broker contributors
Rodes Report 2011:4
New South (incl. Southdale/Mondeor/ Glenvista/Linmeyer)
Germiston average
Primrose
Germiston C & S
Germiston South - suburbs
Elsburg
Pretoria average
Akasia
113
Pretoria North/Dorandia/Florauna
Annlin/Wonderboom/Sinoville/Montana
Die Moot/Queenswood
Silverton/Meyerspark/La Montagne
Eastern suburbs (Menlo Park/Ashlea Gardens/all Lynnwoods/Die Wilgers/ Faerie Glen/Garsfontein/Pretoriuspark/ Constantia/Waterkloof Glen/ Erasmuskloof)
-
Groenkloof/Brooklyn/most Waterkloofs/ Monumentpark/Erasmusrand
South-eastern suburbs (Elarduspark/ Wingate Park/Moreletapark/Pierre van Ryneveld/Waterkloof)

-
Sunnyside
Flats market
Arcadia

Average rands per month as at quarter 2011:3 Bachelor Mean R2.000 R2.000 R2.886 R2.800 R2.800 R2.900 R3.050 R212 R4.000 R4.000 R283 R3.300 R3.300 R4.200 R3.800 R4.533 R5.400 R3.752 R4.446 R849 R4.500 R5.500 R3.100 R4.000 R4.400 R3.000 R3.800 R5.000 R5.700 R5.500 R6.900 R5.307 R4.000 R5.750 R6.500 TR TR TR, WK TR R3.472 R4.379 R5.735 FN FN FN FN SD Mean SD Mean SD Mean SD Broker contributors 1-Bedroom 2-Bedroom 3-Bedroom
Rodes Report 2011:4
Pretoria West
Kwaggasrand/West Park
Elandspoort/Danville
Atteridgeville/Laudium
Nelspruit average
Nelinda
Nelspruit CBD
West Acres and extensions
Sonheuwel and extensions
114
Nelspruit and extensions
Nelsville
Durban average
Upper highway: Kloof/Hillcrest
Pinetown area/Queensburgh
Westville area
Central City (incl. Lower Berea)
Berea / Morningside / Glenwood
South and North Beach
Durban North/La Lucia/Umhlanga
North (Dolphin) Coast/Ballito
Montclaire/Yellowwood Park
Flats market
Bluff area/Durban South
Durban South/Amanzimtoti/Warner Beach area

Average rands per month as at quarter 2011:3 Bachelor Mean R3.387 R5.125 R4.183 R4.817 R4.950 R5.000 R4.183 R4.150 R3.725 R3.125 R3.138 R3.350 R2.550 R2.650 R3.775 R2.717 R2.933 R2.775 R2.250 R2.450 R87 R304 R2.913 R3.383 R318 R3.717 R252 R3.417 R333 R247 R290 R202 R448 R3.200 R361 R35 R4.500 R0 R3.950 R3.050 R4.050 R4.650 R5.750 R4.133 R4.483 R4.688 R3.838 R4.083 R328 R3.925 R530 R4.975 R512 R3.933 R231 R4.850 R556 R3.875 R492 R4.825 R834 R870 R1.025 R354 R351 R448 R266 R236 R722 R318 R4.450 R707 R5.450 R1.485 R212 R4.775 R247 R6.225 R1.025 R7.825 R7.000 R6.350 R6.333 R6.525 R5.050 R5.650 R7.000 R5.067 R5.483 R6.700 R4.575 R5.617 R965 R5.167 R945 R7.000 R1.323 R10.250 R6.500 R9.000 R15.000 R636 R6.125 R177 R7.900 R141 R11.250 R275 R6.133 R321 R8.533 R462 R10.000 R0 R1.061 R1.061 R1.167 R1.414 R1.021 R1.041 R955 R707 R513 R480 R1.131 R106 R1.828 LA, PF, RS, TR LA, PF, RS, TR LA, PF, TR TR TR LA , TR LA , SQ, TR LA, SQ, TR LA, PF, SF, TR LA, PF, SF, TR GE, LA, TR R852 R4.933 R1.235 R6.833 R1.258 R9.250 R1.061 PF, SQ, TR JL, SQ, TR SQ, TR TR PF, SQ, TR SQ, TR SQ, TR R530 R6.750 R354 R10.000 R1.414 R16.000 R2.828 SQ, TR R4.219 R5.488 R7.264 SD Mean SD Mean SD Mean SD
contributors
1-Bedroom Broker
2-Bedroom
3-Bedroom
Rodes Report 2011:4
Cape Town average
Camps Bay/Clifton/Bantry Bay
Sea Point
Green Point/Three Anchor Bay
City Bowl (excluding Higgovale)
City Centre
Waterfront
Rondebosch/Rosebank/Claremont
Kenilworth/Wynberg/Plumstead
115
Muizenberg/ Kalk Bay/ Fish Hoek
Hout Bay
Milnerton/Sanddrift
Tableview/Parklands
Blouberg/Melkbos
Athlone
Mitchell's Plain
Pinelands
Brooklyn/Rugby/Maitland
MonteVista/Goodwood/Parow/Bellville Central
Tyger Valley area/Durbanville
Brackenfell/Kuils River
Flats market
Somerset West

Average rands per month as at quarter 2011:3 Bachelor SD Mean SD Mean SD Mean SD Broker contributors 1-Bedroom 2-Bedroom 3-Bedroom
Mean
Rodes Report 2011:4
Strand
R2.817 R275 R173 R202 R257 GE, LA, TR R3.400 R3.066 R4.000 R3.800 R2.750 R3.075 R3.025 R2.975 R2.200
R2.906 R2.000 R2.000 R2.000 R2.300 R2.000 R2.800 R3.100 R2.800 R2.500 R2.800 R2.500 R2.057 R3.300 R2.794 R2.700 R3.050 R3.250 R3.500 R3.250 R3.600 R3.356
R275 R4.383 R3.563 R4.700 R4.650 R3.250 R3.450 R3.500 R3.400 R2.500 R3.000
R3.813 R4.050 R4.200 R3.500 R3.550 R3.486 R3.500 R4.000 R3.500 R3.000 R3.500 TR TR TR TR ED ED ED ED
R3.417 R5.717 R4.320 R7.600 R6.250 R3.500 R3.800 R3.850 R3.850 R1.061 CD CD, JP CD, JP CD, JP CD R1.493 CD, JP, ZB CD, JP
R144
R4.550
R427
R6.050
R826
GE, LA, TR
Gordon's Bay
Port Elizabeth average
R2.817 R2.610 R354 R177 R318 R212 R141 R177 R141 R247 R0 R318 R354 R0 R212 R283 R283
Summerstrand/Humewood/South End
R3.250
Walmer
R2.975
Central/North End
R2.500
Newton Park
R2.675
Westering
R2.650
Kabega
R2.600
116
Algoa Park
R2.800 R3.100 R2.500
R1.850
East London average
R2.658
Southernwood/Quigney Beach/CBD
Berea
Amalinda
Gonubie Park
R1.500 R1.800 R1.800 R1.800 R1.800
Bloemfontein average
R2.300 R1.736
Bloemfontein
Westdene
Willows
Navalsig
Flats market
Arboretum
ED
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House market
Chapter 11: House market
Houses overvalued by 25%

Written by Erwin Rode and Anneke Meijers House prices are still far above their longterm replacement-cost trend line, which is another way of saying houses are still seriously overvalued. The theory behind this statement is that the long-run driver of prices (or rentals) is building costs, a proxy for replacement costs. This can be explained through the substitution principle, which states that a buyer will pay no more for a property than the cost of an equally desirable alternative property. For example, why would one buy a newish used house for, say, R120 when you could have it built for R100? In the accompanying graph, the price mechanism behind this theory is empirically illustrated with reference to the historical movement in house prices since 1967, deflated using the BER Building Cost Index.
Real national house-price cycle (Nominal prices deflated by BER BCI)
320 280
240 Index of real house prices
growth). In fact, it grew by 0,2% per annum compound between 1967 and 2011, and the excess growth could possibly be attributed to the selected period (we have just been through a long boom time, which has skewed the trend line upwards). A first precondition underlying this theory of the longterm sideways movement of real prices is that the supply side must be elastic, that is, new supply can be added at will by developers. In places like the City of London, where excessive town planning conditions apply, this assumption may not hold, which explains the extraordinary growth in real prices here over a long period. A second precondition is that the economy does not collapse, otherwise real prices would tumble to levels below the natural floor. South Africa was heading in this direction during the mid-1990s (see the graph). In sum, in the long run one would expect real prices to move within a certain sideways band. Near the top of the cycle, developers usually flood the market because new developments are now highly profitable, while buyers exit the market because of the lesser affordability of houses. This eventually leads to a correction in prices. At the bottom of the cycle, developers withdraw because it is now less profitable and buyers enter because of improved affordability. This again results in a correction of prices.
200
160
Real house prices Trend line 120 70 75 80 85 90 95 00 05 10 Source: ABSA; BER BCI; Rode calculations
Heres how to interpret the data: In theory, the trend line should be more or less horizontal (0% real
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House market
When real prices pierce the floor (on the way down) the house market can be said to be in a serious depression territory. And, when real prices pierce the ceiling (on the way up) the market can be said to be in a serious bubble territory.
minal house prices (as measured by Absa) recorded growth of 4,2% in November 2011. For now, vigorous growth in nominal prices can only be expected should the magnitudes of the key drivers of demand change significantly. One such driver is, of course, interest rates.
Growth in house prices vs Growth in value of new mortgage loans
r=0,8 30 Growht in house prices (%; y-o-y)
As can be seen in the graph, real house prices pierced the ceiling, or moved passed their historical peaks in 2003 and thus moved into serious bubble territory. The inevitable turning-point came in 2008 with the world economic crash. It is important to consider that one can never forecast the exact turning-point or when the bubble will be pricked; one can only say with a certain degree of confidence that houses are now overpriced or underpriced, as the case may be. The slight recovery that started in the middle of 2009 was never going to be sustainable because it wasnt supported by fundamentals (economic growth), and because it was helped along by a further interest-rate cut and a (temporary) decline in building costs (the deflator). Nonetheless, houses are at the moment still, fundamentally speaking, 25% more expensive than what is suggested by the trend line. Thus, a resumption in the down trend is inevitable; its only a question of time and speed. As for current growth rates, national no-
40
100 80 Growth in new mortgage loans (%; y-o-y) 60 40 20
20
10
0 -20 House prices Mortgage loans (smoothed) -40 -60 00 01 02 03 04 05 06 07 08 09 10 11

Source of data: SARB; Absa
-10
Residential income yields

Tables 11.1 and 11.2 summarize the gross-income yields on houses and townhouses. These yields can be used as a rough guide as to the state of the suburbs within the various cities, towns or areas: the higher the yield, the worse the expected growth in income streams and/or the higher the perceived risk of location. As a rule of thumb, in order to convert gross yields to net, the reader might deduct 1,5% points.
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House market
Table 11.1 Gross-income yields (%) on houses by price class

Quarter 2011:3 Low Middle 4,9%
4,9% N/A 4,9%
High 6,5%
5,1% 8,1% 5,1%
Eastern Cape
Port Elizabeth
Summerstrand/Humewood Fernglen/ Sunridge Park / Framesby Summerstrand/Humewood
4,8%
4,8% N/A 4,8%
Queenstown
6,6%
7,1%
7,0%
Free State
Bloemfontein
Houses north of Nelson Mandela Blvd. (incl. Rayton and Groenvlei) Houses south of Nelson Mandela Blvd. Langenhoven Park
6,4%
5,8% 7,0% N/A
6,6%
5,9% 6,6% 7,3%
6,7%
5,9% 7,8% 6,4%
Gauteng
Pretoria
Akasia Pretoria North / Dorandia / Florauna Annlin/Wonderboom/Sinoville/Montana Die Moot / Queenswood Eastlynne/Eersterust Silverton / Meyerspark / La Montagne Eastern suburbs Groenkloof/Brooklyn/most Waterkloofs/Monumentpark/Erasmusrand South-eastern suburbs Sunnyside Arcadia Pretoria Central Pretoria West Kwaggarand / West Park Elandspoort/Danville Kloofsig/Lyttelton Manor/Doringkloof/Zwartkop Heuweloord
8,2%
5,3% 6,9% 8,1% 10,5% 9,0% 7,0% 6,0% 7,5% 6,7% 7,9% 9,0% 16,1% 11,7% 7,7% 8,0%
8,5%
4,4% 8,0% 6,5% 9,5% 10,4% 7,1% 7,7% 10,3% 10,6% 10,7% 9,6% 12,3% 11,4% 6,0% 7,6%
8,6%
5,0% 9,3% 10,0% 12,8% 7,5% 6,3% 10,0% 12,8% 14,2% 5,5% 7,3% 7,7% 10,7% 7,1% 9,3%
Centurion
7,5%
11,4% 8,3%
7,1%
12,0% 8,8%
6,4%
11,5% 9,7%
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Table 11.2 Gross-income yields (%) of townhouses by price class

Quarter 2011:3 Standard High-priced
Eastern Cape
Port Elizabeth
Summerstrand / Humewood / South End Walmer/Charlo/Fairview/Lorraine Kabega
7,9%
8,0% 7,3% 8,3%
7,4%
7,9% 6,4% N/A
Queenstown
6,1% 6,5%
5,9% 7,1% 6,7%
6,7% 5,0%
3,5% 4,9% 7,2%
Free State

Bloemfontein
Houses north of Nelson Mandela Blvd. Houses south of Nelson Mandela Blvd. Langenhoven Park (incl. surrounding smallholding area)
Gauteng
Benoni
Benoni Central Lakefield Westdene Farrarmere Morehill Rynfield Northmead Crystal Park Pierre van Ryneveld Irene Kloofsig/Lyttleton Manor/Doringkloof/Zwartkop Highveld and extensions Clubviews/Eldoraigne / Wierda park / Cranebrook/Bronberrick / Rooihuiskraal North Rooihuiskraal / The Reeds Heuweloord Valhalla
9,8%
10,5% 10,8% 9,6% 9,6% 8,6% 9,3% 10,2% 10,5% 7,9% 8,3% 8,3% 7,9% 7,4% 7,2% 8,3% 9,0%
9,5%
8,2% 9,0% 9,6% 8,0% 8,0% 10,7% 12,3% 10,1% 7,5% 12,8% 11,3% 8,8% 8,9% 9,6% 7,7% 8,3%
Centurion
8,0%
9,2%
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Building activity and building costs
Chapter 12: Building activity and building costs
Tender prices accelerate as profit margins are milked dry

Written by Anneke Meijers After having been in contraction mode since the middle of 2009, tender prices as measured by the BER BCI accelerated sharply (+6%) in the third quarter of 2011. Intensive tendering competition over the past two years has forced building contractors to cut their profit margins to the bone. As the graph shows, the result of this has been weaker growth in overall tender prices which includes profit margins relative to the growth in building-input prices (as measured by the Haylett Index). Now, however, after having seemingly milked their profit margins dry, contractors have no option but to pass on higher input costs in the form of higher tender prices. Of course, the weaker rand exchange rate does imply higher prices for imported building materials, fuel and construction plants. The implication hereof is the possibility now of even more upward pressure on tender prices. It seems that the building-construction sector is moving into a period of stagflation (stagnant orders and rising cost-push inflation).
BER BCI vs Haylett
20 sm o o the d
In this environment, a puzzling feature is the fact that cement sales are improving.
Growth in cement sales
30
20 Growth (%; y-o-y)
10
-10 Smoothed -20 02 03 04 05 06 07 08 09 10 11 Source of data: PPC
15
After having shrunk year-on-year since 2008, cement sales have since the latter half of 2011 been able to show astonishing growth as much as 10% in October 2011. Yet, the hard building-construction statistics of Statistics SA and the BERs soft surveys do not bear this out (see below). Thus the only explanation we can offer for this contradiction is that the cement sales are from a very low base (the old refuge of confused economists!). This implies that, once the base effects have worn out, a moderation in cement sales will take place. More revealing is that the majority of building contractors remain downbeat (see corresponding graph). In one of their quarterly surveys, the Bureau for Economic Research (BER) asks a panel of residential
% chan ge ( y-o- y)
10
-5 BER BCI H a y l e tt -10 01 02 03 04 05 06 07 08 09 10 11

Source of data: BER, JBCC CPAP Haylett formula
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and non-residential contractors to rate if building activity is up, the same or down when compared to a year ago. The percentage reporting down is then subtracted from the percentage respondents saying up to arrive at a net percentage balance. As can been seen in the graph, this proxy metric of non-residential and residential building activity has been negative since the start of 2008 and is still negative by a wide margin.
Growth in building activity Non-residential vs residential contractors
80
This is borne out by hard statistics from Statistics SA. Data representing buildings completed during the last 12- and 6-month periods that ended September 2011 see Table 12.1 shows that the square metreage of non-residential space completed is still contracting. And the contractions in plans passed, indicate that this might be the situation for some time to come. On the residential side, the growth in plans passed in the categories of Houses smaller than 80 m2 and Flats & townhouses is an indication of a movement to thin-margin sub-R600 000 housing developments in light of the affordability question (see Table 12.2). In sum, building activity is stagnant. Increasing tender prices are thus, for now, being fuelled by cost-push instead of demand-pull pressures. Another name for this is stagflation.
40
Net % balance
-40
-80 non-residential residential -120 01 02 03 04 05 06 07 08 09 10 11
Source: BER Building and Construction Survey
This concludes our section on building activity and building costs.
The BER Building Cost Index (BCI) measures pre-contract non-residential prices and as such it includes the profit margin of contractors. This index is one of the best indicators of the health of the building industry. If it accelerates faster than input costs, then contractors are stretching their profit margins, and vice versa. The Haylett Index is a measure of all input costs in the building industry, especially material and labour costs.
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Table 12.1 New non-residential buildings (private sector) (m)

% change on a year earlier Offices Shopping space -18,0% -11,8% Industrial buildings -40,0% -12,9% Other* Total
12 months ended September 2011 (% change on a year earlier) Completed Plans passed Completed Plans passed -25,9% -2,4% -30,11% -10,6%
6 months ended September 2011 (% change on a year earlier) -21,6% 5,5% -6,6% -21,3% -37,8% -7,0% -24,4% -7,5%
* Other non-residential space includes churches, sports and recreation clubs, schools, crches, hospitals and all other non-residential space. Source of data: Stats SA
Table 12.2 New residential buildings (private sector) (m)

% change on a year earlier Houses Smaller than 80 m Completed Plans passed Completed Plans passed 3,9% Larger than 80 m -10,3% Flats & townhouses Other* Total
12 months ended September 2011 (% change on a year earlier) -32,6% -13,9% 2,2% -2,2% 9,8% -4,0% 0,5% 13,2% 6 months ended September 2011 (% change on a year earlier) 30,7% 18,8% 1,7% -1,5% -29,4% 40,3%
* Other residential buildings include institutions for the disabled, boarding houses, old-age homes, hostels, hotels, guest-houses, casinos, entertainment centres, etc. Source of data: Stats SA
Annexures
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Glossary of property and related terms and abbreviations

Arithmetic mean: The most often used measure of central tendency, it is the simple average of a number of observations. Mathematically, it is equal to the sum of all values divided by the number of observations. For example, the arithmetic mean of 6 and 7 is (6+7)/2. The arithmetic mean of 6, 7 and 8 is (6+7+8)/3; and so forth. Outlier observations may unduly affect the mean. In the Rode publications all references to the mean refer to the arithmetic mean, unless otherwise specified. See also geometric mean and median. Besa: Bond Exchange of South Africa. BER BCI: Bureau for Economic Research Building Cost Index. Measures pre-contract non-residential building-construction prices and as such it includes the profit margin of contractors. This index is one of the best indicators of the health of the buildingconstruction industry. If it accelerates faster than input costs (Haylett Index), then contractors are stretching their profit margins as a result of sufficient work, and vice versa. Building construction: the construction of buildings like houses, office blocks, factories, shopping centres, schools, hospitals. See also civil construction. Bulk: The market value of office and shopping-centre land is generally expressed as the value per bulk square metre. Bulk square metres refer to the gross building area (GBA) of a building. According to The Sapoa Method for Measuring Floor Areas in Commercial and Industrial Buildings, GBA covers: The entire building area, but it excludes patios, plant boxes, sunscreening, escape stairs, machine rooms, parking (basements or above ground), lift motor rooms, service rooms, caretakers flats, etc. GBA is mainly used by planning consultants in order to plan and execute a building in accordance with the permissible Floor Area Ratio (F.A.R) as derived from the zoning of the property.GBA is fixed for the life of the building but it should be noted that different local authorities may interpret the National Building Regulations which regulated the F.A.R definition in a slightly different manner. Standard capitalization rate: It is the expected net operating income for year 1, assuming the entire building is let at openmarket rentals, divided by the purchase/transaction price, normally expressed as a percentage. This calculation ignores VAT, transfer duty and income tax, and assumes a cash transaction (in contrast to a paper-based sale). CBD: Central business district or downtown. This is an area of concentrated high economic activity. The user can differentiate between the metropolitan CBD (e.g. the Johannesburg CBD) and a decentralized CBD (like the Sandton CBD). Civils: colloquial for civil construction.
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Civil construction: the construction of physical infrastructure like roads, bridges, dams, the laying of stormwater pipes, electricity and water reticulation. See also building construction. Cyclical trend: A short-term growth path of an economic variable. Normally refers to the business cycle, as distinct from a secular trend. Dec: Decentralized. A Rode abbreviation. Town and regional planners differentiate between local decentralization (from the metropolitan CBD to the suburbs) and regional decentralization (to outlying areas of the country). Deflation: Deflation occurs when prices are declining over time. This is the opposite of inflation and could be catastrophic. When the inflation rate (by some measure) is negative for a period, the economy is in a deflationary period. See also disinflation. Deseasonalized: Seasonal fluctuations have been removed. In the case of retail sales, this is essential in order to be able to compare sales pertaining to different months of the year, as opposed to comparing sales of one quarter or month with the same quarter or month a year earlier. Discount rate: The rate used to express an expected future cash stream in presentvalue terms. In most instances, the discount rate is equal to the hurdle rate. Mathematically, the hurdle rate of a property is the sum of its market capitalization rate and the expected constant growth rate of its cash flow in perpetuity. Disinflation: Disinflation occurs when the inflation rate is declining over time. See also deflation. Escalation rate: The rate by which a rental is hiked once a year in terms of a
lease. The ruling market escalation rate can be seen as an attempt by the market to forecast the growth in market rentals over the duration of the lease, but this attempt is obviously rarely successful. Thus it is important to differentiate between an escalated rental and a market rental. Forward (income) yield: A bourse term, hence it is typically applied to listed properties. In the non-listed property market, its approximate equivalent is the capitalization rate. It represents the expected net income of year 1 (the following 12 months) divided by the current price/value. It stands to reason that existing leases would largely determine the net income of year 1. See also historic (income) yield. Fundamental value (FmV): It is a subjective value based on the investors own, subjective forecast of rentals and maybe the investors unique or different inhouse discount rate/capitalization rate. A FmV higher than the objective market value (MV) is a buy signal to an investor. The calculation of the FmV is especially indicated where the economy, or property market, changes gear, e.g. a secular change in inflation rate or the real-rental cycle bottoming out. These are instances where any market is notoriously poor at forecasting trends. An alternative term is intrinsic value. Geometric mean: A measure of central tendency calculated by multiplying the series of numbers and taking the nth root of the product, where n is the number of items in the series. The geometric mean is defined only for sets of positive numbers. For example, the geometric mean of 6 and 7 is the square root of (6*7). The geometric mean of 6, 7 and 8 is the cube root of (6*7*8); and so forth. See also arithmetic mean and median. Geometric mean return: It is also called the time-weighted rate of return or the average compounded rate of return. It is
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Annexure 1
calculated by taking the geometric mean of a portfolios subperiod returns. Where there is a great variance in subperiod returns, this is a better return measure than the arithmetic mean return. Unlike the internal rate of return, it is not influenced by the timing and weights of money-flows. Haylett index: A measure of the movement of all input costs in the building industry, especially material and labour costs. Designed to recompense the building contractor for in-contract rises in input costs. Official designation: JBCC CPAP Haylett Formula (Work Group 180). Does not include profit margins for contractors. Historic or trailing (income) yield: A bourse term, hence it is typically applied to listed properties. It represents the net income of year 0 divided by the current price/value. See also forward (income) yield. In a market of rising net incomes the historic yield would be expected to be lower than the forward yield. Hurdle rate: The minimum total return (income yield plus expected capital appreciation) required by potential investors to induce them to invest in a property. Also known as the required rate. As such this is normally the correct rate to use when doing discounted cash flow (DCF) analyses. This is a similar concept to a companys cost of capital, and it is not to be confused with the cost of money (say, overdraft interest rate). One way of measuring the total return on an investment, ex post or ex ante, is the internal rate of return (IRR) method. See also discount rate. Index: Describes the method of standardizing the base for comparative data in a time series, usually equating the initial measure to 100 and then expressing all other data in exact relation to that base, e.g. the index for office rentals in any year by comparison with a base-year value of 100 might stand at 90 or 110, indicating a fall or rise of 10% respectively.
Industrial-building grades: Prime: A property in which space is easily lettable because it satisfies each of the following prerequisites: a. b. c. d. e. f. g. h. Generally in a good condition; Satisfactory macro access to freeway); access (i.e.
Satisfactory micro access (i.e. from street to building); Proper loading facilities; Eaves >4 m (excluding micro/ mini units); Clear spans; On ground level; Adequate power. three-phase electrical
The eight conditions above are prerequisites for space to be considered prime. However, a building may possess additional enhancements that could improve lettability through increasing the size of the potential tenant pool. Such enhancements could include sufficient office accommodation, adequate parking, sprinkler systems, masonry up to sill height, adequate floor loadings, roof insulation, sufficient yard space and a good location (as opposed to access). Secondary: This is industrial space which is not classifiable as prime because it does not satisfy all eight prerequisites for prime space listed above. Such space is typically old buildings or structures, which have been haphazardly renovated. It would have poor access, too little yard space or office accommodation, inadequate goods lifts, no three-phase power and obsolete electrics and ablution facilities. Such space is often (but not exclusively) found in highly urbanised areas.
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Annexure 1
Comparative grading of industrial and office space

Industrial Prime + Prime Prime Secondary Offices A B C D
that a voluntary, informed and prudent lessee will pay a voluntary, informed and prudent lessor in a normal open-market (arms-length) transaction, when neither party is under any compulsion to rent or let, other than their normal desire to transact. Market value: The most probable price that a voluntary, informed and prudent purchaser will pay a voluntary, informed and prudent seller in a normal openmarket (arms-length) transaction at the date of valuation after allowing for proper marketing prior to the valuation date when neither party is under any compulsion to sell or to purchase, other than their normal desire to transact. See also price and fundamental value. Mean: See arithmetic mean; median; geometric mean. Median: Midpoint of a series of observations when arranged in order of magnitude. Thus it is a measure of central tendency that divides the data set into halves. Less affected by outlier observations than the arithmetic mean. For example, the median of 5, 6, 7, 8, 9 is 7. And for 5, 9, 15, 16, 17, 21, 23 the median is 16. See also geometric and arithmetic mean. Metro: Metropolitan. MFA: Medium-Term Associates, construction located in Stellenbosch. n: Number of respondents. N/A: Not available fewer than two respondents. NNN lease: Also known as a triple-net lease. A fully repairing and insuring lease (tenant pays all operating costs). The commonest example is a Leaseback. Forecasting economists
Industrial park: An industrial park is a multi-tenanted complex of industrial buildings, typically surrounded by a security fence with access control and possibly some greenery. Initial yield: The first years expected net operating income (based on existing leases and other income reasonably expected) divided by the purchase price. Therefore the initial yield and the capitalization rate are only the same in those rare cases where a building is let at open-market rentals. Internal rate of return (IRR): A performance measurement that takes cognisance of the time-value of money. Technically, it is that rate which equates the inflows with the outflows of a cash flow. Also known as the money-weighted rate of return because the timing and weights of the money-flows influence the return. See also geometric mean return. JSE: JSE Securities Exchange South Africa. Leaseback: A fully repairing and insuring lease (tenant pays all operating costs) for 10 years or longer (with typically 5yearly rent reviews or fixed annual escalations) with a tenant with a strong covenant. Lessee: A person or other entity to whom space is rented under a lease. A tenant. See also lessor. Lessor: One who rents space to another under a lease. A landlord. See also lessee. Market rental: The most probable rental
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Office building grades defined by quality of finishes and facilities: Grade A: Generally not older than 10 years, unless renovated; prime location; high-quality finishes; adequate on-site parking; air-conditioning. Commands a gross market rental as indicated in the accompanying table. Grade B: Generally 10 to 20 years old, unless renovated; accommodation to modern standards; prime location; airconditioning; on-site parking. Commands a gross market rental as indicated in the accompanying table. Grade C: Generally 20 to 30 years old, unless renovated; in fairly good condition, although finishes are not up to modern standards; good location; may have onsite parking; unlikely to be centrally airconditioned; commands a gross market rental as indicated in the accompanying table. Grade D: A building reaching the end of its functional life; old and in poor condition; near the bottom of the rental rate range; typically no air-conditioning and no on-site parking; may have good location. These grades might be further sub-divided into sub-grades A+, A-, B+, B-, C+ or C-. Office demand: Office stock less office space vacant (space on the market for renting irrespective of whether there is still a valid lease over the space). In other words, demand is office space occupied. Office stock: Total rentable office space. Office take-up: Change in office demand. Where take-up is positive, it can also be called the growth in demand. Office vacancies: This is the floor area available for leasing at any given time, irrespective of whether there is still a valid lease over the space. Often expressed as a percentage of the stock in rentable m.
Operating costs: See outgoings. Opportunity cash flow (OCF): A valuation term introduced by Rode. The OCF quantifies the amount gained or foregone by the landlord in that the property is either over rented or under rented. More precisely, for each lease and the space that such a tenant occupies, it is, until expiry of such a lease, the present value (PV) of the contractual rental less the open-market rental (as at the valuation date) escalating at the openmarket escalation rate (as at the valuation date). Outgoings (operating costs): In the case of office buildings, the following items are included under total gross outgoings, irrespective of who pays for these: Cleaning. Repairs & maintenance. Common-area electricity & water (not tenants own). Security. Management (excluding head office overheads). All leasing expenses: brokers commission and in-house payroll, advertising, tenant installations & relocations (unless recovered), buy-outs, etc. Municipal tax. Insurance (fire & SASRIA). In the case of self-insurance, the landlords provision should be included. Refuse & sewerage less recoverable amount. External & common area repairs & maintenance. Audit fees. The following items are excluded: VAT. Head office overheads. Tenants own electricity and water. Tenant installations/relocations recovered. Internal maintenance. Recoverable refuse & sewerage.
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Price: The amount actually paid for an asset. Not the same as market value, because special circumstances may have applied when the transaction was concluded. PLS: Property loan stock, also known as variable loan stock (VLS) (type of listed property fund). PUT: Property unit trust (type of listed property fund). Reit: A reit is an entity that invests primarily in real estate and qualifies for special tax status, so there is single taxation at the investor level. Source: Lehman, Robert W. & Howard, Roth S. Global Real Estate Investment Trust Report 2010: Against all odds. Ernst & Young. Rental: Basic rental (base rental in the USA): A set amount used as a minimum rent in a lease which also employs a percentage of turnover or other allocation for additional rent. Gross rental: The total rental payable by the tenant, excluding VAT, the tenants own electricity and water charges, but including other operating costs recovered by the landlord (if any), as well as promotion expenses payable by the tenant in the case of shopping centres. See also rental, net. Net rental: The amount payable by the tenant, excluding VAT and excluding operating costs recovered by the landlord (if any). See also rental, gross. Nominal rental: This has a dual meaning: o Firstly, it refers to rentals where the analyst or valuer assumes no incentives like a rent-free period, free relocation, cash upfront, or balance-of-installation allowance. It also excludes amortisation of tenant-installation costs. o Secondly, it can also mean actual rental values (i.e. not deflated). See
also rental, real. Pioneer rental: The highest rental actually achieved and could be a once-off outlier deal; hence pioneer is not market. The difference between pioneer and the highest market rentals may be used as a blunt tool to gauge the prospects for market rental growth in the short term. If the differential is positive, it is an indication of growth prospects in the node. If the differential is negative, it is an indication that landlords are finding it difficult to find new tenants at the going market rental rate. Real rental: Deflated rental, typically observations (values) over time (a time series) from which the relevant inflation has been removed. See also rental, nominal.
Rent-free period: No rent is payable by the tenant for an initial portion of the term of a lease. It is offered by a landlord as a rental concession to attract tenants. Required rate: see hurdle rate. Retail price: In the context of property syndication, this means the price at which a property-holding companys shares are sold to the public or the price at which these shares trade. See also wholesale value. RR: Rode's Report on the South African Property Market, a quarterly journal for the professional property practitioner. Sapoa: South African Property Owners Association. SARB: South African Reserve Bank (viz. the central bank) Secular trend: A long-term growth path of an economic variable, around which there might be short-term (business cycle) or other fluctuations. See also cyclical trend.
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Annexure 1
Shopping centre configurations: Mall: Typically enclosed with common walkway between two facing strips of stores. This is the design mode for super regional, regional and most community shopping centres. Strip centre: Is an attached row of stores or service outlets managed as a coherent retail entity, with on-site parking, usually located in front of the stores. Store-fronts may be connected by open canopies, but there are no enclosed walkways linking the stores. Store configuration is either a straight line, L or U shaped. This is the design mode for most neighbourhood, convenience and value (power) centres.
Constantia Centre (Port Elizabeth); Brandwag Centre (Bloemfontein); Beacon Bay Retail Park (East London). Neighbourhood: 3.000 to 10.000 rentable m of shop space; principal tenant is a supermarket; 15 to 40 shops. Convenience: 300 to 1.200 rentable m of shop space; principal tenant is a caf or grocer like Kwik Spar; 5 to 15 shops. Retail warehouse: Stand-alone; single tenant; >10.000m; air-conditioned, no ceiling, warehouse-like finishes, e.g. Makro, Hypermarket, Game, Dion. Value centre: Multi-tenanted strip centre; >10.000m; warehouse type finishes in order to deliver lower prices to consumers.
Shopping centre types: Super regional: More than 100.000 rentable m of shop space; substantial comparison-shopping; principal tenants are three or more major department stores; more than 250 shops. Examples are: Eastgate and Sandton City (Johannesburg); Menlyn Park (Pretoria); Gateway (Durban metro); Canal Walk (Cape metro). Regional: 30.000 to 100.000 rentable m of shop space; principal tenant(s) are one or more major department stores; approximately 40 to 250 shops. Examples are: Westgate, Fourways Mall, Cresta (Johannesburg); Brooklyn Mall (Pretoria); The Pavilion (Durban metro); Sanlam Centre in Parow, Tyger Valley, Kenilworth (Cape metro); Greenacres (Port Elizabeth); Mimosa Mall (Bloemfontein); Vincent Park Shopping Centre (East London). Community: 10.000 to 30.000 rentable m of shop space; principal tenant is typically a variety store (e.g. Clicks) or a discount department store (e.g. Dion or Game); approximately 30 to 60 shops. Examples are: Sunnypark (Pretoria); Musgrave Centre (Durban); Middestad Mall in Bellville, Meadowridge, Goodwood Mall, Constantia Village (Cape metro);
Smoothing: Removal of shorter-term fluctuations in a time series, by e.g. moving averages, exponential smoothing, or curve fitting. Standard deviation (SD): A measure of dispersion in a set of data. For instance, assume a mean of R10 and an SD of R1,50. This means there is a 68% chance the values will lie between R10 - R1,50 = R8,50 and R10 + R1,50 = R11,50. Stats SA: Statistics South Africa, South African governments statistics department. Previously known as Central Statistical Services (CSS) and even earlier as the Department of Statistics. Time series
A graphic portrayal of a rental time series Quarterly frequency
90 80 70
R/m per month
60 50 40 30 20 93 94 95 96 97 98 99 00 01 02
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Annexure 1
A set of observations for the same variable at different times (see graph). The intervals or frequencies may be of any length, e.g. years or quarters for nationalincome or property data, monthly for prices, and weekly, daily, or even minuteby-minute for stock exchange prices. Total return: Normally measured over a year, in which case it is the income yield for the applicable year (net income in year 1 divided by the purchase price or value in year 0) plus the change in capital value over that year. Also known as the combined return because it combines the income yield and capital return in one measure.
Triple-net lease: see NNN lease.
should the holding company be dissolved and the underlying property sold as a normal, non-syndicated property. See also retail price. Year-growth: Percentage by which figures have changed compared to the same month, quarter or year of the previous year. Year 0: Refers to the year ended at the present time. Year 1: Refers to the period from year 0 to the end of the first year thereafter. References: 1. International Centres 2. Sapoa 3. Bureau of Market Research, University of South Africa Council of Shopping
VAT: value-added tax. Wholesale value: In the context of property syndication, this means the estimated price that a share or shares of a syndicated property-holding company would fetch (excluding winding-up costs)
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Annexure 2
Technical background to the Rode surveys

Rode has been surveying the crucial variables of the property market in South Africa since the beginning of 1988 using the expert-panel method. Broadly speaking, the researcher has two potential approaches available to him. These are: Track actual transactions, like rental levels of lettings or capitalization rates at which sales concluded. Valuers (appraisers) these comparables. the the are call Below we give the reader some insight in our survey approach to determine the levels of the various property variables: Capitalization rate: The Rode capitalization rate panel consists of two categories of panellist major owners, and leading investment brokers who know their market segments intimately. This means that the latter's knowledge is based on actual sales. The question put to these carefully chosen panellists is: Owners: In your opinion, what is presently the capitalization rate at which your organization is equally happy to buy or sell the properties in the cities below? (Assume a typical location and a cash sale, rather than paper.). For leasebacks, assume the escalation rate reported by you in this questionnaire. Brokers: In your opinion, what is presently the most prevalent capitalization rate at which the following properties are sold/bought in the cities indicated below (assume a cash sale rather than paper)? For leasebacks, assume the escalation rate reported by you in this questionnaire. Escalation rate (for industrial leasebacks). The question put to the panellists is: Owners: In your opinion, what is the current prevalent (i.e. most often achieved) market escalation rate for prime industrial leasebacks (assume the market capitalization rate you provided in this questionnaire)? Brokers: In your opinion, what is the current prevalent (i.e. most often achieved)
The expert-panel method of surveying, in which the surveyor regularly asks the same individual members of the panel for their expert opinions, which in turn will of course be based on actual deals of which the panellists are aware.
The cons of tracking actual transactions are: A paucity of transactions in most nodes, making statistical inferences impossible. Hence the danger of relying on outlier data (mainly the result of small samples) Dated transactions The cost The unwillingness of the parties to report the details of individual deals.
o o
o o o
In contrast, through the expert-panel method of research, most of the above cons of the actual-transactions approach are addressed through opinion surveys. This results in cheaper, more accurate and timely information. Sample size is still (and will always be) a problem in some of the less active nodes, but to a lesser extent.
Rodes Report 2011:4
Annexure 2
market escalation rate for prime industrial leasebacks (assume the market capitalization rate you provided in this questionnaire)? Hurdle rate: The question put to landlord panellists is: In your opinion, what is presently the minimum expected internal rate of return or hurdle rate (%) at which your organization will acquire the following property types in the cities indicated on the right. (Assume a time horizon of 5 years)? The question is asked in respect of three property types: office buildings, industrial leasebacks and regional shopping centres. Respondents are asked to supply two hurdle rates, one rate for "buy" and one rate for "develop on spec". Office rentals: The Rode office rental survey asks respondents to supply average market rentals by grade (grades A+, A, B & C) for a specific office node. The question put to the panellists is: In your opinion, what is presently the nominal gross achievable/market rental (not asking rent, not escalated contractual rents, not exceptional deals) per rentable m excluding VAT? The questionnaire also asks for the typical rent-free period in months, the gross current-year operating costs per rentable m and the predominant escalation rate on net & gross rentals, and operating costs. Nominal rental means the panellist has to assume no incentives like a rent-free period. We ask the panellists to assume office lettings of 250m in the case of grades A+, A & B and 150m in the case of grade C (150m in smaller towns for all office
grades); occupation within 3 months, a lease period of 4 years and an average position within the building. Land values: The question developers or brokers is: put to
Office bulk: In your opinion, what is the market value (R/bulk m)* of a vacant stand with an average location in the following nodes? a. The bulk that is legally permissible and economically viable.
Shopping centre bulk: In your opinion, what is the market value (R/bulk m)a of vacant stands appropriately zonedb and with the necessary bulk for the following shopping centres? a. b. The bulk that is legally permissible and economically viable. Assume that these stands are ready for construction and that the major external infrastructure investments that municipalities normally force the developer to pay for are already in place. That is, external roads, offramps, bridges, new electrical substations, and the like, are in place.
Filling-station land: In your opinion, what is the market value of an average-sized, filling station sitea, with a pump-potential of 350.000 litres per month? a. Site is defined as the unimproved land, with services to its borders, and appropriately zoned.
Industrial rentals: The question put to panellists is: In your opinion, what are the current gross achievable/market rentals per m for prime industrial buildings for the townships and lease sizes indicated below?
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Annexure 2
Respondents are asked to assume that the office portion (if any) is less than 10% of the total area. The assumed floor area sizes are: 250m, 500m, 1.000m, 2.500m and 5.000m. Respondents are also asked to fill in their vacancy estimate for prime industrial space, using a scale of 0 to 9. See the table below for detail on the vacancy scale. Vacancy scale for industrial townships <10% 0 Nil 1 2 Low 3 10 20% 4 5 6 7 Medium >20% 8 High do not 9
stand sizes indicated below? Where land is only leased, provide the rent per m per month. Exclude transfer costs and VAT. Provided you are well informed, please give us your opinion even though you might not have concluded a sale for the exact sizes shown in the spreadsheet attachment. The information is required for stand sizes of 1.000m, 2.000m, 5.000m and 10.000m. Flat rentals: The question put to panellists is: In your opinion, what are the current market rentals (not asking rent) for new lettings for uncontrolled standard and upmarket flats in the following categories and areas? The rental data required is for unfurnished flats, excluding water and electricity. Parking is typically included. Respondents are asked to provide rentals for bachelor, 1-, 2- and 3-bedroom units. Note that the flat rentals are not quoted per m.
Thus, the reported vacancies represent percentages.
Industrial land values: The question put to panellists is: In your opinion, what are the current market values per m for vacant, serviced levelled land in the townships and for the
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Annexure 3
How to interpolate industrial rental rates and land values

The industrial rental and land value tables in the body of the RR contain regression equations in natural log (ln) form in order to allow the reader to interpolate rental rates or industrial land values for area sizes other than those given in the tables. (All references below are to the industrial rental tables. However, they also apply mutatis mutandis to the industrial land value table.) The regression equations are in natural log (ln) form because the relationship between the rental rates and area sizes leased, is curvilinear. This means that the rental rate for area sizes other than those quoted cannot be calculated by straight linear interpolation. In order to calculate the rental rate for an area size other than those quoted, use the following equation from the tables: ln Y = a + b(ln X) where: ln Y = the natural log of the rental rate, i.e. the value which we want to calculate. ln X = the natural log of the applicable floor area in m for which we want to calculate the market rental rate. Note that a and b are given in the table. The coefficient of determination r2 is an indication of the goodness of fit of the urve, i.e. how much confidence we can put in the interpolation we want to perform. An r2 close to 1 is a good fit. An example: Interpolate a rental rate for an area size other than those quoted in the table e.g. for an area of 750 m. Use your financial calculator and proceed as follows: Assume the following equation: ln Y = 3,8855 (0,2263(ln X)) where X = 750 m. Step 1: Calculate the natural log of X, viz. the floor area for which you want to interpolate the market rental rate. The natural log of a floor area of 750 m is 6,6201 (use the ln key of your financial calculator). Thus: ln Y = 3,8855 (0,2263(6,6201)) = 3,8855 1,4981 = 2,3874 Step 2: In order to calculate Y, get the exponential of ln Y (viz. of 2,3874) by using the ex key on your financial calculator. The answer is R10,89 per m.
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Annexure 4
Approximate building cost rates as at September 2011

Source: 2010. Property and construction handbook, Davis Langdon, an AECOM company, March
The following, unless otherwise stated, is a list of approximate building cost rates per m of construction area for various building types in the Gauteng region. The rates represent the average expected building cost rates for 2011. It is stressed that these rates are purely of an indicative nature and should be used with circumspection, as they are dependent upon a number of variables. The area of the building expressed in m is equivalent to the Construction Area where appropriate, as defined in the Method for Measuring Floor Areas in Buildings First Edition (effective from 1st August 2005), published by the South African Property Owners Association (SAPOA). It is recommended that a quantity surveyor be consulted to calculate a more accurate replacement value of a building, which can be updated thereafter using the BER Building Cost Index. The rates below include P & G but exclude in-contract escalations, professional fees and VAT. For the calculation of replacement costs, for insurance purposes, the following should also be included: An allowance for demolition costs; Professional fees; In-contract building cost escalation (Haylett); Loss of interest; An escalation of the contract price to the end of the insurance period; and Loss of income.
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Annexure 4
Building type
Rates include the cost of appropriate building services, e.g. air-conditioning, electrical, etc. but exclude costs of site infrastructure development, parking, any future escalation, professional fees and VAT. Offices R5.200 R6.300 1. Low-rise office park development with standard specification /m 2. Low-rise prestigious office park development /m R6.700 R10.000 3. High-rise tower block with standard specification /m R7.400 R10.000 4. High-rise prestigious tower block /m R910.000 R12.500 Note: The aforegoing rates include appropriate tenant allowances incorporating carpets, wallpaper, louver drapes, partitions, lighting, air-conditioning and electrical reticulation. Parking 1. 2. 3. 4. 1. 2. 3. 4. 5. 6. Parking on grade including integral landscaping and ground preparation Structured parking above ground Parking in semi-basement Parking in basement Local Convenience centre (not exceeding 5.000m) Neighbourhood centres (5.000 12.000m) Community centres (12.000 25.000m) Minor regional centres (25.000 50.000m) Regional centres(50.00 100.000m) Super regional centres (exceeding 100.000m) /m /m /m /m /m /m /m /m /m /m R350 R2.800 R2.800 R3.000 R5.000 R5.000 R5.500 R6.000 R7.000 R7.000 R450 R3.600 R3.800 R4.500 R6.500 R7.000 R7.500 R8.000 R8.500 R9.500
Retail
Note: The above rates include the cost of tenant requirements and specifications of national chain stores. Industrial 1. 1.1 1.2 1.3 1.4 1. 2. 3. 4. 5. 6. 7. Industrial warehouse including small office area and change within structure (architect/engineer-designed) Steel frame, corrugated steel cladding and roof sheeting Steel frame, brickwork to ceiling height, corrugated steel cladding above and roof sheeting Administration offices, ablution and change room block Cold storage facilities Site services to low cost housing stand (250 350m) RDP houding Low-cost housing Simple low-rise apartment block Duplex townhouse economic Prestige apartment block Private dwelling houses: Economic facilities /m /m /m /m /no /m /m /m /m /m /m R2.500 R3.800 R3.000 R4.200 R4.800 R6.000 R8.900 R12.700 R22.000 R34.000 R1.200 R1.400 R2.000 R3.200 R4.700 R6.600 R4.700 R6.700 R9.000 R14.000 R3.400
Residential
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Annexure 4
8. 9.
10.
11.
Standard Middle Class Luxury Exclusive Exceptional (Super luxury) Outbuildings Carport (shaded): Single Double Carport (covered): Single Double Swimming pool Not exceeding 50kl Exceeding 50kl and not exceeding 100kl
/m /m /m /m /m /m /no /no /no /no /no /no /no /no
R4.600 R5.500 R7.800 R11.600 R18.000 R36.000 R2.000 R3.400 R2.900 R5.600 R4.500 R8.300 R60.000 R60.000 R100.000 R215.000 R280.000
12.
Tennis court Standard Floodlit Clinic: 150-bed, 5-theatre (excluding doctors' accommodation)
Clinics 1. /bed R590.000 R900.000
Hotels 1. Limited service hotel /key R495.000 R715.000 2. Resort Style /key R1.760.000 R3.420.000 3. Luxury /key R1.430.000 R1.650.000 Note: The rate stated above for a luxury hotel is based on a hotel having a ratio of approximately 35m of back-of-house and public areas such as conference rooms, entrance foyers, lounges and restaurants per room. This ratio can vary considerably with different types of hotels, e.g. limited service and resort hotels, CBD business hotels or casino complexes. Studios 1. 1. Studios: dancing, art exhibitions, etc. Conference centre to international standards /m /m R8.900 R12.700 R16.000 R21.000 Conference Centres
Building type
Retirement Centres 1. Dwelling house middle class luxury Apartment block middle class luxury Community centre middle class /m /m /m /m /m R5.300 R7.400 R5.500 R8.500 R7.100
2.
3.
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Annexure 4
luxury Frail care 4. Note: The above rates exclude frail care facilities. Schools 1. 2. 1. Primary school Secondary school Stadiums to PSL standards including partial roofing and seating to main stand and VIP areas, public seating on concrete stands and facilities, change rooms, including field preparation, irrigation, drainage, access control, PA system and floodlighting. Stadiums to FIFA Standards including roofed public seating, private suites, bar facilities, change rooms, press and VIP areas, field preparation, irrigation, drainage, access control, PA system, video displays, floodlighting and CCTV. Stadium pitch to FIFA standards
/m /m
R10.500 R8.500
/m /m
R4.500 R5.700 R4.800 R6.300
Stadiums
/seat
R22.000 R34.000
2.
/seat
R50.000 R67.000 R14.000.000 R17.000.000
3.
Prisons 1. New generation prison /inmate R380.000 R400.000
Building services
The following rates are for building services (mechanical and electrical) applicable to typical building types in the categories indicated. Rates are dependent on various factors related to the design of the building and the requirements of the system. In particular the design, and therefore the cost of air conditioning can vary appreciably depending on the orientation, shading, extent and type of glazing, external wall and roof construction, etc. Electrical installation 1. 2. 3. 4. 5. 6. 7. Office buildings standard installation Office buildings sophisticated installation Office buildings UPS, substations, standby generators Residential Shopping centres Hotels Hospitals /m /m /m /m /m /m /m R325 R575 R460 R750 R230 R320 R525 R675 R500 R650 R680 R850 R800 R1.050
Building services
Electronic installation 1. 2. 3. 4. 5. Offices - standard installation Offices sophisticated installation Residential Shopping centres Hotels /m /m /m /m /m R340 R425 R440 - 560 R180 - 230 R400 R550 R360 R450
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Annexure 4
6.
Hospitals
/m
R370 R460
Fire protection installation (offices) 1. Sprinkler system including hydrants and hose reels (excluding void sprinkler) Air-conditioning installation 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Notes Ventilation to parking/services areas Office buildings: console units Office buildings: console/split units Office buildings: package units Office buildings: central plant Office buildings: Variable Refrigerant Flow Residential: split units Shopping centres: split units Shopping centres: package units Shopping centres: evaporative cooling Hotels: public areas Hospitals: split units to wards Hotels: console units Hotels: split units Hotels: central plants Hospitals: operating theatres
/m /m /m /m /m /m /m /m /m /m /m /m /m /key /key /key /theatre
R140 R230 R150 R300 R450 R600 R520 R675 R725 R900 R950 R1.400 R950 R1.550 R675 R1.200 R625 R750 R650 R1.200 R310 R775 R950 R1.650 R1.350 R1.550 R12.000 R18.000 R26.000 R36.000 R40.000 R67.000 R210.000 - R780.000
Note: see note with regard to hotels.
1. Regional variations: Construction costs normally vary between the different provinces of South Africa. Costs in the Western Cape and KwaZulu-Natal, specifically upper class residential, for example, are generally significantly higher than Gauteng due to the demand for this accommodation. Rates have therefore been based on data received from the Gauteng province, where possible. However, specific costs for any region can be given upon request from any Davis Langdon office in that region. 2. Value added tax (VAT): As the majority of developers are registered vendors in the property industry, any VAT paid by them on commercial property development is fully recoverable. Therefore to reflect the net development cost, VAT has not been allowed for in the above rates. Should the gross cost (i.e. after VAT inclusion) be required, then VAT at the ruling rate (currently 14%) should be added to all the above rates. Cognisance should be taken however, of the effect of VAT on cash flow over a time period. This will vary according to the payment period of the individual vendor but in all cases will add to the capital cost of the project to the extent of interest on the VAT outstanding for the VAT cycle of the particular vendor.
Monthly forecast of in-contract building costs (Haylett formula)
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Work group 180 (February 1991 = 100)
Forecast from: January 2011 2010 % ch 4.0 3.8 3.5 3.7 5.1 5.3 4.0 3.4 3.3 3.6 3.9 3.6 3.9 413.1 5.9 428.0 8.4 427.6 8.7 454.1 454.4 44.9 426.0 8.5 452.8 418.2 6.8 447.9 414.2 5.9 443.2 7.0 7.1 6.3 6.2 6.2 7.0 413.4 5.6 442.9 7.1 409.5 4.4 439.2 7.3 407.5 4.2 437.0 7.2 474.4 482.3 487.8 491.5 498.1 503.5 505.3 505.4 483.3 407.4 5.0 435.9 7.0 469.0 406.5 5.0 435.2 7.0 464.9 6.8 7.6 8.6 9.8 10.1 10.9 11.2 11.2 11.3 11.2 9.4 401.3 4.1 431.4 7.5 460.5 6.8 397.7 3.6 429.1 7.9 457.3 6.6 505.7 508.5 513.4 516.5 519.9 523.3 525.4 530.2 535.7 541.5 542.8 542.9 525.5 Index % ch Index % ch Index % ch Index 2011 2012 2013 2014 % ch 10.6 10.4 10.4 10.1 9.6 8.5 7.7 7.9 7.5 7.6 7.4 7.4 8.7
Forecast date: September 2011 2015 Index 544.0 545.2 548.4 550.8 551.9 553.2 554.3 555.0 558.9 561.8 566.6 566.6 554.7 % ch 7.6 7.2 6.8 6.6 6.2 5.7 5.5 4.7 4.1 3.7 4.4 4.4 5.5
2009
Month
Index
% ch
Index
Jan
369.1
9.9
383.8
Feb
371.5
8.8
3.85
XVIII
Mar
373.9
7.0
387.1
Apr
373.9
3.4
387.9
May
372.2
-1.2
391.2
Jun
372.4
-1.0
392.2
Jul
376.5
-1.5
391.6
Aug
378.3
-2.5
391.0
Sep
379.0
-1.9
391.6
Oct
378.7
-1.6
392.5
Nov
378.9
-0.3
393.5
Dec
381.0
2.7
394.7
Avg.
375.5
1.7
390.2
Note: New weighting structures were introduced in 2003. Consequently, all indices were revised back to January 2002.5.4
Source:
Annexure 5
This table is an extract of the Building Cost Report of Medium-Term Forecasting Associates, P O Box 7119, Stellenbosch, 7600, Tel. 0218838152, and is published with their permission.
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Annexure 6
Absa home building-cost index

2000 = 100
Quarter
1996:1 1996:2 1996:3 1996:4 1997:1 1997:2 1997:3 1997:4 1998:1 1998:2 1998:3 1998:4 1999:1 1999:2 1999:3 1999:4 2000:1 2000:2 2000:3 2000:4 2001:1 2001:3 2001:4 2002:1 2002:2 2002:3 2002:4 2003:1 2003:2 2003:3 2003:4
Index
68,3 68,2 68,9 69,4 71,0 74,0 77,1 79,7 82,3 83,5 84,0 84,2 86,6 89,4 92,2 96,1 99,4 101,5 103,0 105,3 107,4 111,4 115,9 118,9 122,1 126,7 131,8 137,4 143,1 149,0 156,2
% change on previous year

4,5% 3,6% 3,0% 1,3% 4,1% 8,4% 11,9% 14,8% 15,8% 12,8% 9,1% 5,7% 5,2% 7,1% 9,7% 14,1% 14,8% 13,5% 11,7% 9,6% 8,1% 9,7% 12,5% 12,9% 13,7% 13,8% 13,8% 15,5% 17,3% 17,6% 18,5%
Quarter
2004:1 2004:2 2004:3 2004:4 2005:1 2005:2 2005:3 2005:4 2006:1 2006:2 2006:3 2006:4 2007:1 2007:2 2007:3 2007:4 2008:1 2008:2 2008:3 2008:4 2009:1 2009:2 2009:3 2009:4 2010:1 2010:2 2010:3 2010:4 2011:1 2011:2 2011:3
Index
163,6 170,2 175,3 180,3 185,9 192,1 198,2 204,3 208,3 211,5 219,6 227,0 230,8 236,7 240,0 245,2 254,0 256,0 258,7 261,9 264,0 272,5 277,4 278,4 285,9 292,3 296,2 304,4 305,4 302,7 310,2
% change on previous year

19,1% 18,9% 17,6% 15,4% 13,6% 12,9% 13,0% 13,3% 12,1% 10,1% 10,8% 11,1% 10,8% 11,9% 9,3% 8,0% 10,1% 8,2% 7,8% 6,7% 3,9% 6,5% 7,2% 6,3% 8,3% 7,3% 6,8% 9,3% 6,8% 3,6% 4,7%
Source: ABSA. Calculated from Absa home mortgage data, viz. value of houses to be built divided by number of m.
:
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Annexure 7
BER Building Cost Index (non-residential tender prices)

2005=100 First quarter 2005 % ch 2006 % ch 2007 % ch 2008 % ch 2009 % ch 2010 %ch 2011 %ch 96,5 20,2 103,0 6,8 113,9 10,6 135,4 18,9 138,7 2,4 145,7 5,1 140,8 -3,4 Second quarter 97,8 16,5 109,2 11,7 132,8 21,6 147,0 10,6 151,0 2,7 144,8 -4,1 147,0 1,5 Third quarter 101,0 16,3 110,6 9,5 122,9 11,2 141,2 14,9 140,9 -0,2 141,3 0,3 150,0 5,6 Fourth quarter 104,7 15,6 117,7 12,4 138,4 17,6 157,5 13,8 145,6 -7,6 140,1 -3,8 Average 100,0 17,1 110,1 10,1 127,0 15,3 145,3 14,4 144,0 -0,9 143,2 -0,6
Source: This table is an extract of the Building Cost Report of Medium-Term Forecasting Associates, P O Box 7119, Stellenbosch, 7600, Tel. 0218838152, and is published with their permission. The last few months are always subject to change.
Prime overdraft rate at month-end (%)

Rodes Report 2011:4
(proxy for trends in mortgage rates*)
XXI
Year 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Jan 18,0 21,0 21,0 20,3 17,3 15,3 16,3 18,5 20,3 19,3 22,0 14,5 14,5 14,0 17,0 11,5 11,0 10,5 12,5 14,5 15,0 10,5 9,0
Feb 19,0 21,0 21,0 20,3 16,3 15,3 17,5 18,5 20,3 19,3 21,0 14,5 14,5 14,0 17,0 11,5 11,0 10,5 12,5 14,5 14,0 10,5 9,0
Mar 19,0 21,0 21,0 20,3 16,3 15,3 17,5 18,5 20,3 18,3 20,0 14,5 14,5 15,0 17,0 11,5 11,0 10,5 12,5 14,5 13,0 10,0 9,0
Apr 19,0 21,0 20,0 19,3 16,3 15,3 17,5 19,5 20,3 18,3 19,0 14,5 14,5 15,0 17,0 11,5 10,5 10,5 12,5 15,0 13,0 10,0 9,0
May 20,0 21,0 20,0 19,3 16,3 15,3 17,5 20,5 20,3 18,3 19,0 14,5 14,5 15,0 17,0 11,5 10,5 10,5 12,5 15,0 11,0 10,0 9,0
Jun 20,0 21,0 20,0 19,3 16,3 15,3 17,5 20,5 20,3 22,3 18,0 14,5 13,8 16,0 15,5 11,5 10,5 11,0 13,0 15,5 11,0 10,0 9,0
Jul 20,0 21,0 20,0 18,3 16,3 15,3 18,5 19,5 20,3 24,0 17,5 14,5 13,5 16,0 15,5 11,5 10,5 11,0 13,0 15,5 11,0 10,0 9,0
Aug 20,0 21,0 20,0 18,3 16,3 15,3 18,5 19,5 20,3 25,5 16,5 14,5 13,5 16,0 14,5 11,0 10,5 11,5 13,5 15,5 10,5 10,0 9,0
Sep 20,0 21,0 20,0 18,3 16,3 16,3 18,5 19,5 20,3 25,5 16,5 14,5 13,0 17,0 13,5 11,0 10,5 11,5 14,0 15,5 10,5 9,5 9,0
Oct 21,0 21,0 20,3 18,3 16,3 16,3 18,5 19,3 19,3 24,5 15,5 14,5 13,0 17,0 12,0 11,0 10,5 12,0 14,0 15,5 10,5 9,5 9,0
Nov 21,0 21,0 20,3 17,3 15,3 16,3 18,5 20,3 19,3 23,5 15,5 14,5 13,0 17,0 12,0 11,0 10,5 12,0 14,0 15,5 10,5 9,0 9,0
Dec 21,0 21,0 20,3 17,3 15,3 16,3 18,5 20,3 19,3 23,0 15,5 14,5 13,0 17,0 11,5 11,0 10,5 12,5 14,5 15,0 10,5 9,0
Year 19,8 21,0 20,3 18,8 16,2 15,6 17,9 19,5 20,0 21,8 18,0 14,5 13,8 15,8 15,0 11,3 10,6 11,2 13,2 15,1 10,8 9,8
Source: SARB
Annexure 8
*Average mortgage rates for new bonds are, on average, below the prime overdraft rate. Individual mortgage rates will depend on the creditworthiness of the mortgagor.
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Real office rentals stutter fundamentals

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Office rentals, operating expenses, and office demand & vacancies

Non-industrial land values

Industrial rentals and vacancies and industrial stand values

Building activity & building costs

Rodes Report 2011:4

Rodes Report 2011:4

Table 8.4: Table 8.5: Table 9.1: Table 9.2:

79 80 83 93 106 107 112 119 120 123 123

Rodes Report 2011:4

Rodes Report 2011:4

Rodes Report 2011:4

Rodes Report 2011:4

Rodes Report 2011:4

Rodes Report 2011:4

0413656200 0312047400 0413630168 0448732519 0466361388 0562123207

Rodes Report 2011:4

Rodes Report 2011:4

John S. Lottering Editor 8 December 2011

Rodes Report 2011:4

State of the property market

Chapter 1: State of the property market

State of the property market in quarter 3 of 2011

Quantitative overview of the property market

Table 1.1 The property market at a glance at quarter 2011:3*

Rodes Report 2011:4

State of the property market

Table 1.1 (continued) The property market at a glance at quarter 2011:3*

Rodes Report 2011:4

State of the property market

The house market

Rodes Report 2011:4

Standard capitalization rates

Chapter 2: Capitalization rates

Investment demand at risk of being dampened further

Capitalization rates (smoothed) Business cycle indicator

Source of data: Rode's Time Series; SARB

Capitalization rates (smoothed) Business cycle indicator

Source of data: Rode's Time Series; SARB