2011:4

Real office rentals stutter Business cycle indicators

losing vigour, bringing with them implications for property

fundamentals Houses overvalued by 25%

PROPERTY PUBLICATIONSA DIVISION OF RODE & ASSOCIATES (PTY) LTD.www.rode.co.za

Editor-in-chiefErwin G. Rode

EditorJohn S. Lottering

Survey administratorJuwayra Januarie

AdvertisingLynette Smit

012-664 4159

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© Rode & Associates (Pty) Ltd., December 2011. All rights reserved. No part of this publicationmay 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 permissionof 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 oropinions contained in this publication. Portions of this report may be reproduced for legitimateacademic or review purposes provided due attribution is cited.

Vol. 22 no. 4

Erwin G. Rode(editor-in-chief)

John S. Lottering(editor)

on the South African Property Market2011:4

iRode’s Report 2011:4

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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:

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Services offered by RodeviRode’s Report 2011:4

Rode's Report on the South African Property Market

The Rode Report analyses and reports on mostsectors of the property market. It covers, amongothers, trends and levels of rentals and standardcapitalization rates by property type, grade,node/township, the listed real estate market, andbuilding construction costs and building activity.Quarterly updated; print or electronic version.

Rode's South African Property Trends

Trends is aimed at general managers with strategicdecision-making power and property investment analystswho are involved in asset allocation and viability studies.It offers a statistically-based analysis and forecast byproperty type of all key indicators affecting the propertymarket, and it covers all the major metropolitan areas toprovide a complete framework for property investmentplanning. The forecasts include those for standard capitalizationrates, prime industrial and office rentals, office take-up, officevacancies, building costs, the property cycle and expected totalreturns on a notional office-building portfolio. Biannual CD publication.

Rode's Retail Report on South Africa

Rode's Retail Report contains analyses and reports onretail property, including shop rentals, operating ex-penses and escalation rates. It covers about 100 shop-ping centres and 120 street-front micro locations (high-street shops) in six metropolitan areas. Retail sales datais presented by magisterial district and by merchandisecategory. It also contains data on new shopping centres,mooted developments and extensions to existing centres.Quarterly CD publication.

PROPERTY PUBLICATIONSA DIVISION OF RODE & ASSOCIATES (PTY) LTD.

Services offered by RodeviiRode’s Report 2011:4

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 sub-

markets – 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 in-

vestment 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

Rode’s Report. Users of Rode’s Sales are advised to make use

of this information in conjunction with Rode’s Report. Monthly

electronic publication.

Rode staff

Erwin RodeBA, MBA (Stell): CEO

Garth JohnsonBCom (Stell), BComHons(Econ) (UNISA), NDREES (UNISA)

Juliana DommisseBEconHons (Stell)

John S LotteringBCom(Finance)(UWC), BComHons(Econ)(UWC),MCom(Econ) (UWC)

Angelique Claasen

Abigail Jaftha

Biancé JohnsonJournalism (City Varsity)

Elizma Hawksley

Lynette Smit

Juwayra Januarie

Karen E ScottBComHons (Stell), BComHons (UCT)

Monique VernooyBTech(QS) (Cape Tech), NDREES (UNISA)

Tobi RetiefBA (Stell), NDREES (UNISA)

Madeniah JappieBScHons (Property Studies) (UCT)

Anneke MeijersBCom(Stell), BCom Hons(Econ) (Stell)

Berchtwald RodeBA (Stell), MTRP (UOFS)

Tanya Lendis

Stephan van der WaltMA (Stell)

Janelle Van HarteParalegal (School of Paralegal Studies)

Martin CarstensB Iuris, B Admin Hons (Mun Admin), M Admin (UNISA), D Admin (UP)

Rode’s Report 2011:4 Rode staffix

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 4

How to estimate capitalization rates – anywhere 14

Listed property

A double whammy for listed property prices 17

Office rentals, operating expenses, and office demand &vacancies

Rental office rentals stutter 21

Low confidence suppressing demand for space 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 54

Values of industrial stands are struggling 81

Residential market

What’s up? Residential rentals stutter while retail sales are booming 104

Houses overvalued by 25% 117

Building activity & building costs

Tender prices accelerate as profit margins are milked dry 121

Rode’s Report 2011:4 Contentsxi

Tables

Table 1.1: The property market at a glance 1

Table 2.1: Survey of capitalization rates: office buildings 8

Table 2.2: Change in capitalization rates: office buildings 9

Table 2.3: Survey of capitalization rates: industrial buildings 10

Table 2.4: Change in capitalization rates: industrial buildings 10

Table 2.5: Survey of capitalization rates (%): shopping centres 11

Table 2.6: Change in capitalization rates (%): shopping centres 12

Table 2.7: Survey of capitalization rates (%): street-front shops 13

Table 2.8: Change in capitalization rates (%): street-front shops 13

Table 4.1: Total return on property unit trusts and property loan stocks 19

Table 5.1: Pioneer office rentals 25

Table 5.2: Market rental rates for office buildings 26

Table 5.3: Standard deviation of market rental rates for office buildings 28

Table 5.4: Market parking rentals 30

Table 5.5: Office rental escalation rates on new leases (%) 32

Table 5.6: Typical gross outgoings for prime office buildings 33

Table 5.7: Escalation rates on operating costs 36

Table 6.1: Committed new developments 41

Table 6.2: Sapoa office vacancy factors (%) 42

Table 7.1: Office stand values 51

Table 7.2: National shopping-centre stand values 52

Table 7.3: National filling-station land survey 53

Table 8.1: Pioneer rental rates for new, state-of-the-art industrialdevelopments 56

Table 8.2: Mean prime industrial market rentals 57

Table 8.3: Standard deviation from mean prime industrial market rentals 67

Rode’s Report 2011:4 Tablesxiii

Tables

Table 8.4: Predominant market escalation rates (%) for industrial leases 79

Table 8.5: Indicative operating expenses for industrial buildings 80

Table 9.1: Market values for industrial stands 83

Table 9.2: Standard deviation from industrial stands 93

Table 10.1: Gross-income yields (%): Flats 106

Table 10.2: Flat rentals: standard-quality block of flats 107

Table 10.3: Flat rentals: upmarket-quality block of flats 112

Table 11.1: Gross-income yields (%) on houses by price class 119

Table 11.2: Gross-income yields (%) of townhouses by price class 120

Table 12.1: New buildings completed (private sector)(m2) 123

Table 12.2: New residential buildings (private sector)(m2) 123

Rode’s Report 2011:4 xiv

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

Rode’s Report 2011:4 Annexuresxv

Panellist codes

Code Company Telephone number

ACU Acumen Properties 0312662003AE Astol Properties 0114554781AH Alex Thornhill Properties 0538326889AI Aïda Boksburg 0119173135AI Aida Brits 0122523330AI Aïda Commercial Pretoria 0123483720AI Aïda Pretoria 0125430054AI Aida Rustenburg 0145921501AI Aida Tzaneen 0153073680AI Aida Phalaborwa 0157817930AI Aida Lichtenburg 0186325777AJ Property Specials 0114753955AL Bothma Eiendomme 0583076400AN Annenberg Real Estate 0214657780AP API Property Group 0112341144AQ Assetbridge Real Estate 0219058490AR Ash Brook Investments 71 0832301611ASA ASAP Property Agents 0126431938AT Anne Griesel Properties 0113931810AV 5th Avenue Properties 0112346111AW Watprop 0118870473AX Avron Commercial Industrial Properties CC 0215520001AY Alpine Estates 0114537600AZ AJ Nel 0832819644BA Brammer Ross & Shapcott 0118734903BC Barclay Miller & Associates (Pty) Ltd 0118035821BD Bruce McWilliams Industries (Pty) Ltd 0413961400BG Batting Properties 0437220649BL Benchmark Property Group 0214215000BM Jones Lang LaSalle 0115072200BQ Brightridge Properties 0117864747BR Broll Property Group 0114414000BR Broll Property Group 0114414108BR Broll Property Group 0118341136BR Broll Property Group 0214197373BR Broll Property Group 0413635559BS Penthouse Real Estate 0116726251BT Basie Botha Estate Agents 0137522700BU Barbour & Thorne 0573532951BW Buschow Properties 0845103119BX Buffalo City Municipality 0437220240BY Bobby Rogers Property Broker 0123614484BZ Bales Investprop 0216838877BZ Bales Investprop 0861332562

Rode’s Report 2011:4 Panellist codesxvi

CB Centurion Letting & Sales 0126536180CC CCI Properties CC 0828211214CD Chris van der Walt Properties 0415821110CE Cenprop Real Estate 0333949595CF Cathy Cordier Eiendomme 0562121518CI City Property Administration 0123198811CL Cleomic Property Consultants 0117061591CM Capitol Commercial Properties 0219141840CN Citynet 0114833930CP Citiprop Real Estate 0214658391CQ Connaught Properties (Pty) Ltd 0117252780CR Colliers International 0215915067CR Colliers International 0312672001CR Colliers International 0413742205CS Chase & Sons 0164213170CU Africape Property Investments (Pty) Ltd. 0219144533CV Chris Hearn and Associates 0314629270DA Dallas Properties CC 0118273417DC Dave Furness Properties 0136536330DD Diamond Properties 0214340001DE Dedekind Real Estate 0366372297DG DG Ladegaard Real Estate 0169339633DK Direct @ Home Estates 0186320269DL Delta Real Estate 0219302343DN David Newham Property Management 0219480934DO Bainprop (Pty) Ltd 0116092542DP De la Porte Property Group 0215519777DQ DesKay Real Estate 0437484252DT DTZ Leadenhall (Pty) Ltd 0112742300DV Dan Viljoen Estates 0116832345DW Divaris Property Brokers 0215311551EB ERA Real Estate 0145974977EB ERA Bundu Properties 0157810589EB ERA Ermelo 0178192398EB ERA Sun Properties 0436433024EB ERA National George 0448741113EB ERA Kuruman 0537123503EC EVS Elite Valuation Services 0741922667ED Edric Trust 0514489431EH Ermelo Homenet 0178192880EJ Erasmus JoosteIng 0184734511EK Ellenberger & Kahts 0514301511EL East London Estates & Auctioneering 0437351662EM Property Management & Rental Specialist CC 0217901991EP Ecclesiate Property Specialists 0458381131ER Associated Property Brokers 0437260501ES Eli StröhEdmsBpk 0152975890EV Engel & Völkers Commercial Properties 0123467777FN Fine & Country Bethlehem 0583032333FN Fine & Country Kellaprince 0137544400

Panellist codesxviiRode’s Report 2011:4

FO Fosprops Properties/ Homenet 0357898583FP PPA Property Development CC 0123429099FR Fraser & Hurd (Pty) Ltd/Fraser Properties 0413654445GB Galetti Commercial and Industrial 0214186308GB Galetti Commercial and Industrial 0117831195GE Gustrouw Estates (Pty) Ltd 0218547220GO Pam Golding 0218711480GO Pam Golding 0583035565GO Pam Golding Commercial 0214177878GO Pam Golding Commercial 0437054040GW Goldswain Investments 0437222876GY Guy de la Porte Property Solutions 0217948879HE Homelet Grahamstown 0466222839HH Hendrik Tryhou Property Consultants 0137441671HK Huurkor 0124008600HN Harcourts Heloman 0118246028HN Harcourts Jana-Marie Real Estates 0155161526HN Harcourts Excellence 0184687089HN Harcourts Queenstown 0458382560HN Harcourts Parklane 0333423340HS Summerton Edelson Commercial CC 0415811768IP InvestPro 0437263116JL Just Letting Randburg/ Northcliff 0117932757JL Just Letting Potchefstroom 0182931858JL Just Letting City Bowl 0214233344JP John Price Estates 0415833903KA Kailas Property Bureau 0114826461KC Keith Roux Properties 0437213465KE Keydom Real Estate 0132826187KI Kitchings Agencies 0419229870KM Kirchmann-Hurry Investments Ltd 0117067131LA Landlords “We do Rentals” 0219751770LD Lendac Property Brokers 0732148655LF Louis Group Properties 0214223030LH Leader Homes 0538313955LM Louis Kruger Property Management 0219033101LP Les' Property and Rentals 0437266933LS Lock Sloane & Partners 0317011010MD Mont Blanc Projects & Properties (Pty) Ltd 0826005326MI Platinum Global 0514474711MJ Majola & Boyd (Pty) Ltd 0861111789ML Mindry Properties CC 0317834307MO Moolman Group of Companies 0152914700MP Monarch Rentals (Kingdom of Rentals) 0118494211MR Marder Properties 0114531220MW Mc William Murray Realty 0312674800NE Newbridge Property Services 0219139131NR National Real Estate 0514059933OC Omnicron Commercial Property Brokers (Pty) Ltd 0219147363OD Oudtshoorn Eiendomme 0442725895

Panellist codesxviiiRode’s Report 2011:4

OG Oscar Saunderson Group 0215914499OM Old Mutual Investment Group Property Investments 0313661811OM Old Mutual Properties 0437270990OP Omnipark Pty (Ltd) 0216836077PA Pace Property Group 0112175959PC Propco (1985) (Pty) Ltd 0312090161PE Property Scene Group 0413734146PF Permanent Trust Property Group 0214418800PG Proximo 0176312033PH President Estate & General Agents (Pty) Ltd 0118738707PI PHG Property Group 0514488831PJ Profile Property Solutions 0333472786PK Philips Property Brokers 0117826007PL Pears Property Consultants (Pty) Ltd 0217623474PM PDL Property Management (Pty) Ltd 0137527333PN Propergation Estates 0219146444PQ Pro-Net Estates 0132433113PR Harcourts Polla Scheepers 0343125841PS Property Scene Real Estate 0357923217QC Cosmoprop Commercial Property Brokers 0219148035QS Commercial Space 0216714343QU Quadrant Properties 0115309840RA Real Estate & Property Services 0878081578RD Redefine Income Fund 0112830028REW Real Estate @ Work 0836328011RF Rent-A-Flat 0117891007RM Remax Kuruman 0537123123RO Reef Property Consultants 0116821827RQ Realty Value 0357891376RR Realnet 0137532544RS Rawson Properties Milnerton 0215587102RY Rita Stipec Properties 0152954537RZ Oriprops 0137528091SC Stockton Property Consultants 0114259857SF Seeff Durbanville & Brackenfell 0219755290SO Simmons & Associates 0437221705SN Selection Estates 0867555545SQ Steer & Company 0214261026SX Status-Mark 0116680100TE Trust & Estate Co. 0026461231224TG Theo Goosen Estate Agents 0152959014TH Trevor Hosioski Investment Properties 0117834569TR Trafalgar Property Services 0112145200TR Trafalgar Property Services 0123265963TR Trafalgar Property Southern Suburbs 0214105500TR Trafalgar Property & Financial Services 0313017017TR Trafalgar Property Management 0437266066UN Unified Properties 0437482323VD Van der Westuizen Eiendomme 0536310846WA Wall & Smith Property Consultants 0217972552

Panellist codesxixRode’s Report 2011:4

WJ Warren Jack Property Group 0413656200WK Wakefields Property Management (Pty) Ltd 0312047400ZB Sotheby's International Realty PE 0413630168ZB Sotheby's International Realty George 0448732519ZB Sotheby's International Realty 0466361388ZE Zenith Properties 0562123207ZZ Anon

Panellist codesxxRode’s Report 2011:4

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 Research’s building-cost index, to

which they hold the marketing rights.

3. Absa for the use of their home-building-cost index.

4. 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.

AcknowledgmentsxxiRode’s Report 2011:4

Foreword

Dear Reader

Welcome to the fourth issue of Rode’s Report on theSouth African Property Market (RR) for 2011, whichreports on surveys conducted in the third quarter of2011.

As usual, we report on movements of a number of criticalproperty variables, ranging from capitalization rates,rentals, escalation rates, land values, and operating costsfor the non-residential property market, to changes inhouse prices and flat rentals in the residential property market.

Readers are again reminded of our website – www.rode.co.za – which containsinteresting and relevant property-related articles, most of which are publishedin our monthly e-newsletter, to which readers can subscribe through ourwebsite. It’s free of charge.

If you want to communicate with a specific niche market, you can contactLynette on 082-323 5799 for RR advertising rates.

Juwayra Januarie and Biancé Johnson are in charge of expanding our surveypanel; their job is to give you access to the opinions of as many propertyexperts as possible. We appeal to all market participants who feel they havewhat it takes to become an RR panellist, to please contact Juwayra or Biancéon 021-946 2480 – it’s for the benefit of everyone in the industry. As apanellist you will also get invaluable exposure.

Happy reading!

Sincerely

John S. LotteringEditor

8 December 2011

ForewordxxiiRode’s Report 2011:4

Rode’s Report 2011:4 State of the property market

1

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 Rode’s 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 col-

lected 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.

Rode’s Report 2011:4 State of the property market

2

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 non-

residential property market is a derivative

of the economy, so this development has

the very real potential to impact on the rat-

ing of the property market, that is capitali-

zation rates.

During the upswing phase of the business

cycle, property fundamentals are likely to

do well. In turn, this will stimulate invest-

ment 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 lead-ing business-cycle indicator1 lead to an

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

actual decline in economic activity, the out-

come could be upward pressure on capitali-

zation rates. Nonetheless, in the third

quarter of 2011, capitalization rates for re-

tail, prime office and industrial property

still managed to remain at roughly the

same level they were in the previous quar-

ter. The market for prime property is still

inherently healthy.

Office rentals

Moderating economic activity and flounder-

ing 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, mar-

ket rentals could — on a national basis —

only muster modest growth of 4%. This

comes after having achieved an unsustain-

leading economic indicator provides a guideline for economic growth for at least six months ahead.

Table 1.1 (continued)

The property market at a glance at quarter 2011:3* % growth on four quarters earlier (on smoothed data)

Nominal Real**

Prime industrial rentals (500 m² units)

Central Witwatersrand +4,6 -0,9

Port Elizabeth -1,2 -6,4

Durban metro +5,1 -0,5

Cape Peninsula +4,2 -1,3

Flat rentals (standard quality, all sizes)

Johannesburg metro +1,5 -3,3

Pretoria metro +4,8 -0,2

Durban metro +1,5 -3,3

Cape Town metro +4,2 -0,8

Port Elizabeth +3,0 -1,9 * Unless otherwise specified

** Nominal values deflated by BER Building Cost Index; however, flat rentals are deflated using the Consumer Price Index.

Rode’s Report 2011:4 State of the property market

3

able growth of about 11% in the first quar-

ter. 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 im-

plies that, in real terms, office rentals have

actually contracted. Thus, we see the busi-

ness-cycle slowdown is already a strong

depressing force on the upswing phase of the long office cycle.

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 in-

tensive 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 moder-

ate growth in market rentals. In the third

quarter of 2011, market rentals on the

Central Witwatersrand and in Durban mus-

tered 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 men-

tion the adverse impact that the current

slowdown in manufacturing output is likely

to have on the demand for industrial prop-erty.

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 house market

For now, no vigorous growth in house pric-

es can be expected until the magnitudes of

the key drivers of demand change signifi-

cantly. One such driver is, of course, inter-

est 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 impli-

cation is that a resumption in the down

trend in real houses prices is inevitable –

it’s only a question of time and speed. A

real decline in house prices does not neces-

sarily mean the nominal prices will decline;

a more likely outcome is that nominal pric-

es might grow at, say, 2% per annum for a

few years while inflation is at, say, 6%. �

Rode’s Report 2011:4 Standard capitalization rates 4

9

10

11

12

13

14

80

100

120

140

160

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

Capitalization rates (smoothed)Business cycle indicator

Industrial leaseback capitalization ratesvs

Coincident business cycle indicator

r = -0,8

Cap

italiz

atio

n ra

tes

(%) B

usiness cycle indicator(2000=

100)

Source of data: Rode's Time Series; SARB

7

8

9

10

11

12

13

80

100

120

140

160

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11

Capitalization rates (smoothed)Business cycle indicator

Regional-shopping-centre capitalization ratesvs

Coincident business cycle indicator

r = -0,8

Cap

italiz

atio

n ra

tes

(%) B

usiness cycle indicator(2000=

100)

Source of data: Rode's Time Series; SARB

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 non-residential 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 indi-cator1 of the Reserve Bank and Rode’s cap-italization rates is depicted in the following graphs.

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 inves-tors to analyze the business cycle. It is coincident in contrast to leading (ahead of the cycle).

do well. In turn, this will stimulate invest-ment 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 econom-ic activity picked up, capitalization rates trended down again. September 2011 marked the third consecutive month that the composite leading business-cycle indi-cator 2 dropped (not shown in a graph). Should this trend persist and lead to an ac-tual cooling in economic activity, the out-come could be upward pressure on capitali-zation rates.

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 move-ments 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.

Rode’s Report 2011:4 Standard capitalization rates 5

7

8

9

10

11

12

13

90 92 94 96 98 00 02 04 06 08 10

PretoriaCape PeninsulaCentral WitwatersrandDurban

Capitalization ratesRegional shopping centres

%

Source of data: Rode's Time Series

Smoothed

8

9

10

11

12

13

14

15

90 92 94 96 98 00 02 04 06 08 10

Cape PeninsulaCentral WitwatersrandPretoriaDurban

Capitalization ratesCommunity shopping centres

%

Source of data: Rode's Time Series

Smoothed

8

9

10

11

12

13

14

90 92 94 96 98 00 02 04 06 08 10

Cape PeninsulaDurbanPretoriaCentral Witwatersrand

Capitalization ratesPrime industrial leasebacks

%

Source of data: Rode's Time Series

Smoothed

8

10

12

14

16

90 92 94 96 98 00 02 04 06 08 10

Sandton CBDParktownRosebankMidrand

Capitalization ratesPrime Johannesburg decentralized offices

%

Source of data: Rode's Time Series

Smoothed

centres remained roughly at their previous-quarter levels. 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%.

Prime industrial leasebacks

With the exception of the Cape Peninsula, where capitalization rates on industrial leasebacks weakened (increased) slightly, capitalization rates in the other major in-dustrial 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-

ardized income yield of about 9,3% in the top cities and nodes. By “standardized in-come yield” we mean the capitalization rate is calculated on the assumption that the property is let at market rentals.

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 in-come return of about 9,3%. In the other Johannesburg decentralized office nodes, opinions of our respondents ranged be-tween 9,8% and 10,6%. The Gautrain sta-tion undoubtedly helped to entrench Sandton CBD’s ‘darling’ status.

Rode’s Report 2011:4 Standard capitalization rates 6

9

10

11

12

13

14

15

98 99 00 01 02 03 04 05 06 07 08 09 10 11

BryanstonRivoniaSunninghillRandburg

Capitalization ratesPrime Johannesburg decentralized offices

%

Source of data: Rode's Time Series

Smoothed

8

9

10

11

12

13

14

15

96 98 00 02 04 06 08 10

BrooklynHatfieldCenturionMidrand

Capitalization ratesPrime Pretoria decentralized offices

%

Source of data: Rode's Time Series

Smoothed

8

9

10

11

12

13

14

15

99 00 01 02 03 04 05 06 07 08 09 10 11

Umhlanga RidgeWestwayEssex TerraceBerea

Capitalization ratesPrime Durban decentralized offices

%

Source of data: Rode's Time Series

Smoothed

8

10

12

14

16

94 96 98 00 02 04 06 08 10

Century CityTyger ValleyCape Town CBD

Capitalization ratesPrime Cape Town offices

%

Source of data: Rode's Time Series

Smoothed

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.

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 decen-tralized, they ranged between 9,1% and 10,6%.

Cape Town decentralized

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 capitali-zation rates also stood at roughly 9%.

This concludes our analysis of capitalization rates and buyer profiles. The capitalization-rate tables follow.

Rode’s Report 2011:4 Standard capitalization rates 7

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 quarter’s 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 arti-cle are smoothed.

A standard capitalization rate (colloquially referred to as a cap rate) is the expected net oper-ating 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 Rode’s Report to “cap rates” and “capitalization rates” mean “stand-ard 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 in-dicative 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.

Rode’s Report 2011:4 Standard capitalization rates 8

Table 2.1 Survey of capitalization rates (%)

Office buildings Means for quarter 2011:3

Best location Grade A:

Multi-tenant Grade A: Leaseback

Grade B: Multi-tenant

Grade C: Multi-tenant

Mean SD n Mean SD n Mean SD n Mean SD n Johannesburg CBD 11,2 0,3 2 10,6 0,4 2 12,1 0,0 2 13,4 0,0 2 Braamfontein 10,6 0,1 2 10,1 0,0 2 11,7 0,2 2 12,4 0,5 2 Parktown 10,2 0,2 2 9,7 - 1 11,2 - 1 12,8 - 1 Rosebank 9,8 0,2 2 9,2 0,2 2 10,5 0,5 2 11,8 0,8 2 Sandton CBD 9,3 0,3 2 8,6 0,4 2 10,6 - 1 12,3 - 1 Rivonia 10,1 0,0 2 9,5 0,0 2 11,4 0,5 2 12,5 - 1 Bryanston 9,9 - 1 9,4 - 1 10,7 0,9 2 12,4 - 1 Sunninghill 9,9 - 1 9,4 - 1 11,6 - 1 12,4 - 1 Randburg Ferndale 10,6 - 1 10,1 - 1 12,2 - 1 12,9 - 1 Midrand 10,4 0,4 2 9,9 0,0 2 11,5 0,5 2 12,4 0,5 2 Germiston CBD 11,3 - 1 11,0 - 1 12,4 - 1 13,5 - 1 Pretoria CBD 10,9 - 1 10,2 - 1 11,1 0,9 2 13,1 - 1 Hatfield 10,5 - 1 9,7 - 1 11,2 - 1 12,6 - 1 Brooklyn 9,9 - 1 9,2 - 1 11,0 - 1 12,3 - 1 Centurion 10,2 - 1 9,5 - 1 11,2 - 1 12,8 - 1 Menlyn/Lynnwood 10,1 - 1 9,2 - 1 11,1 - 1 12,4 - 1 Vaal Triangle 10,4 - 1 9,6 - 1 12,1 - 1 13,2 - 1 Nelspruit 10,0 0,3 2 10,0 0,2 2 11,7 0,2 2 12,4 0,4 2 Polokwane 10,2 - 1 10,0 - 1 11,9 - 1 13,0 - 1 Durban CBD 11,3 0,5 3 10,7 0,2 2 11,9 0,8 3 13,5 0,4 3 Berea 10,6 0,1 2 10,2 0,2 2 11,0 0,0 2 12,7 0,2 2 Essex Terrace 10,5 - 1 10,0 - 1 11,0 - 1 12,5 - 1 Westway 9,1 0,1 2 8,9 0,1 2 10,0 - 1 - - - La Lucia/ Umhlan-ga Ridge

9,3 0,3 3 8,9 0,1 3 10,6 0,4 3 12,5 - 1

Pietermaritzburg 10,2 - 1 10,2 - 1 11,2 - 1 13,0 - 1 Cape Town CBD 9,5 0,4 4 9,5 0,4 3 10,3 0,2 5 11,0 0,8 3 Bellville CBD - - - - - - - - - - - - Bellville Tyger Val-ley

9,0 - 1 9,0 - 1 10,0 - 1 - - -

Claremont - - - - - - - - - - - - Port Elizabeth 10,3 0,2 2 10,0 0,0 2 11,5 - 1 12,8 0,2 2 East London - - - - - - - - - - - - Bloemfontein CBD 9,5 0,4 3 9,5 0,5 2 11,1 0,1 3 12,3 0,4 3 Windhoek - - - - - - - - - - - - n = Number of respondents — = Not available – fewer than two respondents SD = See Glossary of terms and abbreviations in Annexure 1.

Rode’s Report 2011:4 Standard capitalization rates 9

Table 2.2 Change in capitalization rates (% points)

Office buildings Means for quarter 2011:3 less quarter 2011:2

Best location Grade A: multi

Grade A: leaseback

Grade B: multi

Grade C: multi

Broker & owner contributors

Johannesburg CBD 0,0 0,3 0,3 0,1 BM, TH, ZZ Braamfontein 0,3 0,0 -0,1 -0,5 BM, TH Parktown -0,1 0,0 0,0 - BM, TH Rosebank -0,2 0,1 -0,5 -0,8 BM, TH Sandton CBD -0,4 -0,3 0,0 - BM, TH Rivonia 0,1 0,6 0,8 - BM, TH Bryanston 0,4 0,2 -1,0 - BM, TH Sunninghill 0,1 0,1 -0,1 - TH Randburg Ferndale 0,1 0,0 0,0 0,1 TH Midrand -0,4 -0,5 -0,1 0,1 AW, TH Germiston CBD - - 0,2 0,0 TH Pretoria CBD 0,2 -2,0 -0,7 0,1 TH, ZZ Hatfield 0,0 -0,1 0,2 0,1 TH Brooklyn -0,1 0,2 0,0 0,0 TH Centurion 0,0 -0,4 0,1 - TH Menlyn/Lynnwood 0,0 0,0 0,0 0,2 TH Vaal Triangle 0,1 0,1 0,0 0,0 TH Nelspruit -0,1 0,0 0,3 0,0 HH, TH Polokwane 0,0 0,0 0,0 0,0 TH Durban CBD 0,3 0,0 0,6 0,5 MW, PC, TH, ZZ Berea -0,1 0,0 0,0 0,0 PC, TH Essex Terrace 0,0 0,0 0,0 0,0 PC Westway -0,2 -0,1 - - MW, PC La Lucia Ridge -0,4 0,0 -0,2 0,0 MW, PC, TH Pietermaritzburg 0,0 -0,1 0,0 0,0 TH Cape Town CBD 0,1 0,0 0,1 0,0 DD, GY, QS, TH, ZZ Bellville CBD - - - - Bellville Tyger Valley

-1,0 -0,8 -0,2 - DD

Century City -0,4 -0,3 0,5 - DA Westlake - - - - Claremont - - - - Port Elizabeth 0,2 0,1 -0,5 -0,3 MJ, TH East London - - - - Bloemfontein CBD -0,1 0,0 0,0 0,0 CC, EK, TH Windhoek - - - - NB: The number of broker/owner codes does not necessarily match the sample size as indicated by the n in the table on page 10. This is so because several of our owner contributors wish to remain anonymous, but we do not show multiple ZZ codes in the table.

Rode’s Report 2011:4 Standard capitalization rates 10

Table 2.3 Survey of capitalization rates (%)

Industrial buildings Means for quarter 2011:3

Best location Prime leaseback (AAA Tenant)

Prime quality non-leaseback

Prime industrial park

Secondary quality building

Mean SD n 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 11,3 0,3 2 West Rand 9,9 - 1 10,8 - 1 10,7 - 1 11,9 - 1 East Rand 10,2 0,8 2 9,9 0,4 2 10,5 - 1 10,9 0,4 2 Far East Rand 9,6 - 1 10,5 - 1 10,6 - 1 11,5 - 1 Pretoria 9,2 0,4 2 10,6 - 1 9,9 0,7 2 11,6 - 1 Vaal Triangle 9,8 - 1 10,7 - 1 10,7 - 1 11,7 - 1 Nelspruit 9,7 - 1 10,5 0,0 2 10,8 0,2 2 11,8 0,2 2 Polokwane 9,8 - 1 10,9 - 1 10,8 - 1 11,8 - 1 Durban 9,2 0,3 4 10,0 0,4 3 10,0 0,5 4 11,1 0,1 3 Pietermaritzburg 9,7 - 1 10,7 - 1 10,7 - 1 11,3 - 1 Cape Peninsula 9,4 0,5 4 9,8 0,2 2 9,7 0,3 3 10,6 0,0 2 Port Elizabeth 9,6 0,1 2 10,4 0,0 2 10,2 0,2 2 12,1 0,5 2 East London - - - - - - - - - - - - Bloemfontein 9,9 0,1 2 10,7 - 1 11,4 0,3 3 10,4 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 2.4 Change in capitalization rates (% points)

Industrial buildings Means for quarter 2011:3 less quarter 2011:2

Best location Prime leaseback

Prime non-leaseback

Prime

industrial park

Secondary quality building

Broker & owner

contributors

Central Wits -0,6 -0,2 1,0 -1,3 AW, TH, ZZ West Rand 0,1 0,4 1,6 -0,8 TH East Rand 0,7 -0,5 0,1 -1,6 HN, REW, TH Far East Rand 0,0 0,0 0,7 -1,5 TH, ZZ Pretoria -0,4 0,0 1,0 -1,7 TH, ZZ Vaal Triangle 0,0 0,0 -1,0 1,1 TH Nelspruit 0,1 0,0 0,9 -1,1 HH, TH Polokwane 0,0 -0,1 1,0 -1,0 TH Durban 0,0 -0,1 0,8 -1,0 MW, PC, TH, ZZ Pietermaritzburg 0,0 0,0 0,6 -0,4 TH Cape Peninsula 0,3 0,5 1,0 -0,5 GY, QS, TH, ZZ Port Elizabeth 0,0 0,1 1,9 -1,6 MJ, TH East London - - - - Bloemfontein 0,0 - 0,0 0,0 CC, EK, TH Windhoek - - - - NB: The number of broker/owner codes does not necessarily match the sample size as indicated by the n in the ta-ble 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.

Rode’s Report 2011:4 Standard capitalization rates 11

Table 2.5 Survey of capitalization rates (%): shopping centres

Means for quarter 2011:3

Best location Super regional Regional Community

Mean SD n Mean SD n Mean SD n Witwatersrand 7,6 - 1 8,0 - 1 9,0 - 1 Pretoria 7,6 - 1 8,0 - 1 9,0 - 1 Vaal Triangle 7,8 - 1 8,2 - 1 9,1 - 1 Nelspruit 7,6 - 1 8,2 0,1 2 9,0 0,0 2 Polokwane 7,8 - 1 8,2 - 1 9,5 - 1 Durban 7,6 - 1 8,2 0,1 2 9,0 0,0 2 Pietermaritzburg 7,9 - 1 8,3 - 1 9,2 - 1 Cape Town 8,3 0,7 3 8,2 0,5 3 9,3 0,7 2 Port Elizabeth 8,4 0,5 2 8,6 0,4 2 9,9 0,5 2 East London - - - - - - - - - Bloemfontein - - - 8,2 0,2 2 9,5 0,4 3 Platteland - - - - - - - - - Townships - - - - - - 10,5 - 1 Windhoek - - - - - - - - - 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

Means for quarter 2011:3

Best location Neighbourhood Local convenience Retail warehouse

Mean SD n Mean SD n Mean SD n Witwatersrand 10,0 - 1 11,0 - 1 9,5 - 1 Pretoria 10,0 - 1 11,0 - 1 9,5 - 1 Vaal Triangle 10,2 - 1 11,2 - 1 9,6 - 1 Nelspruit 10,0 0,0 2 10,8 0,3 2 9,8 0,2 2 Polokwane 10,2 - 1 11,2 - 1 9,6 - 1 Durban 10,0 - 1 11,0 - 1 9,5 0,0 2 Pietermaritzburg 10,1 - 1 11,1 - 1 9,6 - 1 Cape Town 10,3 0,7 2 10,5 0,4 3 9,1 0,0 2 Port Elizabeth 10,5 0,5 2 11,2 0,3 2 10,2 0,3 2 East London - - - - - - - - - Bloemfontein 10,2 0,6 3 11,2 0,6 3 11,1 1,0 2 Platteland - - - - - - - - - Townships - - - - - - - - - Windhoek - - - - - - - - - n = Number of respondents — = Not available SD = See Glossary of terms and abbreviations in Annexure 1.

Rode’s Report 2011:4 Standard capitalization rates 12

Table 2.6 Change in capitalization rates (% points): shopping centres

Means for quarter 2011:3 less quarter 2011:2

Best location Super

regional Regional Commu-

nity Broker & owner

contributors Witwatersrand 0,2 0,2 0,1 TH Pretoria 0,2 0,2 0,1 TH Vaal Triangle 0,0 0,0 0,0 TH Nelspruit 0,0 0,2 0,0 HH, TH Polokwane 0,0 0,0 0,4 TH Durban 0,2 0,4 0,1 PC, TH Pietermaritzburg 0,0 -0,1 0,1 TH Cape Town 1,1 0,6 0,8 DD, QS, TH Port Elizabeth 0,0 0,0 0,0 MJ, TH East London - - - Bloemfontein - - 0,0 CC, EK, TH Platteland - - - Townships - - 0,0 Windhoek - - -

Table 2.6 (continued) Change in capitalization rates (% points): shopping centres

Means for quarter 2011:3 less quarter 2011:2

Best location Neighbour-

hood

Local conven-

ience

Retail warehouse

Broker & owner contributors

Witwatersrand 0,2 0,5 0,0 TH Pretoria 0,2 0,5 0,0 TH Vaal Triangle 0,0 0,0 0,0 TH Nelspruit 0,1 0,1 0,2 HH, TH Polokwane 0,0 0,0 0,0 TH Durban 0,2 0,5 0,0 PC, TH Pietermaritzburg 0,0 0,0 0,0 TH Cape Town 0,9 10,5 0,1 DD, QS, TH Port Elizabeth 0,3 0,3 0,0 MJ, TH East London - - - Bloemfontein 0,5 0,2 0,0 CC, EK, TH Platteland - - - Townships - - - Windhoek - - -

Rode’s Report 2011:4 Standard capitalization rates 13

Table 2.7

Survey of capitalization rates (%): street-front shops Means for quarter 2011:3

Best location Metro CBD Decentralised

Mean SD n Mean SD n Witwatersrand 11,1 N/A 1 11,0 N/A 1 Pretoria 11,1 N/A 1 11,0 N/A 1 Vaal Triangle 11,2 N/A 1 11,1 N/A 1 Nelspruit 11,1 0,0 2 10,9 0,1 2 Polokwane 11,3 N/A 1 11,1 N/A 1 Durban 11,2 0,0 2 11,0 0,0 2 Pietermaritzburg 11,3 N/A 1 11,1 N/A 1 Cape Town 10,0 0,0 3 10,1 0,1 2 Port Elizabeth 11,6 0,5 2 11,0 0,0 2 East London N/A N/A N/A N/A N/A N/A Bloemfontein 11,2 0,2 2 10,6 0,5 2 Windhoek N/A N/A N/A N/A N/A N/A n = Number of respondents — = Not available SD = See Glossary of terms and abbreviations in Annexure 1.

Table 2.8 Change in capitalization rates (% points): street-front shops

Means for quarter 2011:3 less quarter 2011:2 Best location Metro CBD Decentralised Broker & owner contributors

Witwatersrand -0,1 0,0 TH Pretoria -0,1 0,0 TH Vaal Triangle -0,1 0,0 TH Nelspruit 0,3 0,0 HH, TH Polokwane 0,0 0,0 TH Durban 0,0 0,0 PC, TH Pietermaritzburg 0,0 0,0 TH Cape Town 0,2 0,4 DD, GB, TH Port Elizabeth 0,1 0,0 MJ, TH East London - - Bloemfontein 0,0 0,0 EK, TH Windhoek - -

Rode’s Report 2011:4 Capitalization rate equations 14

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 capitali-zation rate of various property types any-where in South Africa, provided the user is confident about the subject property’s gross-market-rental rate.

As the reader will see below, market-rental rates are amazingly successful in explain-ing the level of capitalization rates. On re-flection, 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 multi-tenanted property, the robustness of the covenant)

Grade/age

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 re-let. Here one thinks of purpose-built build-ings.

Thus, the moderately strong relationship between market-rental rates and capitali-zation rates allows the researcher to build a regression model with which to estimate the levels of capitalization rates.

Office-building equation

In our regression analysis of office build-ings, we use the market capitalization rates (dependent variable) and gross market-rental rates (predictors) of grades A, B and C buildings in the areas surveyed by Rode’s Report (RR).

The source of the national equation given below is this issue of RR. The regression is based on 55 observations in mainly decen-tralized 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.

Rode’s Report 2011:4 Capitalization rate equations 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/m²/month to R132/m²/month.

Example:

If the gross office rental is R60 per rent-able m2 per month, then the capitaliza-tion 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 is-sue of RR, and to consider using a two-quarter average capitalization rate (un-surveyed) if necessary.

Industrial-property equation

This national equation expresses the rela-tionship between the capitalization rates and gross market rental rates of prime stand-alone non-leasebacks, secondary stand-alone industrial buildings, and indus-trial parks. The gross market rental rates are those applicable to 1000 m2 units. The source of

the data is this issue of Rode’s Report. The industrial-regression equation, which is based on 26 observations, includes all pri-mary 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 non-leaseback or prime industrial parks or stand-alone secondary industrial space of 1’000 m2, located in primary and sec-ondary 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/m²/month to R38/m²/month. Also, remember to use the rental rate applicable to an area of 1.000 m².

Example:

If the gross industrial rental for a 1000 m² building, located in a primary or sec-ondary industrial city, is R20 per renta-ble m2 per month, then the capitaliza-tion rate is:

industrial cap rate % = 13,792– (0,081*20) = 11,6% .

Rode’s Report 2011:4 Capitalization rate equations 16

Rode’s Report 2011:4 Listed property 17

-20

-10

0

10

20

30

04 05 06 07 08 09 10 11

Growth in income streams:PLS

% g

row

th (

y-o-

y)

Source of data: JSE

smoothed

5

6

7

8

9

10

11

05 06 07 08 09 10 11

BondsPLSs

Long-bond yieldsvs

PLS yields

Yiel

ds (

%)

Source of data: Rode's Time Series; Bond Exchange of SA

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 margin-ally) 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. The most important driver of the growth in income streams remains contractual rent-als that are escalating at between 8% and 10%. Market rentals have, however, un-derperformed 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 re-newal. Another damper on the income-

growth outlook must be vacancy rates that are stubbornly refusing to drop. The impli-cations of this are that tenants still have bargaining power and, of course, the pos-sibility of continued moderate growth in market rentals.

Global unease over the worsening Europe-an sovereign debt crisis — leading to a re-versal in sentiment towards emerging mar-kets combined with rising domestic infla-tion expectations due mainly to galloping food prices and rand weakness — has in recent months resulted in some upward pressure on long-bond yields. Concomitant-ly, 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.

Rode’s Report 2011:4 Listed property 18

-40

-20

0

20

40

60

80

03 04 05 06 07 08 09 10 11

Growth in PLS prices

% g

row

th (

y-o-

y)

Source of data: JSE

smoothed

5

10

15

20

25

80

90

100

110

120

92 94 96 98 00 02 04 06 08 10

PLS yieldsBusiness cycle

PLS net income yieldsvs

S.A. composite leading business cycle indicator

r = -0,8

PLS y

ield

s (%

)

Business cycle indicator

(2000 = 100)

Source of data: JSE; SARB

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 indi-cators of South Africa's major trading part-ners. Should this trend continue, the result could be more upward pressure on listed-property yields. This is so given the robust inverse relationship (r = -0,8) between the SA leading business indicator and the mar-ket’s rating of listed property (see corre-sponding graph). Putting both sides of the price coin togeth-er − that is, income streams and net in-come yields − it becomes clear why the

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.

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).

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).

This concludes our chapter on listed prop-erty.

Rode’s Report 2011:4 Listed property 19

Table 4.1 Total return on property unit trusts and property loan stocks

September 2011 Individual stock performance

Total return 3 year* 1 year* PUT Index 72,3% 8,8% PLS Index 66,9% 8,0% SA Listed Property Index (SAPY) 68,4% 8,3%

CAPITAL PROPERTY 107,3% 11,5% VUKILE 100,6% 11,1% ACUCAP 93,4% 17,1% RESILIENT 89,4% 11,8% SA CORPORATE 86,5% 15,1% PANPROP 77,2% -1,2% HYPROP 69,0% 8,1% PREMIUM 67,7% -6,2% GROWTHPOINT 66,6% 11,5% REDEFINE 63,8% 5,1% FOUNTAINHEAD 59,7% 8,2% EMIRA 54,5% -2,1% SYCOM 48,2% 5,6% OCTODEC 45,1% -2,5% HOSPITALITY-A 43,1% 0,5% HOSPITALITY-B -66,0% -47,6% FORTRESS-A - 14,7% FORTRESS-B - 100,7% INVESTEC PROPERTY FUND - 8,4% REBOSIS - -4,7% VUNANI - 2,0% DIPULA-A - -0,8% DIPULA-B - -8,9% VIVIDEND - -8,9% *Cumulative growth over period Source: Catalyst Fund Managers

Rode’s Report 2011:4 Office rentals 21

20

40

60

80

100

120

94 96 98 00 02 04 06 08 10

PretoriaJohannesburgDurbanCape Town

Nominal decentralized grade-A office rentals

Smoothed

R/m

² (l

og s

cale

)

Source of data: Rode's Time Series

20

40

60

80

100

94 96 98 00 02 04 06 08 10

JohannesburgPretoriaDurbanCape Town

Nominal CBD grade-A office rentals

Smoothed

R/m

² (l

og s

cale

)

Source of data: Rode's Time Series

Chapter 5: Office rentals

Real office rentals stutter

Written by Anneke Meijers Moderating economic activity and flounder-ing 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, mar-ket rentals could — on a national basis — only show modest growth of 4%. This comes after having achieved an unsustain-able growth of about 11% in the first quar-ter. 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 chap-ter will aim to highlight such disparities.

Regional performance At the regional level, the strongest growth (+5%) was recorded in Johannesburg de-centralized. This was followed by Pretoria and Cape Town decentralized where rentals were, on average, up by 3%. Durban sub-urbs 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.

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; nat-urally on the back of state support in the form of a dominant tenant. The accompa-nying graph shows that Pretoria is catching up with Durban, and it has been narrowing the gap with Cape Town.

Rode’s Report 2011:4 Office rentals 22

20

40

60

80

100

120

140

94 96 98 00 02 04 06 08 10

ParktownRosebankRivoniaSandton CBD

Nominal Johannesburg decentralized grade-A office rentals

Smoothed

R/m

² (l

og s

cale

)

Source of data: Rode's Time Series

20

40

60

80

100

120

140

94 96 98 00 02 04 06 08 10

Randburg FerndaleBryanstonIllovoSandton CBD

Nominal Johannesburg decentralized grade-A office rentals

Smoothed

R/m

² (l

og s

cale

)

Source of data: Rode's Time Series

40

60

80

100

120

140

160

94 96 98 00 02 04 06 08 10

ParktownRosebankRivoniaSandton CBD

Real Johannesburg decentralized grade-A office rentals2005 rands

Smoothed

2005

R/m

² (l

og s

cale

)

Deflated by BER BCI (2005=100)

Source of data: Rode's Time Series; BER

40

60

80

100

120

140

160

94 96 98 00 02 04 06 08 10

Randburg FerndaleBryanston IllovoSandton CBD

Real Johannesburg decentralized grade-A office rentals2005 rands

Smoothed

2005

R/m

² (l

og s

cale

)

Deflated by BER BCI (2005=100)

Source of data: Rode's Time Series; BER

30

40

50

60

70

80

90

94 96 98 00 02 04 06 08 10

JohannesburgPretoriaDurbanCape Town

Real CBD grade-A office rentals2005 rands

Smoothed

2005

R/m

² (l

og s

cale

)

Deflated by BER BCI (2005=100)

Source of data: Rode's Time Series; BER

Nodal performance

On a more micro scale, we shall now con-sider individual office nodes by region. Johannesburg decentralized L 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 con-firm our hypothesis that peripheral areas (including countries!) and secondary properties tend to do rel-atively worse during tough times. We observe this in the national va-cancies by grade at the end of Ta-ble 6.1.

In Sandton CBD (+8%), Bryanston (+9%) and Rivonia (+7%) market rentals were able to show fairly impressive growth. Nonetheless, the general picture in Johan-nesburg decentralized is that of a cooling in rental growth. This can be explained by the fact that vacancies are still stubbornly re-fusing 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.

Rode’s Report 2011:4 Office rentals 23

20

40

60

80

100

120140

94 96 98 00 02 04 06 08 10

CenturionBrooklyn/WaterkloofHatfieldMenlyn

Nominal Pretoria decentralized grade-A office rentals

R/m

² (l

og s

cale

)

Source of data: Rode's Time Series

Smoothed

50

60

70

80

90

100

110

94 96 98 00 02 04 06 08 10

CenturionBrooklyn/WaterkloofHatfieldMenlyn

Real Pretoria decentralized grade-A office rentals2005 rands

Smoothed

2005

R/m

² (l

og s

cale

)

Deflated by BER BCI (2005=100)

Source of data: Rode's Time Series; BER

20

40

60

80

100

120

140

94 96 98 00 02 04 06 08 10

Tyger ValleyClaremontCentury CityWestlake

Nominal Cape Town decentralized grade-A office rentals

Smoothed

R/m

² (l

og s

cale

)

Source of data: Rode's Time Series

40

60

80

100

120

140

94 96 98 00 02 04 06 08 10

Tyger ValleyClaremontCentury CityWestlake

Real Cape Town decentralized grade-A office rentals2005 rands

Smoothed

2005

R/m

² (l

og s

cale

)

Deflated by BER BCI (2005=100)

Source of data: Rode's Time Series; BER

Pretoria decentralized Shifting our view towards Pretoria decen-tralized, we note shrinking market rentals in some of the top nodes, for example Cen-turion (-8%), Brooklyn/Waterkloof (-9%) and Hatfield (-2%). Weak demand, as illus-trated by rising vacancy rates in these nodes, explains the poor rental perfor-mance. In Menlyn (+4%), a less dismal rental performance is observed, albeit still below inflation. Cape Town decentralized Rentals in Tyger Valley (+14%) are making a comeback. This improvement can be ex-plained 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.

Good growth in rentals was also recorded in Westlake (+8%), while in contrast rent-als in Claremont (-1%) and Century City (-3%) shrank. Here the contractions in rent-als are explained by still-high grade-A va-cancy 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). 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 fol-lowed by Westway (+2%) and Berea (-3%). Of course, the poor performance of rentals is in line with the increases in va-cancy rates in Durban decentralized.

Rode’s Report 2011:4 Office rentals 24

20

40

60

80

100

120

140

94 96 98 00 02 04 06 08 10

BereaLa Lucia RidgeWestway

Nominal Durban decentralized grade-A office rentals

Smoothed

R/m

² (l

og s

cale

)

Source of data: Rode's Time Series

50

60

70

80

90

100

110

94 96 98 00 02 04 06 08 10

BereaLa Lucia RidgeWestway

Real Durban decentralized grade-A office rentals2005 rands

Smoothed

2005

R/m

² (l

og s

cale

)

Deflated by BER BCI (2005=100)

Source of data: Rode's Time Series; BER

Pioneer rentals 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 – there’s no more fat left. Thus, from here onwards, changes in prices will more accurately reflect input costs (mainly labour and building materi-als). Therefore, rentals on new custom-built buildings might soon start reflecting this reality (the pioneer rentals in Table 5.1). But don’t 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.

Recap: nominal versus real rentals The term “nominal” refers to money rentals, whereas the term “real” refers to nominal less in-flation. Rode mostly deflates nominal rentals with the Bureau for Economic Research’s 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 (re-placed) 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 rent-als 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 expla-nation of the codes can be found on p. xvi.

Rode’s Report 2011:4 Office rentals 25

Table 5.1 Pioneer office rentals

Highest gross nominal market rental rate achieved Rands per rentable m², gross leases (excl VAT)

During quarter 2011:3

Pioneer Normal Grade A

Difference %

Johannesburg dec. 172,50 104,13 66 Pretoria dec. - - - Durban dec. 136,67 112,00 22 Bloemfontein dec. 122,50 112,50 9 Port Elizabeth dec 120,00 85,00 41 Cape Town CBD 138,33 98,75 40 Cape Town dec. 126,67 90,42 40

Rode’s Report 2011:4 Office rentals 26

Table 5.2 Market rental rates for office buildings

Quarter 2011:3 Rands per rentable m², gross leases (excl VAT)

Grade A+

Grade A mean

Grade B mean

Grade C mean Broker contributor codes

Johannesburg CBD - 64,67 55,80 51,67 AR, BM, GB, PC, QU Braamfontein 95,00 76,00 55,25 24,00 AR, BM, GB, PC, QU Sandton CBD 159,75 132,50 100,75 83,00 AR, AW, BM, GB, PC, QU Dunkeld West 127,00 111,80 92,33 87,33 AR, AW, BM, GB, KM, PC Wierda Valley 133,38 111,25 99,60 87,75 AR, BM, GB, PC, QU Randburg Ferndale 85,50 78,00 75,33 50,00 AR, BM, PC, QU Rivonia 118,33 96,58 84,42 74,30 AR, BC, BM, GB, PC, QU Rosebank 134,38 108,20 88,00 79,50 AR, AW, BM, GB, PC, QU Illovo 133,33 114,33 96,50 85,00 AR, AW, BM, GB, PC, QU Illovo Boulevard 135,00 118,80 100,25 85,00 AR, BM, GB, PC, QU Chiselhurston 118,00 114,67 106,00 85,00 AR, BM, KM, PC Parktown 97,80 88,38 77,50 70,80 AR, BM, DT, GB, PC, QU Richmond/Milpark - 81,00 78,50 63,00 AR, BM, KM, PC Bedfordview 109,50 99,75 90,67 79,67 AR, MR, PC, QU Bruma 97,12 87,62 75,38 68,67 AR, MR, PC, QU Meadowbrook - - - - Woodmead 116,40 106,60 90,00 82,00 AR, AW, BM, GM, PC Sunninghill 108,50 93,38 86,25 76,75 AR, BM, GB, PC, QU Bryanston/Epsom 121,75 109,60 90,17 83,00 AR, BM, GB, KM, PC, QU Fourways 133,33 105,75 88,75 75,75 AR, BM, GB, QU Houghton 116,67 103,75 91,33 85,00 AR, BM, GB, PC, QU Melrose Arch 188,00 180,00 - - AR, GB, PC Hydepark 123,38 115,00 92,20 81,00 AR, BM, GB, KM, PC, QU Eastgate/Kramerville - 80,00 58,00 57,00 AR, BM, PA Ormonde 89,00 78,50 76,00 71,00 AR, GB, PC Midrand 104,00 91,75 77,00 66,00 AR, BM, GB, PC, QU Hendrik Potgieter Corri-dor

117,50 92,00 80,67 68,67 AR, BM, PC

Germiston - - - - Pretoria CBD 105,00 87,50 75,00 62,50 AI, EV Lynnwood Glen 110,00 105,00 87,50 70,00 AI, EV Lynnwood 100,00 89,50 80,00 67,50 AI, EV Lynnwood Manor 137,50 110,00 85,00 60,00 AI, EV Lynnwood Ridge 116,00 115,00 86,50 65,00 AI, EV Faerie Glen 115,00 104,50 85,00 60,00 AI, EV Val de Grace - - - - Menlyn 135,00 116,00 95,00 75,00 AI, EV Menlo Park (Brooks St.) 125,00 120,00 102,50 70,00 AI, EV Brooklyn/Waterkloof 130,00 112,50 91,50 75,00 AI, EV Nieuw Muckleneuk - 120,50 85,00 70,00 AI, EV Hatfield 115,00 110,00 89,00 60,00 AI, EV Centurion 107,50 97,50 90,00 60,00 AI, EV Highveld Technopark 122,50 102,50 85,00 60,00 AI, EV Sunnyside 110,00 95,00 80,00 55,00 AI, EV Arcadia 100,00 87,50 80,00 62,50 AI, EV Murrayfield 100,00 85,00 75,00 55,00 AI Nelspruit - - - - Polokwane 160,00 125,00 87,50 75,80 ES Bloemfontein CBD 125,00 115,00 75,00 52,50 CC, EK Westdene 117,50 112,50 75,00 57,50 CC, EK For definitions, see Glossary of terms and abbreviations in Annexure 1 or visit www.rode.co.za.

Rode’s Report 2011:4 Office rentals 27

Table 5.2(continued) Market rental rates for office buildings

Quarter 2011:3 Rands per rentable m², gross leases (excl VAT)

Grade A+

Grade A mean

Grade B mean

Grade C mean Broker contributor codes

Durban CBD - 85,00 55,00 40,00 MW Durban Berea - 110,00 90,00 75,00 MW Essex Terrace - 95,00 85,00 75,00 MW Westway 125,00 120,00 105,00 - ACU, MW La Lucia Ridge - 125,00 105,00 - MW Westville - 110,00 92,50 77,50 ACU, MW Pinetown - 60,00 50,00 40,00 LS Hillcrest-Kloof (Upper Highway)

- - - -

Empangeni - - - - Richards Bay 120,00 100,00 80,00 60,00 FO P/Maritzburg CBD - - - - Pmb peripheral CBD* - - - - Pmb decentralized - - - - Port Elizabeth CBD - - 50,00 35,00 MJ Greenacres : Parks - 80,00 62,50 45,00 MJ Greenacres: Single 127,00 90,00 - - MJ Walmer Park 1, 2 & 3 - - 62,50 - MJ South End - 75,00 65,00 - MJ Humewood 115,00 85,00 65,00 - MJ Cape Road 125,00 95,00 67,50 - MJ East London - - - - East London dec. - - - - Cape Town CBD 125,00 98,33 72,50 57,50 AN, BR, QS, ZZ Sea Point 100,00 95,00 70,00 55,00 AN, BR, QS V&A Portswood Ridge 142,50 115,00 - - AN, BR, QS Granger Bay 145,00 105,00 - - AN, BR, QS Salt River - 90,00 57,00 40,00 BR, QS Woodstock 95,00 80,00 62,50 45,00 AN, BR, QS Observatory 87,50 75,00 57,50 50,00 AN, BR, QS Mowbray 85,00 80,00 63,33 52,50 BR, GB, QS, WA Kenilworth (Racecourse) 92,50 91,67 78,33 69,00 BR, GB, QS, WA Rondebosch/Newlands 109,33 93,75 73,75 65,00 AN, BR, GB, QS, WA Wynberg 100,00 80,00 67,50 47,50 AN, BR, GB, QS, WA Westlake 111,67 93,75 78,33 65,00 AN, BR, GB, QS, WA Tokai 110,00 80,00 69,00 62,50 AN, BR, GB, WA Claremont Lower** 100,00 80,00 69,00 62,50 AN, QS, WA Claremont Upper 113,33 93,33 71,67 47,50 AN, BR, GB, QS, WA Pinelands - 90,00 70,00 - BR, GB, QS, WA Century City 130,00 99,33 85,00 75,00 AN, QS, ZZ Maitland - - - - BR Goodwood (N1 City) - 80,00 70,00 - BR Tygerberg Hills 120,00 95,00 85,00 75,00 BR Bellville CBD 55,00 40,00 30,00 - BR, DN Tyger Valley area 101,67 94,00 72,00 67,50 AN, BR, DN, PN, QS Durbanville 85,00 60,00 40,00 - BR, DN Airport 120,00 100,00 85,00 70,00 AN, QS Kuils River - - - - BR George 65,00 60,00 55,00 50,00 ZB Windhoek 180,00 150,00 100,00 75,00 TE * 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.

Rode’s Report 2011:4 Office rentals 28

Table 5.3 Standard deviation of market rental rates for office buildings

Quarter 2011:3 Grade A+ Grade A Grade B Grade C

Johannesburg CBD - R2,87 R9,41 R2,36 Braamfontein - R3,74 R10,38 R1,00 Sandton CBD R20,50 R11,32 R3,77 R2,00 Dunkeld West R4,69 R8,42 R2,69 R6,13 Wierda Valley R1,71 R8,93 R8,87 R5,26 Randburg Ferndale R5,50 R4,97 R4,50 - Rivonia R6,24 R5,72 R4,99 R5,38 Rosebank R14,40 R7,55 R7,48 R0,50 Illovo R7,09 R8,78 R6,16 - Illovo Boulevard R4,12 R5,08 R3,56 - Chiselhurston R7,00 R8,58 R4,53 - Parktown R3,92 R3,42 R3,28 R8,45 Richmond/Milpark - R4,00 R6,84 R2,83 Bedfordview R7,12 R6,80 R3,30 R7,32 Bruma R3,13 R3,07 R2,33 R2,62 Meadowbrook - - - - Woodmead R9,48 R8,50 R8,46 R3,08 Sunninghill R5,17 R3,42 R4,15 R2,05 Bryanston / Epsom Downs R6,65 R7,66 R5,64 R2,83 Fourways R2,36 R8,17 R4,15 R6,26 Houghton R2,36 R8,17 R4,15 R6,26 Melrose Arch R6,68 - - - Hydepark R1,71 R6,12 R6,43 R6,98 Eastgate/Kramerville - - R3,00 R3,00 Ormonde - R3,50 - - Midrand R7,11 R4,92 R5,87 R3,94 Hendrik Potgieter Corridor R7,50 R9,90 R3,30 R2,62 Germiston Pretoria CBD - R12,50 R10,00 R2,50 Lynnwood Glen - R10,00 R2,50 - Lynnwood - R0,50 - 2,50 Lynnwood Manor R17,50 - - - Lynnwood Ridge R4,00 - R3,50 - Faerie Glen R0,00 R4,50 R5,00 - Val de Grace - - - - Menlyn - R4,0 - - Menlo Park (Brooks St.) - - R7,50 - Brooklyn/Waterkloof R10,00 R2,50 R1,50 - Nieuw Muckleneuk - R5,50 - - Hatfield - R10,00 R9,00 - Centurion R2,50 R2,50 R5,00 - Highveld Technopark R22,50 R12,50 R10,00 - Sunnyside - - - R10,00 Arcadia - R2,50 - R2,50 Murrayfield - - - - Nelspruit CBD Polokwane - - - - For definitions, see Glossary of terms and abbreviations in Annexure 1 or visit www.rode.co.za.

Rode’s Report 2011:4 Office rentals 29

Table 5.3 (continued) Standard deviation of market rental rates for office buildings

Quarter 2011:3 Grade A+ Grade A Grade B Grade C

Bloemfontein CBD - - R10,00 R12,50 Westdene R7,50 R2,50 R10,00 R7,50 Durban CBD - - - - Durban Berea - - - - Essex Terrace - - - - Westway - R0,00 R0,00 - La Lucia Ridge - - - - Westville - - R2,50 R2,50 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 R5,00 R2,36 R2,50 R7,50 Sea Point - R15,00 - - V&A Portswood Ridge R7,50 R5,00 - - Granger Bay - - - - Salt River - - - - Woodstock R0,00 R0,00 R7,50 R5,00 Observatory R7,50 R5,00 R2,50 - Mowbray R10,00 R8,16 R4,71 R2,50 Kenilworth (Racecourse) R2,50 R4,71 R2,36 R1,00 Rondebosch/Newlands R8,99 R7,40 R2,17 R7,07 Wynberg - - R2,50 R7,50 Westlake R8,50 R7,40 R2,36 - Tokai - R4,08 R2,94 R2,50 Claremont Lower** - R6,24 R2,50 R2,50 Claremont Upper R9,43 R2,36 R2,36 R2,50 Century City R0,00 R8,22 R0,00 - Tygerberg Hills - R5,00 - - Bellville CBD - - - - Tyger Valley area R6,24 R5,05 R8,03 R2,50 George - - - - Windhoek - - - - * 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.

Rode’s 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 Under shade

net

Open-air

parking Gr A+ Gr A Gr B Gr C

Johannesburg CBD - 650 536 377 300 250 Braamfontein - - 499 430 337 266 Sandton CBD 786 647 508 457 380 285 Dunkeld West 563 498 472 428 327 223 Wierda Valley 631 550 498 390 361 266 Randburg Ferndale 511 397 316 286 281 238 Rivonia 500 450 396 348 336 260 Rosebank 651 550 498 390 361 266 Illovo 600 547 433 407 361 326 Illovo Boulevard 647 555 488 450 380 306 Chislehurston 556 500 493 - 304 236 Parktown 495 489 447 417 358 300 Richmond/Milpark 647 555 488 450 380 306 Bedfordview 556 500 493 - 304 236 Bruma 495 489 447 417 358 300 Meadowbrook - - - - - - Woodmead 523 494 416 340 330 254 Sunninghill 527 495 404 356 308 258 Bryanston / Epsom Downs 514 473 397 334 335 250 Fourways 496 460 381 313 338 248 Houghton 397 366 313 225 397 343 Melrose Arch 897 - - - - - Hyde Park 543 480 401 - 336 253 Eastgate/Kramerville - - - - - - Ormonde - 477 389 344 288 191 Midrand 475 442 393 374 311 242 Hendrik Potgieter Corridor 499 437 344 280 294 216 Germiston Pretoria CBD 465 431 379 355 316 269 Lynnwood Glen 500 500 480 450 340 280 Lynnwood 500 450 400 400 425 Lynnwood Manor 550 450 400 400 425 345 Lynnwood Ridge 400 400 400 375 321 300 Faerie Glen 445 350 300 300 287 210 Val de Grace - - - - - - Menlyn 580 515 500 500 415 365 Menlo Park (Brooks St.) 450 400 400 400 350 300 Brooklyn/Waterkloof 525 450 400 400 412 287 Nieuw Muckleneuk 500 500 450 450 300 300 Hatfield 550 525 450 400 300 340 Centurion 415 375 350 300 312 234 Highveld Technopark 410 375 300 250 287 265 Sunnyside 380 300 250 200 190 100 Arcadia 380 300 250 200 190 100 Murrayfield 320 250 200 160 130 100 Nelspruit Polokwane 390 370 290 250 220 180 Bloemfontein CBD - 325 262 200 112 100 Westdene 350 350 275 225 125 100 Durban CBD - 700 575 - - - Durban Berea - 525 500 450 - -

Rode’s Report 2011:4 Office rentals 31

Table 5.4 (continued) Market parking rentals

Monthly parking Rands per bay per month (excl. VAT)

As in quarter 2011:3 Covered reserved parking Under

shade net

Open-air

parking Gr A+ Gr A Gr B Gr C

Essex Terrace - 474 474 450 350 325 Westway 612 587 550 - - 375 La Lucia Ridge 650 600 550 - - 375 Westville - 500 462 - - 312 Pinetown - 380 300 - 275 200 Hillcrest-Kloof (Upper Highway) - - - - - - Empangeni - - - - - - Richards Bay 500 300 250 250 150 - P/maritzburg CBD - - - - - - Pmb peripheral CBD* - - - - - - Pmb decentralized - - - - - - Port Elizabeth CBD - - - - - - Greenacres : Parks - 350 - - - 250 Greenacres: Single - 350 - - - 250 Walmer Park 1, 2 & 3 - 300 - - - 250 South End - 200 - - - 150 Humewood - - - - - - Cape Road 400 400 - - 250 250 East London - - - - - - East London dec. - - - - - - Cape Town CBD 1.200 1.000 783 500 - - Sea Point - - - - - - V&A Portswood Ridge 1.350 1.250 1.200 - - - Granger Bay 1.200 1.000 - - - - Salt River - 800 - - - - Woodstock 750 750 - - 500 - Observatory 750 700 - - 450 - Mowbray 760 730 - - 350 550 Kenilworth (Racecourse) 700 575 - - 375 350 Rondebosch/Newlands 850 825 750 - 500 500 Wynberg 500 - - - 350 - Westlake 625 533 - - - 325 Tokai 600 575 400 - - 350 Claremont Lower** 1.100 1.000 700 - - - Claremont Upper 850 850 450 - - 500 Hout Bay - - - - - - Pinelands - 700 - - 450 - Milnerton - - - - - - Table View / Parklands - - - - - - Goodwood (N1 City) 650 - 550 - - - Century City 775 700 575 600 550 325 Tygerberg Hills 650 - 550 - - - Bellville CBD 600 300 550 - 120 65 Tyger Valley area 625 467 492 300 260 233 Somerset West Mall Area - - - - - - George 200 200 - - - 100 Windhoek 800 800 600 550 500 450 * Defined as bounded by Pietermaritz, Berg, Loop, Burger, between Chapel and Commercial. ** Claremont Lower: east of Main Road

Rode’s Report 2011:4 Office rentals 32

Table 5.5 Office rental escalation rates on new leases (%) Average escalation rate on net rentals for quarter 2011:3

Mean Mean Johannesburg CBD 9,0 Durban Berea 8,5 Braamfontein 9,0 Essex Terrace 8,5 Sandton CBD 9,2 Westway 8,3 Dunkeld West 9,2 La Lucia Ridge 8,5 Wierda Valley 9,2 Westville 8,3 Randburg Ferndale 8,8 Pinetown 8,5 Rivonia 8,8 Hillcrest-Kloof (Upper Highway) 8,5 Rosebank 9,1 Empangeni - Illovo 9,2 Richards Bay 10,0 Illovo Boulevard 9,2 P/maritzburg CBD - Chislehurston 9,5 Pmb peripheral CBD* - Parktown 9,2 Pmb decentralized - Richmond/Milpark 9,0 Port Elizabeth - Bedfordview 9,2 Port Elizabeth dec. - Bruma 9,2 East London - Meadowbrook 10,0 East London dec. - Woodmead 9,2 Cape Town CBD 9,0 Sunninghill 9,2 Sea Point 8,5 Bryanston / Epsom Downs 9,3 V&A Portswood Ridge 9,0 Fourways 9,8 Granger Bay 9,0 Houghton 9,8 Woodstock 8,5 Melrose Arch 10,0 Observatory 8,0 Hyde Park 9,2 Mowbray 8,0 Eastgate/Kramerville 9,0 Kenilworth (Racecourse) 8,5 Ormonde 9,0 Westlake 8,8 Midrand 9,0 Tokai 8,3 Pretoria CBD 10,0 Claremont Lower** 8,5 Lynnwood Glen 10,0 Claremont Upper 8,5 Lynnwood 10,0 Hout Bay - Lynnwood Manor 10,0 Noordhoek (Sun Valley) - Lynnwood Ridge 9,0 Pinelands - Faerie Glen 10,0 Milnerton - Val de Grace - Panorama - Menlyn 12,0 Rondebosch/Newlands 8,8 Menlo Park (Brooks St.) 10,0 Wynberg 8,5 Brooklyn/Waterkloof 10,0 Table View / Parklands - Nieuw Muckleneuk 10,0 Century City 9,0 Hatfield 10,0 Maitland - Centurion 9,0 Goodwood (N1 City) - Highveld Technopark 10,0 Tygerberg Hills 9,0 Sunnyside 10,0 Bellville CBD 8,5 Arcadia 10,0 Tyger Valley area 9,2 Murrayfield 8,0 Durbanville 8,5 Polokwane 8,5 Airport 9,0 Bloemfontein CBD 8,0 Kuils River - Westdene 9,5 George - Durban CBD 8,5 Windhoek 10,0 * Defined as bounded by Pietermaritz, Berg, Loop, Burger, between Chapel and Commercial. ** Claremont Lower: east of Main Road

Rode’s Report 2011:4 Office rentals 33

Table 5.6 Typical gross outgoings for prime office buildings

As reported by brokers R/rentable m² per month: quarter 2011:3

Mean SD n Johannesburg decentralized nodes: Sandton 22,25 2,55 6 Dunkeld West 19,50 2,69 4 Wierda Valley 21,25 1,64 4 Randburg Ferndale 18,50 1,08 3 Rivonia 19,83 0,69 6 Rosebank 26,00 5,69 5 Illovo 24,40 3,61 5 Illovo Boulevard 26,50 2,06 4 Chiselhurston 27,88 2,08 4 Parktown 21,05 5,07 5 Richmond/Milpark 20,33 3,40 3 Bedfordview 16,88 4,13 4 Bruma 16,75 4,09 4 Meadowbrook - - - Woodmead 22,40 2,24 5 Sunninghill 19,90 1,43 5 Bryanston/Epsom 21,00 3,70 6 Fourways 19,00 2,35 4 Houghton 21,00 5,34 4 Melrose Arch 31,50 3,50 2 Hydepark 22,80 2,04 5 Eastgate/Kramerville 18,00 2,16 3 Ormonde 19,00 - 1 Midrand 19,75 3,34 4 Hendrik Potgieter Corridor 21,00 0,83 3 Pretoria decentralized nodes: Lynnwood Glen 15,00 - 1 Lynnwood 10,00 - 1 Lynnwood Manor 20,00 - 1 Lynnwood Ridge 15,00 - 1 Faerie Glen 10,00 - 1 Val de Grace - - - Menlyn 35,00 - 1 Menlo Park (Brooks St.) 15,00 - 1 Brooklyn/Waterkloof 10,00 - 1 Nieuw Muckleneuk 10,00 - 1 Hatfield 10,00 - 1 Centurion 8,00 - 1 Highveld Technopark 10,00 - 1 Sunnyside 10,00 - 1 Arcadia 12,00 - 1 Murrayfield 8,00 - 1 SD and n: See Glossary of terms and abbreviations in Annexure 1.

Rode’s Report 2011:4 Office rentals 34

Table 5.6 (continued) Typical gross outgoings for prime office buildings

As reported by brokers R/rentable m² per month: quarter 2011:3

Mean SD n Germiston - - - Benoni CBD - - - Benoni dec - - - Boksburg CBD - - - Boksburg North - - - Boksburg (East Rand Mall area) - - - Klerksdorp - - - Vereeniging - - - Vanderbijlpark - - - Nelspruit - - - Polokwane 15,50 - 1 Bloemfontein CBD 20,0 - 1 Westdene 20,0 - 1 Durban decentralized nodes: Durban Berea 28,0 - 1 Essex Terrace 29,0 - 1 Westway 30,0 0,00 2 La Lucia Ridge 32,0 - 1 Westville 29,0 1,00 2 Pinetown 27,0 - 1 Hillcrest-Kloof (Upper Highway) - - - Empangeni - - - Richards Bay 10,0 - 1 Pietermaritzburg CBD Pietermaritzburg peripheral CBD - - - Pietermaritzburg decentralized - - - Port Elizabeth CBD 11,5 - 1 Greenacres : Parks 10,5 - 1 Greenacres: Single 10,0 - 1 Walmer Park 1, 2 & 3 10,0 - 1 South End 10,0 - 1 Humewood 10,0 - 1 Cape Road 10,0 - 1 East London CBD East London decentralized - - - SD and n: See Glossary of terms and abbreviations in Annexure 1.

Rode’s Report 2011:4 Office rentals 35

Table 5.6 (continued) Typical gross outgoings for prime office buildings

As reported by brokers R/rentable m² per month: quarter 2011:3

Mean SD n Cape Town CBD 20,0 - 1 Sea Point - - - V&A Portswood Ridge - - - Granger Bay - - - Salt River 15,0 - 1 Woodstock 15,0 - 1 Observatory - - - Mowbray 18,0 - 1 Kenilworth (Racecourse) - - - Westlake - - - Tokai - - - Claremont Lower 17,0 - 1 Claremont Upper 24,0 1,0 2 Hout Bay - - - Noordhoek (Sun Valley) - - - Pinelands 15,0 - 1 Athlone - - - Milnerton - - - Panorama - - - Rondebosch/Newlands 22,50 0,5 2 Wynberg - Table View / Parklands - - - Century City - - - Maitland - - - Goodwood (N1 City) 12,0 - 1 Tygerberg Hills - - - Bellville CBD 10,0 - 1 Tyger Valley area 14,5 0,5 2 Durbanville - - - Mitchell's Plain - - - Airport - - - Kuils River - - - George - - - Windhoek 5,0 - 1 SD and n: See Glossary of terms and abbreviations in Annexure 1.

Rode’s Report 2011:4 Office rentals 36

Table 5.7 Escalation rates on operating costs

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

Rode’s Report 2011:4 Office demand and vacancies 37

-6

-4

-2

0

2

4

20

40

60

80

100

01 02 03 04 05 06 07 08 09 10 11

Office demandBusiness confidence

Growth in office space demand (national dec.)vs

RMB/BER Business confidence index

con

trac

tin

g d

eman

d

Gro

wth

in o

ffic

e sp

ace

dem

and

(%;

y-o-

y)

Business confidence index

Source of data: BER; SAPOA; Rode calculations

r² = 0,8

-4

0

4

8

12

03 04 05 06 07 08 09 10 11

Office demandGDP services

Growth in GDP services sectorvs

Growth in office space demand (national dec.)

r² = 0,6

Gro

wth

(%

; y-

o-y)

Source of data: Stats SA; SAPOA; Rode calculations

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, vacan-cies are still stable. 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 condi-tions. On the basis of the robust relation-ship 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 ser-vices sector of the economy. In the third quarter of 2011, yearly growth of this sub-

sector of GDP accelerated to just below 5% from about 3% in the previous quarter. The accompanying graph shows the strong ten-dency for the growth in service-sector out-put 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).

An overview of office vacancies indicates a continued sideways movement, with va-cancies on a national decentralized basis remaining roughly at 8% in the third quar-ter 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.

Rode’s Report 2011:4 Office demand and vacancies 38

0

4

8

12

16

99 00 01 02 03 04 05 06 07 08 09 10 11

Pretor iaJohannesburgDurbanCape Town

Decentralized office vacanciesGrade A+, A and B combined

Source of data: Rode's Time Series; Sapoa

Vac

ancy

(%

)

0

5

10

15

20

98 99 00 01 02 03 04 05 06 07 08 09 10 11

DecentralizedCBD

National office vacanciesGrade A+, A and B combined

Vac

ancy

(%

)

Source of data: Rode's Time Series; Sapoa

0

5

10

15

20

99 00 01 02 03 04 05 06 07 08 09 10 11

Bryanston/Epsom DownsIllovoMidrandRandburg

Decentralized Johannesburg office vacanciesGrade A+, A and B combined

Source of data: Rode's Time Series; Sapoa

Vac

ancy

(%

)

0

5

10

15

20

25

99 00 01 02 03 04 05 06 07 08 09 10 11

Sandton & env ironsRosebankParktownRivonia

Decentralized Johannesburg office vacanciesGrade A+, A and B combined

Source of data: Rode's Time Series; Sapoa

Vac

ancy

(%

)

All these vacancies are for grades A and B combined. A look at trends within Johannesburg de-centralized shows that vacancies in Rand-burg, after having moved strikingly north over the past few quarters, fell by nearly 2 percentage points in the reporting quarter.

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. 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 per-centage points. Note the amazingly low va-cancies in Pretoria’s 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 illus-trates 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 Rode’s 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 spec-ulative developments are expected to come on stream soon.

Rode’s Report 2011:4 Office demand and vacancies 39

0

4

8

12

16

99 00 01 02 03 04 05 06 07 08 09 10 11

BrooklynPretor ia Eastern SuburbsCenturionHatfie ld

Pretoria decentralized office vacanciesGrade A+, A and B combined

Source of data: Rode's Time Series; Sapoa

Vac

ancy

(%

)

0

5

10

15

20

99 00 01 02 03 04 05 06 07 08 09 10 11

WestvilleBereaLa Lucia/ Umhlanga

Durban decentralized office vacanciesGrade A+, A and B combined

Source of data: Rode's Time Series; Sapoa

Vac

ancy

(%

)

0

5

10

15

20

03 04 05 06 07 08 09 10 11

Century CityWaterfrontBellv i lle

Cape Town decentralized office vacanciesGrade A+, A and B combined

Vac

ancy

(%

)

Source of data: Rode's Time Series; Sapoa

0

5

10

15

20

25

30

00 01 02 03 04 05 06 07 08 09 10 11

Pine landsRondebosch/NewlandsClaremont

Cape Town decentralized office vacanciesGrade A+, A and B combined

Vac

ancy

rat

e (%

)

Source of data: Rode's T ime Series; Sapoa

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 in-crease 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.

In La Lucia / Umhlanga, Durban’s 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 quar-ter of 2011. In the office nodes of Pinelands and Ron-debosch/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. Vacancies in the Port Elizabeth decentral-ized 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 grow-ing vacancy rates in Port Elizabeth’s decen-tralized areas (see Table 6.1).

Rode’s Report 2011:4 Office demand and vacancies 40

0

5

10

15

20

25

99 00 01 02 03 04 05 06 07 08 09 10 11

Cape Town CBDPretor ia CBDJohannesburg CBDDurban CBD

CBD office vacanciesGrade A+, A and B combined

Vac

ancy

(%

)

Source of data: Sapoa

0

10

20

30

40

50

09:3 09:4 10:1 10:2 10:3 10:4 11:1 11:2 11:3

GreenacresNewton ParkCentra l/Park D r iveWalmer/Fa irv iew

Decentralized Port Elizabeth office vacanciesGrade A+, A and B combined

Vac

ancy

rat

e (%

)

Source of data: Rode's Time Ser ies; Sapoa

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 government’s commitment to remain in the CBD.

While vacancy rates in the CBDs of Johan-

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. This chapter is concluded by the office-vacancy-factor tables.

Rode’s Report 2011:4 Office demand and vacancies 41

Table 6.1 Committed new developments

As in 2011:3 Source: Sapoa

Total rentable area m2

Area available

for leasing m2

% unlet

Committed develop-

ments as % of existing

stock Johannesburg & Environs Braamfontein 2.400 2.400 100% 0% Bryanston / Epsom Downs 15.340 6.240 41% 3% Cresta/Blackheath to Randpark 30.600 3.700 12% 18% Parktown 7.400 3.500 47% 2% Fourways 10.842 5.656 52% 7% Hyde Park / Dunkeld 5.000 5.000 100% 6% Randburg 26.000 9.000 35% 6% Rosebank 88.051 18.051 21% 32% Sandton & Environs 72.407 63.407 88% 5% Sunninghill 23.191 23.191 100% 7% Cape Town & Environs CBD Cape Town 16.000 16.000 100% 2% Century City 10.500 0 0% 5% Durban & Environs Umhlanga / La Lucia 24.900 7.200 29% 10% Hillcrest/Gillits 1.559 1.559 100% 5% Westville 8.800 4.800 55% 5% Pretoria & Environs Brooklyn / Nieuw Muckleneuk / Groenkloof 4.792 3.192 67% 2%

Centurion 27.777 19.277 69% 8% Hatfield/Hillcrest - - - - Highveld Technopark & Extensions - - - - Lynwood / Menlo Park / Presequor Park - - - -

Menlyn / Faerue Glen / Ashlea Gar-dens 75.382 28.332 38% 36%

Pretoria Eastern Surburbs/Route 21 29.311 29.071 99% 8% Port Elizabeth & Environs Greenacres 4.465 3.220 72% 7% Newton Park 6.237 6.237 100% 45% Walmer/Fairview 8.900 8.900 100% 54%

Rode’s Report 2011:4 Office demand and vacancies 42

Table 6.2 Sapoa office vacancy factors (%)

Grades A+, A & B Source: Sapoa

Septem-ber 2010

December 2010

March 2011

June 2011

Septem-ber 2011

Johannesburg Bedfordview Grade A+ N/A N/A N/A N/A N/A Grade A 11,6 12,3 11,2 11,2 13,7 Grade B 17,8 17,0 17,7 17,7 25,8 Total 14,6 14,6 14,4 14,4 17,6 Braamfontein Grade A+ N/A N/A N/A N/A N/A Grade A 11,4 13,5 15,3 11,9 14,6 Grade B 14,3 15,7 13,3 1,2 14,6 Total 12,8 14,5 14,4 6,9 14,6 Bryanston / Epsom Downs

Grade A+ N/A N/A N/A N/A N/A Grade A 9,8 11,4 11,7 7,2 6,9 Grade B 27,9 28,3 28,2 33,5 26,3 Total 11,0 12,4 12,7 8,8 8,0 Bruma Grade A+ N/A N/A N/A N/A N/A Grade A 0,0 2,0 2,0 2,0 3,8 Grade B 18,9 18,9 18,9 18,9 15,4 Total 12,3 13,0 13,0 13,0 10,9 CBD Johannesburg Grade A+ 0,0 0,0 0,0 0,0 0,0 Grade A 6,6 6,8 6,9 7,1 8,3 Grade B 26,0 20,6 20,1 22,0 23,3 Total 14,3 12,3 12,3 13,4 14,5 Constantia Kloof Basin Grade A+ N/A N/A N/A N/A N/A Grade A 8,9 10,3 10,2 8,4 8,0 Grade B 11,5 12,5 4,6 4,3 9,5 Total 9,0 10,4 9,9 8,2 8,1 Fourways Grade A+ N/A N/A N/A N/A N/A Grade A 13,3 8,9 10,5 10,5 9,8 Grade B 11,5 15,5 0,0 0,0 0,0 Total 13,2 9,2 10,0 10,0 9,3 Houghton/Killarney Grade A+ N/A N/A N/A N/A N/A Grade A 3,7 2,1 1,0 2,7 0,7 Grade B 1,7 10,3 12,7 13,8 6,4 Total 3,2 4,3 4,2 5,7 2,2 Source of data: Sapoa

Rode’s Report 2011:4 Office demand and vacancies 43

Table 6.2 (continued) Sapoa office vacancy factors (%)

Grades A+, A & B

Septem-ber 2010

December 2010

March 2011

June 2011

Septem-ber 2011

Hyde Park / Dunkeld Grade A+ N/A N/A N/A N/A N/A Grade A 13,3 17,1 19,2 15,8 11,2 Grade B 11,1 8,5 8,5 10,6 13,6 Total 11,7 10,9 11,5 12,1 12,9 Illovo Grade A+ N/A N/A 5,0 5,9 5,9 Grade A 3,1 2,3 2,1 1,2 1,0 Grade B 15,3 14,5 8,6 10,2 12,1 Total 5,1 4,2 3,2 2,7 2,9 Melrose/Waverley Grade A+ 4,0 3,4 3,1 3,2 1,9 Grade A 15,6 15,6 13,2 13,2 11,0 Grade B 6,1 6,2 5,3 5,3 8,3 Total 6,7 6,3 5,5 5,6 4,6 Midrand Grade A+ 0,0 0,0 0,0 0,0 0,0 Grade A 4,5 3,9 2,8 2,5 3,6 Grade B 11,7 11,7 10,9 11,7 10,0 Total 6,0 5,8 5,1 5,3 5,0 Milpark Grade A+ N/A N/A N/A N/A N/A Grade A 0,0 0,0 0,0 0,0 0,0 Grade B 4,3 3,6 3,5 5,0 5,0 Total 3,8 3,2 3,0 4,4 4,3 Morningside Grade A+ N/A N/A N/A N/A N/A Grade A 5,1 3,7 4,3 4,9 6,6 Grade B N/A N/A N/A N/A N/A Total 5,1 3,7 4,3 4,9 6,6 Parktown Grade A+ N/A N/A N/A N/A N/A Grade A 3,4 2,2 1,1 4,1 3,4 Grade B 4,7 2,9 3,2 8,6 13,9 Total 4,3 2,6 2,4 7,2 10,3 Randburg Grade A+ N/A N/A N/A N/A N/A Grade A 12,6 24,6 17,9 17,9 8,2 Grade B 7,9 13,2 13,4 15,0 14,1 Total 8,2 14,1 13,7 15,2 13,6 Source of data: Sapoa

Rode’s Report 2011:4 Office demand and vacancies 44

Table 6.2 (continued)

Sapoa office vacancy factors (%) Grades A+, A & B

Septem-ber 2010

Decem-ber 2010

March 2011

June 2011

Septem-ber 2011

Rivonia Grade A+ 0,0 0,0 0,0 0,0 0,0 Grade A 20,4 20,7 17,7 13,8 13,8 Grade B 11,0 10,8 13,0 12,5 14,4 Total 13,5 13,8 14,5 12,9 14,2 Rosebank Grade A+ N/A N/A N/A N/A N/A Grade A 20,1 21,0 23,2 16,6 14,0 Grade B 3,4 5,4 2,6 3,0 5,0 Total 10,7 12,2 11,7 9,1 9,1 Sandton & environs Grade A+ 0,8 0,8 0,0 0,0 4,0 Grade A 10,2 8,6 8,4 8,4 7,0 Grade B 16,2 13,5 16,0 15,5 13,8 Total 10,0 8,4 8,6 8,3 8,9 Sunninghill Grade A+ N/A N/A N/A N/A N/A Grade A 8,8 7,0 7,3 7,9 7,3 Grade B N/A N/A N/A N/A N/A Total 8,8 7,0 7,3 7,9 7,3 Woodmead Grade A+ N/A N/A N/A N/A N/A Grade A 10,7 10,4 10,4 9,2 8,5 Grade B 24,6 23,1 21,9 24,0 24,4 Total 11,4 11,1 11,0 9,9 9,3

Cape Town

Bellville (incl. Tyger V) Grade A+ 1,4 0,2 N/A N/A N/A Grade A 5,8 5,5 5,5 6,3 7,2 Grade B 8,7 8,5 7,8 8,1 13,9 Total 6,2 5,9 6,2 6,8 9,2 CBD Cape Town Grade A+ 1,9 1,1 0,0 0,0 0,0 Grade A 10,3 10,8 10,8 11,6 11,5 Grade B 8,7 9,2 8,8 9,0 8,5 Total 9,3 9,7 9,8 10,4 10,2 Century City Grade A+ 14,6 14,6 N/A N/A N/A Grade A 9,8 10,1 10,7 10,6 9,3 Grade B 7,6 8,3 5,9 7,4 4,4 Total 10,2 10,5 10,2 10,2 8,7 Source of data: Sapoa

Rode’s Report 2011:4 Office demand and vacancies 45

Table 6.2 (continued) Sapoa office vacancy factors (%)

Grades A+, A & B

Septem-ber 2010

Decem-ber 2010

March 2011

June 2011

Septem-ber 2011

Claremont Grade A+ N/A N/A N/A N/A N/A Grade A 17,0 17,4 14,7 15,1 11,9 Grade B 4,0 4,7 3,4 2,4 11,8 Total 14,7 15,1 12,7 12,8 11,9 Pinelands Grade A+ N/A N/A N/A N/A N/A Grade A 7,3 6,5 5,0 4,3 4,3 Grade B 1,6 1,1 1,8 3,8 4,8 Total 6,8 6,1 4,8 4,3 4,3 Rondebosch/Newlands Grade A+ N/A N/A N/A N/A N/A Grade A 6,7 4,8 4,8 5,7 6,5 Grade B 4,6 9,3 8,6 6,2 7,6 Total 6,1 6,1 5,9 5,9 6,8 V&A Waterfront Grade A+ 0,0 0,0 0,0 0,0 4,3 Grade A 5,4 4,2 4,8 6,8 6,4 Grade B 10,4 8,7 15,0 6,7 8,8 Total 3,6 2,9 3,7 3,9 5,7

Durban

Berea Grade A+ N/A N/A N/A N/A N/A Grade A 1,6 4,4 4,7 4,7 17,0 Grade B 23,5 25,3 24,7 22,8 20,6 Total 14,1 16,3 16,5 14,9 18,9 CBD Durban Grade A+ N/A N/A N/A N/A N/A Grade A 18,4 18,1 19,0 19,8 19,8 Grade B 7,7 6,7 8,3 11,8 12,2 Total 12,3 11,7 13,0 15,3 15,6 Umhlanga / La Lucia Grade A+ 3,9 2,9 2,1 2,1 2,1 Grade A 3,5 4,9 8,0 6,4 7,5 Grade B 2,4 6,3 6,3 7,4 2,8 Total 3,4 5,0 7,7 6,5 6,8 Westville Grade A+ N/A N/A N/A N/A N/A Grade A 2,3 2,4 2,2 1,4 4,3 Grade B 6,8 6,3 5,8 5,4 8,3 Total 4,6 4,4 4,2 3,6 6,5 Source of data: Sapoa

Rode’s Report 2011:4 Office demand and vacancies 46

Table 6.2 (continued) Sapoa office vacancy factors (%)

Grades A+, A & B

Septem-ber 2010

December 2010

March 2011

June 2011

Septem-ber 2011

Pretoria Arcadia Grade A+ N/A N/A N/A N/A N/A Grade A 4,9 3,3 5,0 5,0 5,1 Grade B 8,0 6,0 3,8 3,8 6,7 Total 5,7 4,0 4,7 4,7 5,5 Brooklyn Grade A+ 1,4 3,7 N/A N/A N/A Grade A 2,1 2,0 1,2 1,5 1,8 Grade B 3,6 0,7 4,2 3,4 5,8 Total 2,3 1,9 1,9 2,0 2,7 CBD Pretoria Grade A+ N/A N/A N/A N/A N/A Grade A 0,7 0,7 0,7 0,7 0,9 Grade B 2,4 2,4 2,4 2,4 2,6 Total 1,8 1,8 1,8 1,8 2,0 Centurion Grade A+ N/A N/A N/A N/A N/A Grade A 6,7 6,3 6,2 8,2 9,4 Grade B 13,8 7,7 9,1 11,3 12,4 Total 10,9 7,1 7,9 9,9 11,1 Hatfield/Hillcrest Grade A+ N/A N/A N/A N/A N/A Grade A 2,2 3,0 5,8 7,7 8,9 Grade B 8,9 12,6 14,8 12,8 13,7 Total 6,1 8,9 11,3 10,7 11,8 Highveld Technopark Grade A+ N/A N/A N/A N/A N/A Grade A 4,1 7,0 7,6 9,0 7,1 Grade B 4,2 4,2 8,2 10,5 8,5 Total 4,1 6,4 7,7 9,4 7,5 Menlyn Grade A+ N/A N/A N/A N/A N/A Grade A 3,3 4,4 5,0 4,0 4,0 Grade B 16,6 18,0 19,3 25,4 9,1 Total 6,3 7,5 8,3 10,1 5,1 Source of data: Sapoa

Rode’s Report 2011:4 Office demand and vacancies 47

Table 6.2 (continued)

Sapoa office vacancy factors (%) Grades A+, A & B

Septem-ber 2010

December 2010

March 2011

June 2011

Septem-ber 2011

Pretoria Eastern Suburbs Grade A+ N/A N/A N/A N/A N/A Grade A 9,0 13,5 13,0 10,5 9,6 Grade B 5,9 6,1 5,3 5,3 1,7 Total 7,6 10,1 9,4 8,3 6,2 Lynnwood Grade A+ N/A N/A N/A 1,3 1,3 Grade A 4,5 4,6 2,9 8,2 8,4 Grade B 6,4 6,7 6,4 6,6 9,8 Total 5,5 5,7 4,6 6,5 8,0

Port Elizabeth

Greenacres Grade A+ N/A N/A 0,00 0,00 0,00 Grade A 1,5 2,08 3,85 0,00 0,00 Grade B 5,0 2,99 2,99 6,90 7,07 Total 3,4 2,6 3,4 5,8 5,9 Newton Park Grade A+ N/A N/A 17,56 17,56 17,56 Grade A 18,2 18,25 13,34 13,34 13,34 Grade B 17,7 19,84 22,89 22,89 22,89 Total 18,1 18,5 18,2 18,2 18,2 Central / Park Drive Grade A+ N/A N/A N/A N/A N/A Grade A N/A N/A N/A N/A N/A Grade B 5,9 5,93 12,10 12,13 1,22 Total 5,9 5,9 12,1 12,1 1,2 Walmer/Fairview Grade A+ N/A N/A N/A N/A N/A Grade A 35,2 33,61 13,50 13,50 11,04 Grade B 30,5 31,20 28,82 17,93 14,92 Total 33,7 32,8 18,6 15,00 12,3 Johannesburg central Grade A+ 0,0 0,00 0,00 0,00 0,00 Grade A 7,8 8,28 8,81 8,29 9,78 Grade B 23,2 19,44 18,52 17,37 21,39 Total 14,0 12,7 12,7 12,0 14,5 Source of data: Sapoa

Rode’s Report 2011:4 Office demand and vacancies 48

Table 6.2 (continued)

Sapoa office vacancy factors (%) Grades A+, A & B

Johannesburg decentral-ized

Grade A+ 1,0 0,86 0,59 0,58 1,92 Grade A 9,2 8,86 8,77 7,75 7,09 Grade B 9,9 10,50 10,75 12,04 12,59 Total 9,0 9,00 9,00 8,7 8,8 Pretoria decentralized Grade A+ 1,1 1,59 1,73 1,33 1,31 Grade A 6,5 8,14 8,16 9,78 8,47 Grade B 8,8 7,83 8,90 9,96 9,06 Total 6,2 6,6 7,16 8,06 7,5 Durban decentralized Grade A+ 3,9 2,89 2,12 2,12 2,12 Grade A 2,8 4,09 6,00 4,90 7,45 Grade B 10,7 11,31 10,36 9,50 9,82 Total 5,6 6,5 7,6 6,5 8,3 Cape Town decentralized Grade A+ 4,5 4,0 0,0 0,0 4,3 Grade A 8,1 7,7 7,3 7,6 7,4 Grade B 7,2 7,7 7,08 6,9 11,0 Total 7,6 7,4 7,0 7,2 8,0

National summaries

National decentralised

Grade A+ 1,4 1,5 1,1 0,9 1,7 Grade A 8,3 8,3 8,3 7,9 7,4 Grade B 9,4 9,5 10,0 10,9 11,3 Total 8,2 8,2 8,3 8,3 8,4 National CBDs

Grade A+ 0,3 0,16 0,00 0,00 0,00 Grade A 8,8 9,2 9,6 9,6 10,4 Grade B 14,7 12,9 12,6 12,6 14,6 Total 12,1 11,7 11,8 11,7 13,0 Source of data: Sapoa

Rode’s Report 2011:4 Non-industrial land values 49

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 vari-ous property types, excluding those for in-dustrial stands, which are shown separately in Chapter 9.

Office land values

In our office-stand survey, we pose the fol-lowing question to respondents:

In your opinion, what is the market value (R/bulk m²) of a vacant stand with an aver-age location in the following nodes? Note:

Use the bulk that is legally permissible and economically viable.

The results of the second-quarter office-land survey are summarised in Table 7.1.

The market rental rate and, related to this, the capitalization rate, are the key deter-minants of market value of an income-generating building. Hence, it follows that rental levels will also be a fundamental fac-tor affecting land value. The accompanying graph demonstrates this relationship as in quarter 2011:3.

Rode’s Report 2011:4 Non-industrial land values 50

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 ac-cordance with the permissible Floor Area Ratio (FAR) as derived from the zoning of the prop-erty.

“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 vari-ous 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 pre-dictor on the dependent variable (land val-ue).

The regression line (or line of best fit) has the following equation:

Bulk land value = 2,342*ln(gross mar-ket rental) – 2,7082

where

bulk land value = land value in rands per bulk m²

gross market rental = gross market rental per rentable m² per month achieved on existing prime office build-ings 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/m²/month. What is the most likely of-fice-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 m²

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/m², or greater than R132/m².

The function exp is also an Excel func-tion, and is represented as ex on most scientific or business calculators ― where e (≈ 2,718) is the base of the natural logarithm (ln).

Rode’s Report 2011:4 Non-industrial land values 51

Table 7.1 Office stand values in quarter 2011:3

Location

R/bulk m² Standard deviation (SD)

n Low High

*Best estimate

Low High *Best

estimate Johannesburg:

Sandton CBD R2.598 R3.600 R3.450 R141 - R71 2 Rosebank R2.145 R3.347 R2.650 R212 R849 - 2 Illovo R2.191 R3.464 R2.900 R283 R707 - 2 Illovo Boulevard R2.500 R2.700 R2.600 - - - 1 Parktown - - - - - - 0 Woodmead - - - - - - 0 Sunninghill - - - - - - 0 Bryanston R1.697 R2.449 R2.300 R141 R71 - 2 Fourways R1.732 R3.033 R2.200 R354 R1.202 - 2 Midrand - - - - - - 0 Strubens Valley, greater - - - - - - 0 East Rand Mall area - - - - - - 0 Lakeside Mall area - - - - - - 0 Pretoria: Brooklyn/Waterkloof R2.345 R2.939 R2.800 R212 R354 R530 2 Lynnwood R2.035 R2.538 R2.364 R354 R354 R318 2 Menlyn R2.449 R2.993 R2.884 R71 R283 R424 2 Hatfield R2.045 R2.392 R2.298 R212 R283 R141 2 Centurion R1.587 R1.944 R1.766 R283 R212 R247 2 Highveld Technopark R1.587 R1.944 R1.766 R283 R212 R247 2 Cape Peninsula: Cape Town CBD - - - - - - 0 Westlake - - - - - - 0 Century City - - - - - - 0 Goodwood (N1 City) - - - - - - 0 Tyger Valley area - - - - - - 0 Somerset Mall area - - - - - - 1 Durban: La Lucia Ridge R3.000 R3.500 R3.200 - - - 1 Westville R2.200 R2.700 R2.500 - - - 1 Berea - - - - - - 0 Westway - - - - - - 0 Durban Point - - - - - - 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.

Rode’s Report 2011:4 Non-industrial land values 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 cen-tre (as the case may be)? Assume that these stands are ready for construction and that the

major external infrastructure, which munici-palities normally expect the developer to pay for, is already in place; that is, assume ex-ternal roads, off-ramps, bridges, and new electrical sub-stations have been installed.

Table 7.2 gives a summary of the shop-ping-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*

Type of

shopping centre

R/bulk m² SD

N Low High

Best

esti-mate

Low High Best

estimate

Regional R 1 342 R 1 732 R 1 533 R 566 R 919 R 536 2 Community R 1 026 R 1 558 R 1 400 R 153 R 208 - 3 Neighbourhood R 992 R 1 412 R 1 500 R 275 R 144 - 3

* 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 follow-ing two assumptions:

i. Firstly that the land is already correctly zoned

ii. 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, elec-trical 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 m², but had to pay for external infrastructure amounting to, say, R1000/bulk m². Hence, in effect, this developer paid R1500/bulk m² for the land. It is the latter figure that we report on.

Rode’s Report 2011:4 Non-industrial land values 53

Filling stations

The market value of filling-station land, like that of shopping centres and offices, is crit-ically dependent on the potential net in-come that the site can generate subse-quent to development. Hence in the case of filling stations, the potential pumping ca-pacity 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 com-panies 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 de-terminants. 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 SD

n Low High

Best estimate

Low High Best

estimate R 2.000.000 R 3.500.00 R 2.500.000 - - - 1

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 follow-ing:

a) Firstly, the developer estimates the expected market value of the development upon completion.

b) 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.

c) 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; build-ing 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 Industrial rentals and vacancies 54

1.0

1.5

2.0

2.5

3.0

3.5

4.0

80

100

120

140

160

92 94 96 98 00 02 04 06 08 10

Vacancy factor (smoothed)Business cycle indicator

Rode's national industrial property vacancy factorvs

S.A. coincident business cycle indicator

r = -0,9

Rod

e's

vaca

ncy

fact

or(s

cale

: 0

to 9

)

Business cycle indicator(Index: 2000=

100)

Source of data: Rode's database; SARB

Chapter 8: Industrial rentals and vacancies

Business cycle indicators losing vigour

Written by Anneke Meijers

Disappointing news from an industrial-property point of view must be the loss of steam in South Africa’s business cycle indi-cators. This is so because of the robust in-verse relationship between industrial prop-erty vacancies and South Africa’s compo-site coincident business-cycle indicator1 (see graph).

The graph shows us that during the tenta-tive economic upswing that started in the latter half of 2009, industrial vacancies didn’t come down, thereby (temporarily) discontinuing the strong inverse relation-ship with economic activity. Surely, the ex-planation 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

1 An index published by the South African Reserve Bank that is a broad-based measurement of current economic conditions, helping economists and inves-tors to determine the phase of the business cycle.

could have been the strong rand at that time.

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 per-formance of the composite leading busi-ness-cycle indicators of South Africa's ma-jor trading partners. Should local economic activity be dragged down by trading-partner 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.

2 Also published by the Reserve Bank, the index is used to predict the direction of the economy's move-ments 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.

Rode's Report 2011:4 Industrial rentals and vacancies 55

10

20

30

40

50

90 92 94 96 98 00 02 04 06 08 10

Port ElizabethCentral WitwatersrandDurbanCape Peninsula

Nominal prime industrial rentals (500m² units)

R/m

² (l

og s

cale

)

Source of data: Rode's Time Series

Smoothed

10

15

20

25

30

35

40

90 92 94 96 98 00 02 04 06 08 10

Port ElizabethCentral WitwatersrandDurbanCape Peninsula

Real prime industrial rentals (500m² units)2005 rands

R/m

² (l

og s

cale

)

Source of data: Rode's Time Series; BER BCI

Smoothed

Deflated by BER BCI (2005=100)

Over the same period, building-cost infla-tion — as measured by the BER BCI — is expected to have accelerated to an impres-sive yearly growth rate of 6% (see Chap-ter 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.

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 Research’s Building Cost Index (BER BCI). By using building costs as a deflator, the reader can interpret the graphs from a developer’s point of view, i.e. they can serve as a proxy for the vi-ability of new developments over time, holding constant capitalization rates and operating expenses.

In Table 8.1 we examine pioneer industrial rentals, which provide a quick-and-dirty prognosis of the short-term direction of in-dustrial rentals. These rentals suggest that there is still great upside potential for in-dustrial-rental growth, if only the economy would perform!

The remainder of this chapter includes:

the summary rental-change table,

mean prime industrial rentals by township,

the standard deviations from these mean rentals,

market rentals for office space ancillary to industrial space,

indicative operating costs, and

the predominant escalation rates.

This concludes our section on industrial rentals and vacancies. Note that the industrial tables follow.

Rode's Report 2011:4 Industrial rentals and vacancies 56

Table 8.1 Pioneer rental rates

for new, state-of-the-art industrial developments during quarter 2011:3

Highest gross rental rates achieved (1.000m² units) Rands per rentable square m² (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%

Rode's Report 2011:4 Industrial rentals and vacancies 57

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0 29

,25

26,5

0 24

,50

1,5

3,82

4 -0

,070

-0

,94

Aer

oton

-

30,0

0 30

,00

30,0

0 -

1,0

- -

- D

evla

nd/N

ance

field

25

,00

25,0

0 25

,00

25,0

0 25

,00

1,0

3,21

9 0,

000

-

Cle

vela

nd/H

erio

tdal

e

30,3

3 29

,33

28,3

3 27

,83

26,0

0 1,

5 3,

674

-0,0

47

-0,9

7

New

land

s/M

artin

dale

30

,00

30,0

0 25

,00

25,0

0 25

,00

1,0

3,78

9 -0

,071

-0

,86

Kew

/Wyn

berg

Eas

t

30,0

0 30

,00

25,0

0 25

,00

25,0

0 2,

8 3,

727

-0,0

93

-0,9

6

Bra

mle

y Vie

w/L

omba

rdy

Wes

t

20,0

0 20

,00

19,0

0 21

,50

20,5

0 3,

0 2,

882

0,01

8 0,

47

Mar

lbor

o

15,0

0 15

,00

16,5

0 19

,00

20,0

0 2,

7 2,

078

0,10

8 0,

97

Hal

fway

Hou

se:

hi-t

ech

strip

45

,00

44,5

0 40

,67

39,0

0 38

,33

2,3

4,14

0 -0

,059

-0

,97

Hal

fway

Hou

se:

Ric

hard

s D

rive

45

,00

43,2

5 41

,67

38,3

3 38

,33

2,7

4,12

8 -0

,058

-0

,98

Com

mer

cia

35

,00

35,0

0 30

,00

30,0

0 30

,00

1,0

3,88

3 -0

,060

-0

,86

Kra

mer

ville

/Eas

tgat

e Ex

t12

& E

xt13

47

,25

47,2

5 43

,50

44,7

5 44

,25

3,0

3,98

1 -0

,024

-0

,74

Rode's Report 2011:4 Industrial rentals and vacancies 58

Tab

le 8

.2 (

con

tin

ued

) M

ean

pri

me

ind

ust

rial

mar

ket

ren

tals

as

in q

uar

ter

20

11

:3

(R/

m²

p.m

.; g

ross

leas

e; e

xcl V

AT)

Are

a si

ze le

ased

in m

² V

acan

cy

a b

r

25

0

50

0

1.0

00

2

.50

0

5.0

00

Cen

turion

-

- -

- 42

,00

1,0

- -

- Li

nbro

Par

k

50,0

0 49

,50

48,7

5 48

,75

50,0

0 1,

6 3,

913

-0,0

02

-0,1

8 W

esco

Par

k/Ea

stga

te E

xt3,

Ext

11,

Ext6

, Ex

t8/M

albo

ro N

orth

(N

ew)

44

,50

44,5

0 45

,75

45,1

2 42

,88

1,7

3,85

4 -0

,008

-0

,41

City

Dee

p

36,2

5 33

,25

32,8

8 36

,00

35,0

0 1,

3 3,

524

0,00

3 0,

08

Nor

th R

idin

g

45,0

0 50

,00

50,0

0 50

,00

50,0

0 -

3,70

3 0,

027

0,69

Sam

rand

Cen

turion

50

,00

47,5

0 47

,50

50,0

0 46

,50

3,0

3,95

6 -0

,011

-0

,41

Bar

bequ

e D

owns

50

,00

47,5

0 42

,50

42,5

0 42

,50

1,5

4,19

9 -0

,056

-0

,88

Sel

by E

xt 1

2/13

/15/

19/2

0/24

/City

Wes

t

37,5

0 37

50

32,5

0 33

,00

29,5

0 1,

0 4,

075

-0,0

79

-0,9

3 Sel

by E

xt 5

/10/

14/1

8

- -

- -

- -

- -

- Sel

by E

xt 1

1

33,0

0 33

,00

32,0

0 31

,00

30,0

0 1,

0 3,

693

-0,0

33

-0,9

7 Sel

by E

xt 3

/4/6

25

,00

25,0

0 25

,00

23,0

0 20

,00

1,0

3,65

1 -0

,070

-0

,87

Den

ver

(Old

)

19,3

3 19

,33

20,3

3 19

,00

18,3

3 2,

3 3,

078

-0,0

17

-0,5

5 D

enve

r (N

ew)

34

,75

33,0

0 33

,50

30,0

0 28

,00

1,5

3,94

9 -0

,070

-0

,95

Kya

lam

i Bus

ines

s Pa

rk

53,3

3 51

,67

50,0

0 48

,33

48,3

3 1,

3 4,

160

-0,0

35

-0,9

7 Reu

ven

30

,00

30,0

0 30

,00

30,0

0 28

,00

- 3,

514

-0,0

18

-0,7

1 Sel

by (

Old

)/Sel

by E

xt2/

Park

Cen

tral

-

- -

- -

- -

- -

Rob

erts

ham

30

,00

30,0

0 30

,00

27,0

0 22

,00

1,0

3,99

3 -0

,096

-0

,86

Ford

sbur

g/M

ayfa

ir

25,0

0 25

,00

25,0

0 22

,00

20,0

0 1,

0 3,

686

-0,0

77

-0,9

1 C

entr

al W

itw

ater

sran

d

35

,71

3

5,0

8

34

,26

3

3,2

4

32

,57

2

,1

W

est

Ran

d

Le

a G

len

30,0

0 30

,00

31,5

0 28

,00

25,0

0 2,

5 3,

770

-0,0

58

-0,7

8 H

oney

dew

X19

, 20

, 21

& 2

2 40

,00

40,0

0 45

,00

40,0

0 35

,00

3,0

3,94

4 -0

,037

-0

,50

Sto

rmill

32

,50

30,0

0 30

,00

28,0

0 25

,00

3,5

3,91

3 -0

,078

-0

,96

Cha

mdo

r 27

,50

25,0

0 26

,00

21,0

0 19

,00

1,5

4,00

8 -0

,122

-0

,94

Fact

oria

27

,50

27,5

0 26

,00

21,0

0 19

,00

2,5

4,11

7 -0

,135

-0

,95

Rode's Report 2011:4 Industrial rentals and vacancies 59

Tab

le 8

.2 (

con

tin

ued

) M

ean

pri

me

ind

ust

rial

mar

ket

ren

tals

as

in q

uar

ter

20

11

:3

(R/

m²

p.m

.; g

ross

leas

e; e

xcl V

AT)

Are

a si

ze le

ased

in m

² V

acan

cy

a b

r

25

0

50

0

1.0

00

2

.50

0

5.0

00

Ran

dfon

tein

: D

elpo

rton

/ Aur

eus

30,0

0 30

,00

25,0

0 20

,00

18,0

0 2,

0 4,

505

-0,1

89

-0,9

8 Bol

toni

a 30

,00

30,0

0 25

,00

25,0

0 18

,00

2,0

4,32

7 -0

,157

-0

,91

Roo

depo

ort:

30

,00

30,0

0 25

,00

25,0

0 25

,00

1,0

3,78

9 -0

,071

-0

,86

Indu

stria

Nor

th

31,0

0 31

,00

27,5

0 26

,50

23,0

0 2,

0 4,

011

-0,0

99

-0,9

6 Rob

ertv

ille

35,0

0 32

,50

28,0

0 27

,50

22,0

0 3,

0 4,

354

-0,1

43

-0,9

6 La

serp

ark

40,0

0 40

,00

40,0

0 30

,00

38,0

0 2,

5 4,

003

-0,0

55

-0,5

3 W

est

Ran

d

31

,57

3

0,7

1

29

,29

2

6,1

2

23

,53

2

,5

Ea

st R

and

El

ands

font

ein

33,5

0 32

,50

31,5

0 26

,50

25,0

0 2,

5 4,

124

-0,1

05

-0,9

7 Tu

nney

/Gre

enhi

lls

47,6

7 47

,67

45,6

7 40

,00

41,0

0 2,

0 4,

238

-0,0

64

-0,9

2 H

envi

lle

47,5

0 45

,67

45,0

0 45

,00

45,0

0 1,

5 3,

938

-0,0

16

-0,8

7 M

eado

wbr

ook/

Wilb

art

35,7

5 35

,75

34,3

3 35

,00

33,3

3 1,

3 3,

696

-0,0

21

-0,8

4 Sun

nyro

ck

43,0

0 40

,50

39,5

0 35

,00

35,0

0 3,

0 4,

168

-0,0

74

-0,9

7 Rus

tivia

/Act

ivia

Par

k 35

,00

35,0

0 35

,00

30,0

0 30

,00

1,0

3,93

1 -0

,062

-0

,89

East

leig

h 34

,25

34,0

0 31

,25

30,0

0 30

,00

2,3

3,82

0 -0

,051

-0

,94

Seb

enza

Ext

14

32,2

5 31

,75

30,0

0 27

,67

25,0

0 2,

3 3,

972

-0,0

85

-0,9

7 Spa

rtan

Ext

16

(Seb

enza

Lin

k) +

Ext

1,

3,7

36,3

3 35

,67

33,3

3 31

,00

- 2,

3 -

- -

Isan

do

36,2

0 36

,00

32,2

0 31

,60

33,3

3 3,

2 3,

790

-0,0

39

-0,7

4 Is

ando

3

38,5

0 38

,50

38,5

0 36

,00

- 3,

0 -

- -

Jet

Park

36

,75

38,4

0 37

,20

37,3

3 37

,50

3,5

3,61

3 0,

001

0,11

Alrod

e &

Xs

28,7

5 37

,50

37,4

0 26

,80

26,2

0 1,

5 3,

501

-0,0

28

-0,9

6 Alrod

e Sou

th

25,0

0 25

,00

25,0

0 25

,00

24,6

7 2,

0 3,

241

-0,0

03

-0,7

1 Alb

erto

n 35

,00

30,0

0 25

,00

25,0

0 25

,00

3,0

4,09

5 -0

,110

-0

,87

Aer

opor

t/ S

part

an E

xt 2

43

,60

43,6

0 42

,60

42,2

0 39

,33

1,8

3,96

3 -0

,031

-0

,89

Rus

tivia

-

- -

- -

- 3,

757

-0,0

91

-0,9

3

Rode's Report 2011:4 Industrial rentals and vacancies 60

Tab

le 8

.2 (

con

tin

ued

) M

ean

pri

me

ind

ust

rial

mar

ket

ren

tals

as

in q

uar

ter

20

11

:3

(R/

m²

p.m

.; g

ross

leas

e; e

xcl V

AT)

Are

a si

ze le

ased

in m

² V

acan

cy

a b

r

25

0

50

0

1.0

00

2

.50

0

5.0

00

Del

ville

24

,67

25,2

5 24

,00

20,5

0 19

,50

1,3

3,47

9 -0

,039

-0

,90

Roo

deko

p 26

,00

26,0

0 24

,25

24,6

7 23

,00

1,7

3,66

2 -0

,050

-0

,96

Wad

evill

e: I

ndus

tria

l zon

ing

29,8

6 28

,71

27,0

0 25

,86

26,0

0 1,

0 3,

712

-0,0

03

-0,0

7

Rou

te 2

4/ M

eado

wda

le

41,2

5 40

,75

38,5

0 37

,50

42,5

0 3,

0 3,

740

-0,0

76

-0,9

5 G

erm

isto

n S/

Indu

stries

E

27,1

7 26

,67

24,6

7 24

,20

21,3

3 1,

7 3,

880

-0,0

63

-0,9

7

Drieh

oek/

Ind

ustr

ies

W

34,0

0 33

,20

30,5

0 31

,12

28,0

0 2,

0 3,

631

-0,0

70

-0,9

7

Kni

ghts

25

,00

25,2

5 23

,00

22,0

0 20

,50

1,7

3,78

1 -0

,042

-0

,87

Spa

rtan

Pro

per

34,7

5 34

,75

32,2

5 30

,50

31,6

7 2,

5 3,

747

-0,0

07

-0,8

6

Foun

ders

Vie

w

40,7

5 40

,75

40,0

0 40

,00

40,0

0 1,

7 3,

802

0,01

6 0,

91

Long

mea

dow

48

,33

50,0

0 50

,00

50,6

7 51

,00

1,2

3,24

0 0,

056

0,91

East

Ran

d

35

,07

3

4,8

9

33

,16

3

1,8

7

30

,86

2

,1

Fa

r Ea

st R

and

Bok

sbur

g N

orth

& E

ast

30,0

0 27

,50

27,5

0 30

,00

27,5

0 1,

5 3,

417

-0,0

10

-0,2

5

Ben

oni S

outh

35

,00

35,0

0 28

,00

30,0

0 20

,00

1,0

4,52

6 -0

,165

-0

,87

New

Era

/ Vul

cani

a 30

,00

30,0

0 25

,00

20,0

0 20

,00

3,0

4,33

3 -0

,161

-0

,96

Nuf

field

25

,00

25,0

0 20

,00

20,0

0 20

,00

2,0

3,69

4 -0

,087

-0

,86

Fulc

rum

25

,00

25,0

0 20

,00

20,0

0 20

,00

2,0

3,69

4 -0

,087

-0

,86

Ape

x 35

,00

35,0

0 30

,00

30,0

0 20

,00

1,0

4,54

7 -0

,167

-0

,87

Labo

re B

rakp

an

30,0

0 30

,00

25,0

0 25

,00

18,0

0 1,

0 4,

327

-0,1

57

-0,9

1

Mor

ehill

Ext

8 B

enon

i 40

,00

35,0

0 35

,00

35,0

0 30

,00

1,0

4,07

2 -0

,074

-0

,88

Far

East

Ran

d

31

,11

3

0,0

0

26

,44

2

6,6

7

22

,56

1

,6

Pre

tori

a

Mitc

hell

St

- -

- -

- -

- -

-

Pret

oria

Ind

ustr

ial T

owns

hip

25,0

0 25

,00

20,0

0 20

,00

19,0

0 2,

0 3,

778

-0,1

00

-0,9

1 Koe

does

poor

t 30

,00

33,0

0 26

,00

- -

2,0

- -

-

Rode's Report 2011:4 Industrial rentals and vacancies 61

Tab

le 8

.2 (

con

tin

ued

) M

ean

pri

me

ind

ust

rial

mar

ket

ren

tals

as

in q

uar

ter

20

11

:3

(R/

m²

p.m

.; g

ross

leas

e; e

xcl V

AT)

Are

a si

ze le

ased

in m

² V

acan

cy

a b

r

25

0

50

0

1.0

00

2

.50

0

5.0

00

Wal

tloo/

Des

patc

h 30

,00

30,0

0 30

,00

45,0

0 40

,00

3,0

2,60

6 0,

133

0,83

Silv

erto

n/ S

ilver

tond

ale

37,5

0 37

,50

37,5

0 38

,00

- 3,

0 -

- -

Sam

cor

Park

35

,00

35,0

0 35

,00

40,0

0 40

,00

3,0

3,23

0 0,

054

0,89

Sun

derlan

d Rid

ge

35,0

0 35

,00

35,0

0 32

,50

25,0

0 3,

0 4,

165

-0,0

99

-0,8

2 H

erm

anst

ad

- 35

,00

30,0

0 30

,00

- -

- -

- Kirkn

ey

- 35

,00

30,0

0 -

- -

- -

- H

enno

pspa

rk X

15 &

X7

45,0

0 45

,00

40,0

0 40

,00

35,0

0 4,

0 4,

276

-0,0

81

-0,9

3 G

atew

ay

45,0

0 50

,00

45,0

0 45

,00

35,0

0 3,

0 4,

339

-0,0

80

-0,7

3 Ly

ttle

ton

Man

or X

4/X6

35,0

0 35

,00

37,5

0 30

,00

30,0

0 2,

0 3,

952

-0,0

64

-0,7

6 Pr

etor

ia N

orth

30

,00

25,0

0 20

,00

20,0

0 20

,00

3,0

4,05

5 -0

,133

-0

,87

Silv

erto

ndal

e X1

35,0

0 40

,00

37,5

0 -

- 3,

0 -

- -

Brits

-

- -

- -

- -

- -

Kle

rkso

ord

25,0

0 25

,00

20,0

0 20

,00

20,0

0 4,

0 3,

694

-0,0

87

-0,8

6 Ros

slyn

27

,50

25,0

0 22

,50

20,0

0 20

,00

4,0

3,91

9 -0

,113

-0

,97

Pre

tori

a 3

3,3

3

34

,06

3

2,4

3

31

,87

2

7,5

5

3,0

Pol

okw

ane

Le

bow

akgo

mo

- -

- -

- -

- -

- Sup

erbi

a 42

,00

35,0

0 32

,00

25,0

0 -

2,0

- -

- In

dust

ria

43,0

0 37

,00

32,0

0 25

,00

- 2,

0 -

- -

Ladi

ne

45,0

0 37

,00

32,0

0 28

,00

- 2,

0 -

- -

Futu

ra

40,0

0 35

,00

30,0

0 22

,00

- 2,

0 -

- -

Labo

ria

45,0

0 35

,00

30,0

0 30

,00

- 2,

0 -

- -

Mag

na V

ia

42,0

0 45

,00

42,0

0 40

,00

- 2,

0 -

- -

Ses

hego

-

- -

- -

- -

- -

Pol

okw

ane

42

,83

3

7,3

3

33

,00

2

8,3

3

- 2

,0

Rode's Report 2011:4 Industrial rentals and vacancies 62

Tab

le 8

.2 (

con

tin

ued

) M

ean

pri

me

ind

ust

rial

mar

ket

ren

tals

as

in q

uar

ter

20

11

:3

(R/

m²

p.m

.; g

ross

leas

e; e

xcl V

AT)

Are

a si

ze le

ased

in m

² V

acan

cy

a b

r

25

0

50

0

1.0

00

2

.50

0

5.0

00

Nel

spru

it

Nel

spru

it Ea

st

42,

00

35,

00

32,

00

25,

00

22,

00

4,0

4,

918

-0,2

15

-1,0

0

Nel

spru

it W

est

42,

00

40,

00

40,

00

38,

00

35,

00

2,0

4,

045

-0,0

55

-0,9

5

Roc

ky's

Drift

3

7,00

3

6,00

3

5,00

3

0,00

2

6,00

2

,0

4,30

7 -0

,118

-0

,95

Riv

ersi

de P

ark

55,

00

45,

00

42,

00

38,

00

35,

00

4,0

4,

730

-0,1

40

-0,9

7

Nel

spru

it

44

,00

3

9,0

0

37

,25

3

2,7

5

29

,50

3

,0

Du

rban

Spr

ingf

ield

Par

k 41

,67

41,6

7 39

,50

38,3

3 37

,00

4,0

3,97

4 -0

,042

-0

,98

May

ville

30

,00

32,0

0 31

,50

31,0

0 30

,00

3,0

3,46

4 -0

,005

-0

,20

Phoe

nix

31,0

0 31

,33

31,3

3 30

,67

29,3

3 3,

7 3,

549

-0,0

18

-0,7

8

Nor

th C

oast

Rd

/ Briar

dene

41

,50

41,0

0 41

,00

40,0

0 40

,00

3,0

- -

- Briar

dene

Ind

ustr

ial P

ark

44,0

0 44

,00

42,5

0 40

,67

40,0

0 3,

3 -

- -

Um

geni

Rd/

Sta

mfo

rd H

ill

36,5

0 36

,50

36,5

0 36

,50

35,0

0 3,

0 3,

666

-0,0

11

-0,7

1

Um

bilo

/ Syd

ney

Rd/

Gal

e St

35,0

0 35

,00

35,0

0 37

,50

37,5

0 4,

0 3,

387

0,02

8 0,

89

Jaco

bs

36,8

3 36

,83

36,6

7 36

,00

36,0

0 4,

0 3,

661

-0,0

09

-0,9

3 M

oben

i 35

,00

35,0

0 35

,00

36,0

0 36

,00

3,3

- -

-

Pros

pect

on

37,5

0 37

,33

37,3

3 37

,33

37,6

7 3,

3 3,

614

0,00

1 0,

36

Itha

la I

ndus

tria

l Est

ate

41,0

0 39

,50

39,5

0 38

,50

38,5

0 3,

5 3,

813

-0,0

20

-0,9

3 Pi

neto

wn

Cen

tral

39

,75

39,0

0 37

,50

37,7

5 37

,25

3,8

3,79

0 -0

,021

-0

,90

New

Ger

man

y 37

,67

35,5

0 34

,25

34,0

0 33

,75

4,3

3,79

3 -0

,034

-0

,90

Isip

ingo

-

- -

- -

- -

- -

Ros

sbur

gh/

Sou

th C

oast

Rd

37,5

0 37

,50

37,5

0 37

,50

37,5

0 3,

0 -

- -

Edw

in S

wal

es D

rive

40

,00

40,0

0 40

,00

40,0

0 40

,00

2,5

3,68

9 0,

000

-

Gle

n Ani

l 40

,50

40,5

0 40

,00

40,0

0 40

,50

4,0

3,70

7 -0

,002

-0

,28

Brick

field

Rd

31,5

0 31

,50

28,0

0 28

,00

28,0

0 2,

5 3,

701

-0,0

46

-0,8

6

Rode's Report 2011:4 Industrial rentals and vacancies 63

Tab

le 8

.2 (

con

tin

ued

) M

ean

pri

me

ind

ust

rial

mar

ket

ren

tals

as

in q

uar

ter

20

11

:3

(R/

m²

p.m

.; g

ross

leas

e; e

xcl V

AT)

Are

a si

ze le

ased

in m

² V

acan

cy

a b

r

25

0

50

0

1.0

00

2

.50

0

5.0

00

Ver

ulam

-

- -

- -

2,5

- -

-

Can

elan

ds

- -

- -

- 2,

5 -

- -

Tong

aat

35,5

0 35

,50

33,0

0 31

,00

31,0

0 2,

0 3,

877

-0,0

54

-0,9

5

New

Wes

tmea

d/ M

ahog

any

41

,00

39,5

0 38

,25

37,7

5 38

,25

3,3

3,82

9 -0

,024

-0

,86

Wes

tmea

d 40

,25

39,0

0 37

,25

37,0

0 36

,75

4,0

3,85

1 -0

,030

-0

,93

Mar

iann

Par

k/ S

outh

mea

d 32

,00

33,5

0 34

,00

33,3

3 31

,00

2,7

3,55

6 -0

,010

-0

,30

Max

mea

d 41

,00

40,5

0 39

,00

38,2

5 37

,75

2,3

3,87

5 -0

,029

-0

,98

Rin

groa

d In

dust

rial

Par

k 40

,00

40,0

0 40

,00

- -

2,0

- -

-

Avo

ca/

Red

Hill

/ N

orth

gate

-

38,0

0 38

,00

40,0

0 40

,00

3,0

- -

-

Falc

on P

ark

37,0

0 36

,50

35,5

0 35

,00

34,5

0 3,

0 3,

741

-0,0

24

-0,9

9

Riv

er H

orse

Val

ley

Bus

ines

s

51,6

7 51

,67

49,6

7 49

,67

48,0

0 3,

7 4,

085

-0,0

24

-0,9

4 M

ount

Edg

ecom

be

41,0

0 40

,33

39,3

3 39

,33

39,3

3 3,

7 3,

783

-0,0

14

-0,8

8

Um

bogi

ntw

ini/

Sou

thga

te

40,0

0 40

,00

38,0

0 38

,00

38,0

0 3,

0 3,

798

-0,0

20

-0,8

6

Sou

thga

te I

ndus

tria

l Par

k -

40,0

0 39

,00

38,0

0 38

,00

3,0

- -

-

Um

geni

Par

k -

40,0

0 40

,00

- -

2,0

- -

- H

amm

ersd

ale

25,0

0 25

,00

23,1

3 22

,50

22,2

5 4,

0 3,

470

-0,0

44

-0,9

5 Cat

o Rid

ge

24,0

0 24

,00

23,3

3 23

,75

23,7

5 3,

0 3,

195

-0,0

04

-0,4

0 D

urb

an

38

,34

37

,69

36

,32

35

,77

35

,51

3,4

Low

er U

mfo

lozi

Empa

ngen

i -

- -

- -

- -

- -

Ric

hard

s Bay

35

,00

28,0

0 25

,00

25,0

0 -

3,0

- -

-

Ric

hard

s Bay

CBD

(D

olla

r D

rive

) 50

,00

45,0

0 35

,00

- -

1,0

- -

-

Low

er U

mfo

lozi

4

2,5

0

36

,50

3

0,0

0

25

,00

-

2,0

Cap

e P

enin

sula

Vik

ing

Plac

e 3

5,67

3

3,67

3

2,50

3

3,25

-

2,7

- -

-

Rode's Report 2011:4 Industrial rentals and vacancies 64

Tab

le 8

.2 (

con

tin

ued

) M

ean

pri

me

ind

ust

rial

mar

ket

ren

tals

as

in q

uar

ter

20

11

:3

(R/

m²

p.m

.; g

ross

leas

e; e

xcl V

AT)

Are

a si

ze le

ased

in m

² V

acan

cy

a b

r

25

0

50

0

1.0

00

2

.50

0

5.0

00

Glo

sder

ry

43,

00

43,

00

39,

67

37,

00

- 1,

5 -

- -

Paar

den

Eila

nd/

Met

ro

37,

25

36,

80

35,

00

34,

00

31,

00

2,3

3,95

8 -0

,059

-0

,96

Mon

tagu

e G

arde

ns

35,

00

34,

50

33,

00

33,

25

30,

50

3,2

3,78

7 -0

,041

-0

,91

Mar

coni

Bea

m

39,

60

37,

67

37,

67

35,

00

32,

50

1,3

4,02

8 -0

,062

-0

,97

Kill

arne

y G

arde

ns

29,

50

29,

40

28,

33

27,

67

27,

00

4,0

3,56

4 -0

,031

-0

,98

Rac

ing

Park

2

8,75

2

8,25

2

4,67

2

4,67

2

5,00

5,

0 3,

642

-0,0

54

-0,8

4

Atla

ntis

1

8,00

1

8,00

1

6,00

1

6,00

1

6,00

-

3,14

1 -0

,046

-0

,86

Woo

dsto

ck/

Sal

t Riv

er/

Obs

erva

tory

3

3,00

3

3,00

3

5,00

-

- 3,

0 -

- -

Ath

lone

1 &

2

30,

00

30,

00

30,

00

25,

00

25,

00

5,0

3,84

5 -0

,074

-0

,89

Lans

dow

ne N

eris

sa

31,

00

31,

00

31,

00

30,

00

30,

00

4,5

3,51

4 -0

,013

-0

,89

San

d In

dust

ria

- -

- -

- -

- -

-

Ott

ery

Hill

star

3

7,00

3

6,00

3

5,33

3

2,67

3

0,00

3,

7 4,

008

-0,0

68

-0,9

6 O

tter

y Sun

set

36,

50

35,

50

35,

50

33,

00

30,

00

3,0

3,95

8 -0

,062

-0

,93

Die

p Riv

er

43,

50

42,

50

41,

50

38,

00

- 2,

5 -

- -

Elfin

dale

4

3,50

4

2,50

4

0,50

4

0,00

4

0,00

3,

5 3,

928

-0,0

30

-0,9

3

Mon

woo

d/ P

hilip

pi E

ast

30,

00

30,

00

30,

00

25,

00

25,

00

- 3,

845

-0,0

74

-0,8

9

Ret

reat

/ Ste

enbe

rg

44,

00

42,

50

41,

50

40,

00

40,

00

2,5

3,95

9 -0

,033

-0

,97

Cap

rico

rn P

ark

41,

00

40,

00

37,

50

37,

50

- 5,

5 -

- -

Mai

tland

3

1,33

3

1,00

2

7,33

-

- 3,

7 -

- -

Nda

beni

3

6,00

3

4,00

3

2,00

3

0,00

3

0,00

2,

5 3,

926

-0,0

64

-0,9

7

Airpo

rt

36,

00

35,

00

33,

20

31,

75

27,

50

3,2

4,06

7 -0

,084

-0

,95

Eppi

ng 1

& 2

3

1,33

3

0,20

2

7,90

2

5,38

2

5,12

4,

2 3,

897

-0,0

81

-0,9

8

WP

Park

3

8,40

3

7,00

3

4,00

3

3,00

3

2,67

1,

7 3,

954

-0,0

57

-0,9

6

Elsi

es R

iver

(ex

cl.

Cen

tral

Par

k)

24,

92

24,

62

23,

25

21,

33

22,

00

4,2

3,50

9 -0

,052

-0

,92

Paro

w B

eaco

nval

e 3

1,00

3

0,17

2

9,20

2

4,67

2

4,33

3,

8 3,

963

-0,0

92

-0,9

6

Rode's Report 2011:4 Industrial rentals and vacancies 65

Tab

le 8

.2 (

con

tin

ued

) M

ean

pri

me

ind

ust

rial

mar

ket

ren

tals

as

in q

uar

ter

20

11

:3

(R/

m²

p.m

.; g

ross

leas

e; e

xcl V

AT)

Are

a si

ze le

ased

in m

² V

acan

cy

a b

r

25

0

50

0

1.0

00

2

.50

0

5.0

00

Tyge

rber

g Bus

ines

s Pa

rk

34,

60

31,

00

29,

33

26,

67

26,

67

3,3

4,00

1 -0

,088

-0

,97

Paro

w I

ndus

tria

3

1,00

2

7,75

2

6,50

2

4,33

2

3,00

4

3,94

1 -0

,096

-0

,99

Paro

w E

ast

32,

75

29,

25

27,

00

25,

50

25,

00

2,5

3,94

2 -0

,088

-0

,96

Bel

lvill

e O

akda

le

35,

00

35,

00

30,

00

30,

00

- 1,

0 -

- -

Bel

lvill

e Stik

land

/ Kay

mor

3

4,25

3

2,00

3

0,00

2

8,00

2

8,00

2,

0 3,

906

-0,0

70

-0,9

7 Bel

lvill

e Tr

iang

le

29,

33

26,

50

25,

50

24,

50

22,

50

2,0

3,79

7 -0

,079

-0

,98

Bel

lvill

e Sou

th/

Sac

ks C

ircl

e 2

8,75

2

6,33

2

4,33

2

2,50

2

2,50

3,

0 3,

804

-0,0

85

-0,9

7 Kra

aifo

ntei

n 2

8,00

2

8,00

2

5,00

2

5,00

2

3,00

1,

0 3,

710

-0,0

66

-0,9

4 Bra

cken

fell

Indu

stria

30,

00

29,

50

26,

00

25,

50

25,

00

2,0

3,76

6 -0

,067

-0

,93

Ever

ite B

rack

enfe

ll 3

5,50

3

2,50

2

8,00

2

7,00

2

7,00

2,

0 4,

062

-0,0

95

-0,9

3 Kui

ls R

iver

3

3,00

2

5,50

2

4,50

2

4,50

2

3,00

2,

0 3,

938

-0,0

98

-0,8

4 Bla

ckhe

ath

28,

00

25,

00

22,

00

22,

00

20,

00

1,0

3,87

1 -0

,104

-0

,95

Sax

enbu

rg I

ndus

tria

l Par

k 3

1,00

3

0,00

2

6,50

2

5,50

2

6,00

2,

0 3,

792

-0,0

67

-0,9

1 O

kava

ngo

Park

3

5,67

3

2,50

2

7,00

2

7,00

2

7,00

2,

0 4,

060

-0,0

96

-0,8

8 Fi

rgro

ve

- -

- -

- -

- -

- Th

e In

terc

hang

e (S

omer

set

-

- -

- -

- -

- -

Str

and

Hal

t -

- -

- -

- -

- -

Bro

adla

nds

- -

- -

- -

- -

- C

ape

Pen

insu

la

33

,57

3

2,3

2

30

,67

2

8,6

4

27

,46

3

,0

G

eorg

e

Geo

rge

2,0

0 2

,00

2,0

0 1

,00

1,0

0 2

,0

2,38

1 -0

,281

-0

,89

Geo

rge

2,0

0

2,0

0

2,0

0

1,0

0

1,0

0

2,0

Port

Eliz

abet

h

Dea

l Par

ty

25,0

0 23

,75

22,2

5 20

,00

20,0

0 4,

0 3,

668

-0,0

82

-0,9

8 N

orth

End

27

,75

25,7

5 24

,25

21,0

0 21

,00

3,5

3,87

5 -0

,101

-0

,98

Rode's Report 2011:4 Industrial rentals and vacancies 66

Tab

le 8

.2 (

con

tin

ued

) M

ean

pri

me

ind

ust

rial

mar

ket

ren

tals

as

in q

uar

ter

20

11

:3

(R/

m²

p.m

.; g

ross

leas

e; e

xcl V

AT)

Are

a si

ze le

ased

in m

² V

acan

cy

a b

r

25

0

50

0

1.0

00

2

.50

0

5.0

00

Kor

sten

/ N

eave

/ Sid

wel

l/ S

yden

ham

24

,00

24,0

0 22

,50

19,0

0 19

,00

3,2

3,72

7 -0

,094

-0

,95

Sou

th E

nd W

alm

er

21,0

0 21

,00

21,0

0 20

,00

20,0

0 2,

0 3,

163

-0,0

20

-0,8

9 U

itenh

age:

Vol

ksw

agen

are

a/N

elso

n

Man

dela

Bay

Log

istic

s Pa

rk

27,5

0 27

,50

27,5

0 25

,00

25,0

0 1,

0 3,

546

-0,0

39

-0,8

9

Uite

nhag

e: H

ella

/Kru

isrivi

er

17,5

0 17

,50

17,5

0 20

,00

20,0

0 3,

0 2,

537

0,05

4 0,

89

Str

uand

ale

- 17

,25

16,2

5 15

,25

14,0

0 4,

2 -

- -

Mar

kman

Tow

nshi

p 15

,00

13,7

5 13

,75

12,2

5 11

,00

5,5

3,25

1 -0

,097

-0

,97

Pers

ever

ance

28

,00

24,7

5 23

,25

23,2

5 21

,50

1,5

3,71

4 -0

,076

-0

,93

Wal

mer

36

,50

36,5

0 35

,00

33,5

0 32

,00

1,5

3,86

8 -0

,046

-0

,97

Gre

enbu

shes

30

,00

29,0

0 29

,00

29,0

0 25

,25

3,2

3,66

1 -0

,045

-0

,80

Fairvi

ew

40,2

5 40

,25

37,7

5 35

,00

35,0

0 1,

0 4,

016

-0,0

56

-0,9

6 P

ort

Eliz

abet

h

27

,88

2

5,5

2

24

,48

2

2,3

2

20

,82

2

,9

B

loem

fon

tein

Hilt

on

30,

00

27,

00

25,

00

20,

00

18,

00

2,0

4,38

4 -0

,175

-0

,99

East

End

3

5,00

3

6,00

3

1,50

2

2,00

1

5,00

1,

8 5,

313

-0,2

91

-0,9

4 H

arve

y Roa

d 3

5,00

3

0,00

2

5,00

1

9,00

1

5,00

1,

8 5,

150

-0,2

84

-1,0

0 O

ld I

ndus

tria

l 2

8,00

3

0,00

2

0,00

1

5,00

1

2,00

2,

5 5,

193

-0,3

16

-0,9

6 H

amilt

on:

Mill

St

22,

00

20,

00

15,

00

12,

00

10,

00

2,5

4,63

9 -0

,275

-0

,99

Ham

ilton

: G

Lub

be S

t 2

0,00

1

8,00

1

2,00

1

0,00

9

,00

2,5

4,57

8 -0

,286

-0

,97

Esto

ir

45,

00

40,

00

35,

00

30,

00

25,

00

1,0

4,88

0 -0

,192

-1

,00

Blo

emfo

nte

in

30

,71

2

9,6

7

24

,44

1

8,3

8

14

,86

2

,1

W

ind

ho

ek

N

orth

38

,00

38,0

0 35

,00

30,0

0 30

,00

2,0

4,18

8 -0

,095

-0

,95

Lafr

enz

30,0

0 30

,00

30,0

0 30

,00

30,0

0 4,

0 3,

401

0,00

0 -

Sou

th

50,0

0 50

,00

45,0

0 45

,00

40,0

0 1,

0 4,

329

-0,0

72

-0,9

3 Pr

ospe

rita

40

,00

40,0

0 38

,00

35,0

0 30

,00

1,0

4,25

1 -0

,094

-0

,93

Win

dh

oek

3

9,5

0

39

,50

3

7,0

0

35

,00

3

2,5

0

2,0

Rode's Report 2011:4 Industrial rentals and vacancies 67

Tab

le 8

.3

Sta

nd

ard

dev

iati

on f

rom

mea

n p

rim

e in

du

stri

al m

arke

t re

nta

ls

as in

20

11

:3

A

rea

size

leas

ed in

m²

Con

trib

uto

r co

des

2

50

5

00

1

.00

0

2.5

00

5

.00

0

Cen

tral

Wit

wat

ersr

and

Cam

brid

ge P

ark

0,00

0,

00

0,00

2,

36

0,00

AP,

MR,

RA

Wyn

berg

pro

per

5,09

5,

27

4,71

5,

53

5,34

AP,

AW

, BM

, G

B,

MR,

RA

Str

ijdom

Par

k 2,

05

2,05

3,

30

3,30

2,

87

AP,

BM

, RA

Kya

San

d 4,

11

4,11

5,

10

4,03

6,

94

AP,

BM

, RA

Cla

yvill

e/ O

lifan

tsfo

ntei

n 7,

50

5,00

2,

50

4,00

2,

50

AP,

BM

Chl

oork

op

- -

- -

- AP

Am

alga

m

- -

- 1,

50

1,00

AP,

BM

Cro

wn

Min

es

- -

- -

- AP

Indu

stria

- -

- -

- AP

Boo

ysen

s/ B

ooys

ens

Res

erve

/ O

phirto

n 5,

00

5,00

2,

50

1,50

10

,00

AP,

BM

Vill

age

Mai

n/ V

illag

e D

eep/

New

Cen

tre

5,00

5,

00

0,00

1,

00

2,50

AP,

BM

Ben

rose

0,

94

0,00

0,

71

0,00

0,

70

AP,

GB,

RO

Ste

eled

ale/

Ele

ctro

n/ T

ulis

a

2,00

2,

00

2,75

1,

50

0,50

AP,

GB,

RO

Aer

oton

-

- -

- -

AP

Dev

land

/ N

ance

field

-

- -

- -

AP

Cle

vela

nd/

Her

iotd

ale

3,30

1,

89

1,25

1,

84

1,41

AP,

GB,

RF

New

land

s/ M

artin

dale

-

- -

- -

AP

Kew

/ W

ynbe

rg E

ast

0,00

2,

00

2,59

1,

60

2,41

AP,

AW

, G

B,

MR,

RO

Bra

mle

y Vie

w/

Lom

bard

y W

est

0,00

0,

00

1,00

3,

50

4,50

AP,

GB

Mar

lbor

o Sou

th (

Ale

xand

ra)

0,00

0,

00

1,50

1,

00

0,00

AP,

GB,

RO

H

alfw

ay H

ouse

: hi

-tec

h st

rip

3,54

3,

64

0,94

2,

94

2,36

AP,

AW

, BM

, M

R

Hal

fway

Hou

se:

Ric

hard

s D

rive

0,

00

2,05

2,

36

2,36

2,

36

AP,

AW

, BM

, M

R

Com

mer

cia

- -

- -

- AP

Rode's Report 2011:4 Industrial rentals and vacancies 68

Tab

le 8

.3 (

con

tin

ued

) S

tan

dar

d d

evia

tion

fro

m m

ean

pri

me

ind

ust

rial

mar

ket

ren

tals

as

in 2

01

1:3

A

rea

size

leas

ed in

m²

Con

trib

uto

r co

des

2

50

5

00

1

.00

0

2.5

00

5

.00

0

Kra

mer

ville

/ Ea

stga

te X

12 &

X13

2,

17

2,17

2,

06

0,43

0,

83

AP,

AW

, G

B,

RA

Cen

turion

-

- -

- -

BM

Linb

ro P

ark

3,54

3,

64

2,17

2,

17

3,54

AP,

BM

, G

B,

MR,

RA

Wes

co P

ark/

Eas

tgat

e X3,

X11

,X6,

X8/

M

arlb

oro

Nor

th (

New

) 2,

87

2,87

1,

30

1,95

1,

88

AP,

GB,

MR,

RA

City

Dee

p 5,

85

3,42

2,

92

1,41

2,

45

AP,

BM

, G

B,

RO

N

orth

Rid

ing

- -

- -

- AP

Sam

rand

Cen

turion

-

2,50

2,

50

0,00

1,

50

AP,

BM

Bar

bequ

e D

owns

0,

00

2,50

2,

50

2,50

2,

50

AP,

AW

Sel

by E

xt 1

2/ 1

3/ 1

5/ 1

9/ 2

0/ 2

4/ C

ity W

est

7,50

7,

50

7,50

7,

00

5,50

AP,

RA

Sel

by E

xt 5

/ 10

/ 14

/ 18

-

- -

- -

AP

Sel

by E

xt 1

1 -

- -

- -

AP

Sel

by E

xt 3

/ 4/

6

- -

- -

- AP

Den

ver

(Old

) 0,

94

0,94

3,

30

4,32

4,

78

AP,

BM

, G

B,

RO

Den

ver

(New

) 3,

56

1,87

1,

50

0,00

0,

00

AP,

BM

, G

B,

RO

Kya

lam

i Bus

ines

s Pa

rk

2,36

2,

36

0,00

2,

36

2,36

AP,

AW

, M

R

Reu

ven

- -

- -

- AP

Sel

by (

Old

)/ S

elby

X2/

Par

k C

entr

al

- -

- -

-

Rob

erts

ham

-

- -

- -

AP

Ford

sbur

g/ M

ayfa

ir

- -

- -

- AP

Wes

t R

and

Le

a G

len

0,00

0,

00

3,50

0,

00

0,00

AP,

RO

Hon

eyde

w X

19,

20,

21 &

22

- -

- -

- AP

Sto

rmill

2,

50

0,00

0,

00

0,00

0,

00

AP,

RO

Cha

mdo

r 2,

50

0,00

4,

00

1,00

1,

00

AP,

RO

Rode's Report 2011:4 Industrial rentals and vacancies 69

Tab

le 8

.3 (

con

tin

ued

) S

tan

dar

d d

evia

tion

fro

m m

ean

pri

me

ind

ust

rial

mar

ket

ren

tals

as

in 2

01

1:3

A

rea

size

leas

ed in

m²

Con

trib

uto

r co

des

2

50

5

00

1

.00

0

2.5

00

5

.00

0

Fact

oria

2,

50

2,50

4,

00

1,00

1,

00

AP,

RO

Ran

dfon

tein

: D

elpo

rton

/ Aur

eus

- -

- -

- AP

Bol

toni

a -

- -

- -

AP

Roo

depo

ort:

-

- -

- -

AP

Indu

stria

Nor

th

1,00

1,

00

0,50

1,

50

5,00

AP,

RO

Rob

ertv

ille

5,00

2,

50

0,00

2,

50

0,00

AP,

RO

La

serp

ark

- -

- -

- AP

East

Ran

d

Elan

dsfo

ntei

n 1,

50

2,50

3,

50

1,50

0,

00

AP,

DO

Tunn

ey/G

reen

hills

2,

05

2,05

3,

30

4,08

2,

94

AP,

BM

, M

R,

RO

H

envi

lle

2,50

3,

30

4,00

-

- AP,

BM

, M

R

Mea

dow

broo

k/W

ilbar

t 3,

77

3,77

0,

94

0,00

2,

36

AP,

BM

, M

R,

RO

Sun

nyro

ck

1,41

1,

66

0,87

0,

00

- AP,

BM

, D

O,

MR,

RO

Rus

tivia

/Act

ivia

Par

k -

- -

- -

AP

East

leig

h 1,

30

1,22

2,

17

0,00

-

AP,

DO

, M

R,

RO

Seb

enza

Ext

14

2,28

2,

05

1,41

2,

05

- AP,

BM

, M

R,

RO

Spa

rtan

Ext

16

(Seb

enza

Lin

k) +

Ext

1,3

,7

2,62

3,

30

4,71

2,

94

- AP,

DO

, RO

Is

ando

2,

14

2,10

2,

71

2,87

2,

36

AP,

BM

, D

O,

MR,

RO

Isan

do 3

3,

50

3,50

3,

50

6,00

-

AP,

RO

Jet

Park

3,

56

3,61

3,

19

3,30

2,

50

AP,

BM

, D

O,

MR,

RO

Alrod

e &

Xs

2,59

1,

80

2,24

2,

14

2,14

AP,

BM

, G

B,

REW

, RO

Alrod

e Sou

th

0,00

0,

00

0,00

0,

00

0,47

AP,

BM

, G

B

Alb

erto

n -

- -

- -

AP

Aer

opor

t/ S

part

an E

xt 2

3,

14

3,14

3,

01

3,43

4,

19

AP,

BM

, D

O,

Rus

tivia

-

- -

- -

Rode's Report 2011:4 Industrial rentals and vacancies 70

Tab

le 8

.3 (

con

tin

ued

) S

tan

dar

d d

evia

tion

fro

m m

ean

pri

me

ind

ust

rial

mar

ket

ren

tals

as

in 2

01

1:3

A

rea

size

leas

ed in

m²

Con

trib

uto

r co

des

2

50

5

00

1

.00

0

2.5

00

5

.00

0

Del

ville

2,

05

2,17

2,

92

0,50

0,

50

AP,

HN

, M

R,

RF

Roo

deko

p 1,

41

1,41

1,

30

0,47

2,

16

AP,

BM

, G

B,

MR,

RO

Wad

evill

e: I

ndus

tria

l zon

ing

2,42

1,

75

1,69

1,

88

2,00

AP,

BM

, BN

, G

B,

HN

, M

R,

REW

, RO

Rou

te 2

4/ M

eado

wda

le

2,17

2,

59

2,18

2,

89

2,50

AP,

BM

, BN

, M

R,

RO

Ger

mis

ton

S/

Indu

stries

E

2,54

2,

29

3,54

3,

82

3,40

AP,

BM

, BN

, G

B,

HN

D

rieh

oek/

Ind

ustr

ies

W

2,61

2,

71

0,87

1,

24

1,63

AP,

BM

, BN

, M

R,

RO

Kni

ghts

1,

63

1,79

1,

63

1,41

2,

50

AP,

BN

, M

R,

RO

Spa

rtan

Pro

per

0,43

0,

43

1,79

0,

87

2,36

AP,

BM

, BN

, M

R,

RO

Foun

ders

Vie

w

4,38

4,

38

0,00

0,

00

0,00

AP,

GB,

MR,

RO

Lo

ngm

eado

w

4,71

5,

00

3,54

0,

94

1,00

AP,

BM

, G

B,

MR,

RO

Far

East

Ran

d

Bok

sbur

g N

orth

& E

ast

10,0

0 7,

50

7,50

5,

00

2,50

AP,

BM

Ben

oni S

outh

-

- -

- -

AP

New

Era

/ Vul

cani

a -

- -

- -

AP

Nuf

field

-

- -

- -

AP

Fulc

rum

-

- -

- -

AP

Ape

x -

- -

- -

AP

Labo

re B

rakp

an

- -

- -

- AP

Mor

ehill

Ext

8 B

enon

i -

- -

- -

AP

Pre

tori

a

M

itche

ll St

- -

- -

-

Pret

oria

Ind

ustr

ial T

owns

hip

- -

- -

1,00

AI,

AP

Koe

does

poor

t -

- -

- -

AP

Wal

tloo/

Des

patc

h -

- -

- -

AP

Rode's Report 2011:4 Industrial rentals and vacancies 71

Tab

le 8

.3 (

con

tin

ued

) S

tan

dar

d d

evia

tion

fro

m m

ean

pri

me

ind

ust

rial

mar

ket

ren

tals

as

in 2

01

1:3

A

rea

size

leas

ed in

m²

Con

trib

uto

r co

des

2

50

5

00

1

.00

0

2.5

00

5

.00

0

Silv

erto

n/ S

ilver

tond

ale

2,50

2,

50

2,50

-

- AI,

AP

Sam

cor

Park

-

- -

- -

AI,

AP

Sun

derlan

d Rid

ge

- -

5,00

2,

50

- AI,

AP

Her

man

stad

-

- -

- -

AI

Kirkn

ey

- -

- -

- AI

Hen

nops

park

X15

& X

7 -

- -

- -

AI,

AP

Gat

eway

-

- 5,

00

5,00

-

AI,

AP

Lytt

leto

n M

anor

X4/

X6

- -

7,50

-

- AI,

AP

Pret

oria

Nor

th

- -

- -

- AP

Silv

erto

ndal

e X1

- 5,

00

2,50

-

- AI,

AP

Brits

-

- -

- -

Kle

rkso

ord

- -

- -

- AP

Ros

slyn

2,

50

0,00

2,

50

0,00

-

AI,

AP

Pol

okw

ane

Lebo

wak

gom

o -

- -

- -

ES

Sup

erbi

a -

- -

- -

ES

Indu

stria

- -

- -

- ES

La

dine

-

- -

- -

ES

Futu

ra

- -

- -

- ES

Labo

ria

- -

- -

- ES

Mag

na V

ia

- -

- -

- ES

Ses

hego

-

- -

- -

ES

Nel

spru

it

Nel

spru

it Ea

st

- -

- -

- H

H

Nel

spru

it W

est

- -

- -

- H

H

Rode's Report 2011:4 Industrial rentals and vacancies 72

Tab

le 8

.3 (

con

tin

ued

) S

tan

dar

d d

evia

tion

fro

m m

ean

pri

me

ind

ust

rial

mar

ket

ren

tals

as

in 2

01

1:3

A

rea

size

leas

ed in

m²

Con

trib

uto

r co

des

2

50

5

00

1

.00

0

2.5

00

5

.00

0

Roc

ky’s

Drift

-

- -

- -

HH

Riv

ersi

de P

ark

- -

- -

- H

H

Du

rban

Spr

ingf

ield

Par

k 2,

89

2,89

3,

28

2,89

1,

73

CR,

ML,

PC

May

ville

-

2,83

2,

12

1,41

-

CR,

PC

Phoe

nix

1,41

1,

15

1,15

1,

15

1,15

CR,

MI,

PC

Nor

th C

oast

Rd

/ Briar

dene

2,

12

1,41

1,

41

0,00

0,

00

CR,

PC

Briar

dene

Ind

ustr

ial P

ark

1,73

1,

73

0,50

1,

15

2,00

CR,

ML,

PC

Um

geni

Rd/

Sta

mfo

rd H

ill

2,12

2,

12

2,12

2,

12

- CR,

PC

Um

bilo

/ Syd

ney

Rd/

Gal

e St

0,00

0,

00

0,00

3,

54

3,54

CR,

PC

Jaco

bs

1,61

1,

61

1,53

1,

73

1,73

CR,

ML,

PC

Mob

eni

0,00

0,

00

0,00

1,

73

1,73

CR,

ML,

PC

Pros

pect

on

3,54

2,

52

2,52

2,

52

2,52

CR,

ML,

PC

Itha

la I

ndus

tria

l Est

ate

1,41

3,

54

3,54

4,

95

4,95

CRM

PC

Pine

tow

n C

entr

al

3,86

4,

24

2,08

2,

63

3,20

CR,

LS,

ML,

PC

New

Ger

man

y 2,

52

1,73

1,

71

1,41

1,

50

CR,

LS,

ML,

PC

Isip

ingo

-

- -

- -

CR

Ros

sbur

gh/

Sou

th C

oast

Rd

- -

- -

- CR,

ML

Edw

in S

wal

es D

rive

3,

54

3,54

3,

54

3,54

3,

54

CR,

MI

Gle

n Ani

l 7,

07

7,07

7,

07

7,07

7,

07

CR,

PC

Brick

field

Rd

6,36

6,

36

7,07

7,

07

6,36

CR,

PC

Ver

ulam

4,

95

4,95

-

- -

CR,

PC

Can

elan

ds

- -

- -

-

Tong

aat

- -

- -

- CR,

ML

Rode's Report 2011:4 Industrial rentals and vacancies 73

Tab

le 8

.3 (

con

tin

ued

) S

tan

dar

d d

evia

tion

fro

m m

ean

pri

me

ind

ust

rial

mar

ket

ren

tals

as

in 2

01

1:3

A

rea

size

leas

ed in

m²

Con

trib

uto

r co

des

2

50

5

00

1

.00

0

2.5

00

5

.00

0

New

Wes

tmea

d/ M

ahog

any

2,

71

4,04

3,

30

3,10

2,

87

CR,

LS,

MC,

PC

Wes

tmea

d 3,

30

4,24

3,

30

3,37

3,

50

CR,

LS,

ML,

PC

Mar

iann

Par

k/ S

outh

mea

d -

2,12

1,

73

2,89

1,

41

LS,

ML,

PC

Max

mea

d 2,

71

3,32

2,

58

2,87

3,

10

CR,

LS,

ML,

PC

Rin

groa

d In

dust

rial

Par

k -

- -

- -

PC

Avo

ca/

Red

Hill

/ N

orth

gate

-

- -

- -

PC

Falc

on P

ark

- 0,

71

0,71

0,

00

0,71

LS

, PC

Riv

er H

orse

Val

ley

Bus

ines

s

5,77

5,

77

6,81

6,

81

5,29

CR,

MI,

PC

Mou

nt E

dgec

ombe

3,

61

4,04

2,

31

2,31

2,

31

CR,

MI,

PC

Um

bogi

ntw

ini/

Sou

thga

te

- -

- -

- PC

Sou

thga

te I

ndus

tria

l Par

k -

- -

- -

PC

Um

geni

Par

k -

- -

- -

PC

Ham

mer

sdal

e 7,

07

7,07

5,

01

5,26

5,

32

CR,

LS,

ML

PC

Cat

o Rid

ge

8,49

8,

49

7,64

6,

29

6,29

CR,

LS,

ML,

PC

Low

er U

mfo

lozi

Empa

ngen

i -

- -

- -

FO

Ric

hard

s Bay

-

- -

- -

FO

Ric

hard

s Bay

CBD

(D

olla

r D

rive

) -

- -

- -

FO

Cap

e P

enin

sula

Vik

ing

Plac

e 3,

50

3,50

4,

50

- -

BR,

DN

, Q

S

Glo

sder

ry

2,16

2,

16

0,47

3,

00

- G

B,

QS,

SW

A

Paar

den

Eila

nd/

Met

ro

0,00

0,

83

2,00

1,

00

1,00

AN

, BR,

DL,

LE,

QS

Mon

tagu

e G

arde

ns

3,16

1,

20

2,05

2,

05

2,50

AN

, BR,

DL,

DN

, LE

, Q

S

Mar

coni

Bea

m

1,00

2,

50

2,50

3,

50

4,50

AN

, BR,

DL,

DN

, LE

Rode's Report 2011:4 Industrial rentals and vacancies 74

Tab

le 8

.3 (

con

tin

ued

) S

tan

dar

d d

evia

tion

fro

m m

ean

pri

me

ind

ust

rial

mar

ket

ren

tals

as

in 2

01

1:3

A

rea

size

leas

ed in

m²

Con

trib

uto

r co

des

2

50

5

00

1

.00

0

2.5

00

5

.00

0

Kill

arne

y G

arde

ns

0,00

1,

79

1,50

2,

50

- AN

, BR,

DL,

LE,

QS

Rac

ing

Park

0,

00

0,94

0,

50

0,50

-

AN

, BR,

DL,

DN

, LE

, Q

S

Atla

ntis

-

- -

- -

BR

Woo

dsto

ck/

Sal

t Riv

er/

Obs

erva

tory

-

- -

- -

QS

Ath

lone

1 &

2

- -

- -

- G

B

Lans

dow

ne N

eris

sa

1,00

1,

00

1,00

0,

00

0,00

G

B,

WS

San

d In

dust

ria

- -

- -

-

Ott

ery

Hill

star

1,

41

1,41

0,

47

2,05

-

GB,

QS,

WS

Ott

ery

Sun

set

1,50

0,

50

0,50

2,

00

- G

B,

WS

Die

p Riv

er

1,50

2,

50

3,50

2,

00

- G

B,

WS

Elfin

dale

1,

50

2,50

4,

50

- -

GB,

WS

Mon

woo

d/ P

hilip

pi E

ast

- -

- -

- G

B

Phili

ppi W

est

(wes

t of

Van

guar

d

- -

- -

-

Gug

ulet

hu I

ndus

tria

l (Bro

wn

Farm

) -

- -

- -

Ret

reat

/ Ste

enbe

rg

1,41

2,

50

3,50

-

- G

B,

QS,

WS

Cap

rico

rn P

ark

4,00

5,

00

7,50

7,

50

- G

B,

QS

Mai

tland

1,

89

3,74

3,

77

- -

DN

, G

Y, Q

S

Nda

beni

1,

00

1,00

-

- -

GY,

QS

Airpo

rt

1,60

0,

49

2,50

2,

05

5,50

AN

, BR,

DL,

DN

, G

Y, L

E, Q

S

Eppi

ng 1

& 2

0,

98

1,09

1,

41

0,47

0,

47

AN

, BR,

DL,

DN

, G

Y, L

E, Q

S

WP

Park

2,

50

0,50

0,

00

0,50

0,

00

AN

, BR,

DL,

GY,

LE

Elsi

es R

iver

(ex

cl,

Cen

tral

Par

k)

0,98

0,

82

1,25

2,

00

2,00

AN

, BR,

DL,

DN

, G

Y, L

E

Paro

w B

eaco

nval

e 1,

00

1,34

0,

98

2,05

1,

70

AN

, D

L, D

N,

GY,

LE,

QS

Tyge

rber

g Bus

ines

s Pa

rk

0,80

0,

82

0,94

1,

89

1,89

AN

, D

L, D

N,

GY,

LE

Rode's Report 2011:4 Industrial rentals and vacancies 75

Tab

le 8

.3 (

con

tin

ued

) S

tan

dar

d d

evia

tion

fro

m m

ean

pri

me

ind

ust

rial

mar

ket

ren

tals

as

in 2

01

1:3

A

rea

size

leas

ed in

m²

Con

trib

uto

r co

des

2

50

5

00

1

.00

0

2.5

00

5

.00

0

Paro

w I

ndus

tria

1,

00

1,34

0,

98

2,05

1,

70

AN

, D

L, D

N,

GY,

LE

Paro

w E

ast

1,30

1,

30

2,00

1,

50

1,00

D

L, D

N,

GY,

LE

Bel

lvill

e O

akda

le

- -

- -

- D

N

Bel

lvill

e Stik

land

/ Kay

mor

1,

30

2,00

0,

00

0,00

0,

00

AN

, D

L, D

N,

LE

Bel

lvill

e Tr

iang

le

0,94

1,

50

0,50

0,

50

0,50

AN

, D

L, D

N,

LE

Bel

lvill

e Sou

th/

Sac

ks C

ircl

e 1,

30

1,70

3,

30

2,50

2,

50

AN

, D

L

Kra

aifo

ntei

n 0,

00

- -

- -

AN

, D

L, L

E

Bra

cken

fell

Indu

stria

0,00

0,

87

1,00

1,

50

- AN

, D

L, D

N,

LE

Ever

ite B

rack

enfe

ll 0,

50

2,50

2,

00

1,00

-

AN

, D

L, D

N,

LE

Kui

ls R

iver

2,

12

1,50

0,

50

0,50

-

AN

, D

L, D

N,

LE

Bla

ckhe

ath

0,00

-

- -

- AN

, D

L, L

E

Sax

enbu

rg I

ndus

tria

l Par

k 1,

00

2,00

1,

50

1,50

-

AN

, D

L, D

N,

LE

Oka

vang

o Pa

rk

0,47

2,

50

1,00

1,

00

- AN

, D

L, D

N,

LE

Firg

rove

-

- -

- -

The

Inte

rcha

nge

(Som

erse

t

- -

- -

-

Str

and

Hal

t -

- -

- -

Bro

adla

nds

- -

- -

-

Geo

rge

Geo

rge

- -

- -

- ZB

Po

rt E

lizab

eth

Dea

l Par

ty

0,00

1,

25

0,25

0,

00

0,00

M

J, P

S

Nor

th E

nd

0,25

2,

25

0,75

1,

00

1,00

M

J, P

S

Kor

sten

/ N

eave

/ Sid

wel

l/ S

yden

ham

4,

00

4,00

2,

50

1,00

1,

00

MJ,

PS

Sou

th E

nd W

alm

er

- -

- -

- M

J

Rode's Report 2011:4 Industrial rentals and vacancies 76

Tab

le 8

.3 (

con

tin

ued

) S

tan

dar

d d

evia

tion

fro

m m

ean

pri

me

ind

ust

rial

mar

ket

ren

tals

as

in 2

01

1:3

A

rea

size

leas

ed in

m²

Con

trib

uto

r co

des

2

50

5

00

1

.00

0

2.5

00

5

.00

0

Uite

nhag

e: V

olks

wag

en a

rea/

Nel

son

Man

dela

Bay

/Log

istic

s Pa

rk

- -

- -

- M

J

Uite

nhag

e: H

ella

/Kru

isrivi

er

- -

- -

- M

J

Str

uand

ale

- 4,

75

3,75

2,

75

4,0

MJ,

PS

Mar

kman

Tow

nshi

p -

1,25

1,

25

0,25

1,

00

MJ,

PS

Pers

ever

ance

-

3,25

1,

75

1,75

3,

50

MJ,

PS

Wal

mer

1,

50

1,50

0,

00

1,50

-

MJ,

PS

Gre

enbu

shes

-

1,00

1,

00

1,00

2,

75

MJ,

PS

Fairvi

ew

2,25

2,

25

0,25

-

- M

J, P

S

Blo

emfo

nte

in

Hilt

on

- 10

,00

- -

- CC,

EK

East

End

25

,00

40,0

0 -

- -

CC,

EK

Str

uand

ale

- -

- -

- CC,

EK

Har

vey

Roa

d -

- -

- -

CC,

EK

Old

Ind

ustr

ial

- 70

,00

- -

- CC,

EK

Ham

ilton

: M

ill S

t -

- -

- -

CC,

EK

Ham

ilton

: G

Lub

be S

t -

- -

- -

CC,

EK

Esto

ir

- -

- -

- CC,

EK

Win

dh

oek

Nor

th

- -

- -

- TE

La

fren

z -

- -

- -

TE

Sou

th

- -

- -

- TE

Pr

ospe

rita

-

- -

- -

TE

Rode's Report 2011:4 Industrial rentals and vacancies 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.

2. The rental rates assume gross leases, market escalation rates and leases of 3 to 5 years.

3. 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.

4. 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.

5. 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 suffi-cient 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.

Rode's Report 2011:4 Industrial rentals and vacancies 78

7. Vacancy scale for industrial townships. The vacancy levels are based on a scale of 0 to 9 as shown below:

0 1 2 3 4 5 6 7 8 9

Nil Low Medium 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.

Rode's Report 2011:4 Industrial rentals and vacancies 79

Table 8.4 Predominant market escalation rates (%)

for industrial leases Average as in quarter 2011:3

5-year leases

Mean SD N Central Witwatersrand 9,5 1,3 6 West Rand 9,9 1,4 4 East Rand 9,2 1,3 7 Far East Rand 9,7 0,5 3 Pretoria 10,0 - 1 Vereeniging - - - Polokwane 8,5 - 2 Nelspruit 8,0 - 1 Klerksdorp - - - Durban 8,75 0,25 4 Pietermaritzburg - - - Ladysmith 9,0 - 1 Newcastle - - - Isithebe - - - Lower Umfolozi 8,0 - 1 Cape Peninsula 8,5 0,5 8 George - - - Port Elizabeth 8,0 - 2 East London - - - Bloemfontein 9,0 1,0 2 Windhoek 10,0 - 1 Notes:

1. These are the averages of the predominant — i.e. most often achieved — market escalation rates as reported by our panel of experts.

Rode's Report 2011:4 Industrial rentals and vacancies 80

Table 8.5 Indicative operating expenses

for industrial buildings As in quarter 2011:3 in rands per m² per month

Stand-alone Park

R/m² SD N R/m² SD N Central Witwatersrand 5,60 1,16 5 8,42 0,93 6 West Rand 5,38 1,52 4 6,83 1,31 3 East Rand 4,84 0,21 5 7,88 0,22 4 Far East Rand 4,00 0 2 5,75 0,75 2 Pretoria 4,50 - 1 8,00 - 1 Vereeniging - - - - - - Polokwane 5,50 - 1 9,00 - 1 Nelspruit 7,00 - 1 10,00 - 1 Klerksdorp - - - - - - Durban 9,88 1,67 4 11,85 1,65 3 Pietermaritzburg - - - - - - Ladysmith - - - - - - Newcastle - - - - - - Isithebe - - - - - - Lower Umfolozi 2,40 - 1 3,50 - 1 Cape Peninsula 5,00 1,15 6 6,88 0,89 6 George 2,50 - 1 2,20 - 1 Port Elizabeth 15,00 - 1 - - - East London - - - - - - Bloemfontein 4,75 4,75 2 0,00 - 1 Windhoek 10,00 - 1 10,00 - 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,

Rode's Report 2011:4 Industrial stand values 81

200

400

600

800

1000

96 98 00 02 04 06 08 10

Port ElizabethCentral WitwatersrandDurbanCape Peninsula

Real industrial stand values (1.000m² units)2005 rands

R/m

² (l

og s

cale

)

Source of data: Rode's Time Series; BER

SmoothedDeflated by BER BCI (2005=100)

200

400

600

800100012001400

96 98 00 02 04 06 08 10

Port ElizabethCentral WitwatersrandDurbanCape Peninsula

Nominal industrial stand values (1.000m² units)

R/m

² (l

og s

cale

)

Source of data: Rode's Time Series

Smoothed

-20

0

20

40

60

80

100

92 94 96 98 00 02 04 06 08 10

Stand valueRental

r² = 0,7

Growth in stand values vs growth in rentals(National)

Gro

wth

(%

; y-

o-y)

Source of data: Rode's Time Series

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.

The tendency for the growth in the indus-trial stand values to follow the growth in rentals is depicted in the graph that fol-lows. Evident from it is the robust relation-ship between the former and the latter, with rentals over time explaining roughly 70% (r² = 0,7) of the change in stand val-ues.

Also illustrated in the graph is how during the industrial-property boom years − be-tween 2006 and 2008 − stand values ac-celerated much faster than industrial rent-als. However, since 2008 — when econom-ic uncertainty and weakness reared their heads — stand values have decelerated faster.

Stand values are evidently more volatile than rentals.

As for trends in the country’s foremost in-dustrial regions, stand values in Durban (+9%) showed the strongest growth in the third quarter of 2011.

This was followed by the Central Witwa-tersrand, 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.

Rode's Report 2011:4 Industrial stand values 82

Over the same period, building-cost infla-tion — as measured by the BER BCI — is expected to have accelerated to a yearly rate of 6% (see Chapter 12 for an expla-nation hereof). This, of course, implies that in real terms industrial rentals in all of the-se 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 econ-omy struggling to find its feet amidst un-certain global economic conditions – not to mention the adverse impact that the cur-rent 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 industrial-land-value tables contain regression pa-rameters in order to allow readers to inter-polate 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 An-nexure 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).

Rode's Report 2011:4 Industrial stand values 83

Tab

le 9

.1

Mea

n m

arke

t va

lues

for

ser

vice

d a

nd

leve

l in

du

stri

al s

tan

ds

in q

uar

ter

20

11

:3

(R/

m²

excl

VA

T)

A

rea

size

in m

² V

acan

cy

gra

de

a b

c

1.0

00

2

.00

0

5.0

00

1

0.0

00

Cen

tral

Wit

wat

ersr

and

Cam

brid

ge P

ark

1.55

0 1.

550

1.55

0 1.

550

0,0

7,34

6 0,

000

- W

ynbe

rg p

rope

r 47

5 45

0 45

0 45

0 0,

5 6,

286

-0,0

02

-0,5

8 Str

ijdom

Par

k 1.

000

1.00

0 1.

000

850

1,7

7,35

8 -0

,017

-0

,91

Kya

San

d 67

5 67

5 67

5 62

5 3,

5 6,

728

-0,0

06

-0,9

1 Cla

yvill

e/ O

lifan

tsfo

ntei

n 50

0 46

7 46

7 41

7 3,

5 6,

685

-0,0

08

-0,9

4 Chl

oork

op

500

500

500

500

3,0

6,21

5 0,

000

- Am

alga

m

700

700

700

700

1,0

6,55

1 0,

000

- Cro

wn

Min

es

1.00

0 1.

000

900

900

2,0

7,30

0 -0

,012

-0

,86

Indu

stria

- -

- -

- -

- -

Boo

ysen

s/ B

ooys

ens

Res

erve

/ O

phirto

n 80

0 75

0 70

0 65

0 1,

0 7,

294

-0,0

15

-0,9

6 Vill

age

Mai

n/ V

illag

e D

eep/

New

Cen

tre

900

800

700

700

0,0

7,56

7 -0

,019

-0

,82

Ben

rose

63

3 63

3 63

3 65

0 1,

0 6,

379

0,00

2 0,

91

Ste

eled

ale/

Ele

ctro

n/ T

ulis

a Pa

rk

725

700

690

630

1,0

6,97

2 -0

,010

-0

,98

Aer

oton

80

0 85

0 60

0 -

2,0

- -0

,058

-0

,91

Dev

land

/ N

ance

field

40

0 40

0 35

0 35

0 -

6,48

9 -0

,006

-0

,86

Cle

vela

nd/

Her

iotd

ale

695

695

657

625

1,0

6,89

1 -0

,008

-0

,99

New

land

s/ M

artin

dale

-

- -

- -

- -

- Kew

/ W

ynbe

rg E

ast

475

475

450

400

1,5

6,69

1 -0

,009

-0

,99

Bra

mle

y Vie

w/

Lom

bard

y W

est

250

250

225

275

1,5

5,35

8 0,

003

0,51

M

arlb

oro

Sou

th (

Ale

xand

ra)

183

183

167

167

2,0

5,56

6 -0

,002

-0

,86

Hal

fway

Hou

se:

hi-t

ech

strip

525

525

475

425

1,3

6,94

4 -0

,012

-0

,99

Hal

fway

Hou

se:

Ric

hard

s D

rive

52

5 52

5 47

5 42

5 1,

5 6,

944

-0,0

12

-0,9

9 Com

mer

cia

450

450

450

350

2,0

6,80

6 -0

,011

-0

,91

Rode's Report 2011:4 Industrial stand values 84

Tab

le 9

.1 (

con

tin

ued

) M

ean

mar

ket

valu

es f

or s

ervi

ced

an

d le

vel i

nd

ust

rial

sta

nd

s in

qu

arte

r 2

01

1:3

(R

/m

² ex

cl V

AT)

A

rea

size

in m

² V

acan

cy

gra

de

a b

c

1.0

00

2

.00

0

5.0

00

1

0.0

00

Kra

mer

ville

/ Ea

stga

te X

12 &

X13

95

0 95

0 95

0 95

0 1,

5 6,

856

0,00

0 -

Cen

turion

1.

200

1.20

0 1.

200

1.20

0 1,

0 7,

090

0,00

0 -

Linb

ro P

ark

1.10

0 1.

075

1.00

0 95

0 2,

0 7,

467

-0,0

17

-0,9

7 W

esco

Par

k/ E

astg

ate

X3,

X11

,X6,

X8/

Mar

lbor

o N

orth

(N

ew)

1.00

0 1.

000

1.00

0 95

0 1,

0 7,

050

-0,0

06

-0,9

1

City

Dee

p 77

5 75

0 73

3 65

0 2,

0 7,

145

-0,0

13

-0,9

8 N

orth

Rid

ing

800

750

700

600

1,5

7,51

5 -0

,021

-0

,99

Sam

rand

Cen

turion

80

0 80

0 70

0 70

0 3,

0 7,

182

-0,0

12

-0,8

6 Bar

bequ

e D

owns

65

0 65

0 60

0 60

0 1,

0 6,

775

-0,0

06

-0,8

6 Sel

by E

xt 1

2/ 1

3/ 1

5/ 1

9/ 2

0/ 2

4/ C

ity W

est

1.00

0 97

5 85

0 77

5 1,

0 7,

732

-0,0

26

-0,9

7 Sel

by E

xt 5

/ 10

/ 14

/ 18

80

0 75

0 70

0 60

0 1,

0 7,

515

-0,0

21

-0,9

9 Sel

by E

xt 1

1 90

0 85

0 80

0 65

0 0,

0 7,

733

-0,0

27

-0,9

9 Sel

by E

xt 3

/ 4/

6

650

600

550

500

1,0

7,24

7 -0

,015

-0

,96

Den

ver

(Old

) 72

5 72

5 69

0 68

0 1,

0 6,

417

-0,0

06

-0,9

5 D

enve

r (N

ew)

725

725

690

680

1,0

6,81

1 -0

,005

-0

,93

Kya

lam

i Bus

ines

s Pa

rk

1.00

0 1.

000

1.00

0 95

0 0,

0 7,

050

-0,0

06

-0,9

1 Reu

ven

900

800

750

650

1,0

7,70

7 -0

,024

-0

,95

Sel

by (

Old

)/ S

elby

X2/

Par

k C

entr

al

800

775

650

625

0,5

7,52

0 -0

,020

-0

,92

Rob

erts

ham

90

0 80

0 75

0 70

0 0,

0 7,

501

-0,0

19

-0,8

9 Fo

rdsb

urg/

May

fair

450

450

450

450

1,0

6,10

9 0,

000

- C

entr

al W

itw

ater

sran

d

72

5

71

8

68

1

64

7

1,4

Wes

t R

and

Le

a G

len

500

500

487

465

1,3

6,44

0 -0

,004

-0

,99

Hon

eyde

w X

19,

20,

21 &

22

1.20

0 1.

200

1.20

0 1.

000

1,0

7,59

5 -0

,022

-0

,91

Sto

rmill

72

5 67

5 62

5 55

0 3,

0 7,

389

-0,0

18

-0,9

8

Rode's Report 2011:4 Industrial stand values 85

Tab

le 9

.1 (

con

tin

ued

) M

ean

mar

ket

valu

es f

or s

ervi

ced

an

d le

vel i

nd

ust

rial

sta

nd

s in

qu

arte

r 2

01

1:3

(R

/m

² ex

cl V

AT)

A

rea

size

in m

² V

acan

cy

gra

de

a b

c

1.0

00

2

.00

0

5.0

00

1

0.0

00

Spa

rtan

Ext

16

(Seb

enza

Lin

k) +

Ext

1,

3, 7

75

0 75

0 65

0 65

0 1,

0 7,

153

-0,0

12

-0,8

6 Is

ando

80

0 80

0 80

0 80

0 0,

5 6,

685

0,00

0 -

Isan

do 3

57

5 57

5 55

0 51

0 1,

7 6,

877

-0,0

06

-0,8

6 Je

t Pa

rk

800

800

750

850

0,5

6,57

8 0,

005

0,51

Alrod

e &

Xs

575

575

550

510

1,7

6,72

9 -0

,008

-0

,99

Alrod

e Sou

th

575

450

450

437

4,0

6,36

4 -0

,003

-0

,82

Alb

erto

n -

- 50

0 50

0 1,

0 -

0,00

0 -

Aer

opor

t/ S

part

an E

xt 2

90

0 90

0 85

0 80

0 0,

0 7,

183

-0,0

12

-0,9

9 Rus

tivia

-

- -

- -

- -

- D

elvi

lle

445

415

392

365

1,0

6,66

6 -0

,008

-0

,95

Roo

deko

p 45

0 40

0 37

5 35

0 1,

0 6,

808

-0,0

09

-0,8

9 W

adev

ille:

Ind

ustr

ial z

onin

g 51

7 53

7 46

7 46

2 1,

2 6,

709

-0,0

08

-0,8

3 Rou

te 2

4/ M

eado

wda

le

1.00

0 1.

000

900

900

1,0

7,30

0 -0

,012

-0

,86

Ger

mis

ton

S/

Indu

stries

E

418

383

393

300

1,5

6,89

0 -0

,012

-0

,93

Drieh

oek/

Ind

ustr

ies

W

650

650

540

475

1,0

7,52

3 -0

,021

-0

,97

Kni

ghts

41

5 39

0 37

5 36

0 1,

0 6,

429

-0,0

05

-0,9

1 Spa

rtan

Pro

per

750

750

700

700

0,0

6,87

7 -0

,006

-0

,86

Foun

ders

Vie

w

900

867

900

900

1,5

6,74

8 0,

002

0,41

Lo

ngm

eado

w

1.05

0 1.

300

1.35

0 1.

350

2,0

6,33

1 0,

024

0,67

Pa

nora

ma/

Kem

pton

Par

k 70

0 70

0 77

5 75

0

6,26

3 0,

006

0,69

Ea

st R

and

7

11

7

31

6

97

6

89

1

,1

Fa

r Ea

st R

and

Bok

sbur

g N

orth

& E

ast

850

800

750

700

1,0

7,31

4 -0

,015

-0

,96

Ben

oni S

outh

70

0 65

0 60

0 60

0 1,

0 7,

017

-0,0

10

-0,8

2

Rode's Report 2011:4 Industrial stand values 86

Tab

le 9

.1 (

con

tin

ued

) M

ean

mar

ket

valu

es f

or s

ervi

ced

an

d le

vel i

nd

ust

rial

sta

nd

s in

qu

arte

r 2

01

1:3

(R

/m

² ex

cl V

AT)

A

rea

size

in m

² V

acan

cy

gra

de

a b

c

1.0

00

2

.00

0

5.0

00

1

0.0

00

New

Era

/ Vul

cani

a 35

0 30

0 27

5 25

0 4,

0 6,

796

-0,0

09

-0,8

9 N

uffie

ld

350

300

275

250

4,0

6,79

6 -0

,009

-0

,89

Fulc

rum

35

0 30

0 27

5 25

0 4,

0 6,

796

-0,0

09

-0,8

9 Ape

x 65

0 65

0 60

0 55

0 5,

0 7,

016

-0,0

12

-0,9

9 La

bore

Bra

kpan

35

0 30

0 27

5 25

0 3,

0 6,

796

-0,0

09

-0,8

9 M

oreh

ill E

xt 8

Ben

oni

850

800

750

700

1,0

7,31

4 -0

,015

-0

,96

Far

East

Ran

d

55

6

51

2

47

5

44

4

2,9

Pre

tori

a

M

itche

ll St

800

800

800

800

0,0

6,68

5 0,

000

- Pr

etor

ia I

ndus

tria

l Tow

nshi

p 80

0 80

0 80

0 80

0 0,

0 6,

685

0,00

0 -

Koe

does

poor

t 80

0 80

0 80

0 80

0 1,

0 6,

685

0,00

0 -

Wal

tloo/

Des

patc

h 60

0 62

5 60

0 60

0 3,

0 6,

456

-0,0

01

-0,4

1 Silv

erto

n/ S

ilver

tond

ale

450

550

450

450

3,0

6,40

1 -0

,005

-0

,41

Sam

cor

Park

60

0 60

0 60

0 60

0 1,

0 6,

397

0,00

0 -

Sun

derlan

d Rid

ge

550

550

500

475

3,0

6,80

7 -0

,009

-0

,96

Her

man

stad

-

450

- -

- -

- -

Kirkn

ey

400

425

400

400

- 6,

080

-0,0

01

-0,4

1 H

enno

pspa

rk X

15 &

X7

1.00

0 1.

000

1.00

0 80

0 1,

0 7,

526

-0,0

22

-0,9

1 G

atew

ay

1.00

0 75

0 1.

000

800

1,0

7,52

6 -0

,022

-0

,91

Lytt

leto

n M

anor

X4/

X6

1.00

0 1.

000

1.00

0 80

0.00

1,

0 7,

526

-0,0

22

-0,9

1 Pr

etor

ia N

orth

-

- -

- -

- -

- Silv

erto

ndal

e X1

450

425

450

450

2,0

6,02

6 0,

001

0,41

Brits

-

- -

- -

- -

- Kle

rkso

ord

500

500

500

500

3,0

6,21

5 0,

000

-

Rode's Report 2011:4 Industrial stand values 87

Tab

le 9

.1 (

con

tin

ued

) M

ean

mar

ket

valu

es f

or s

ervi

ced

an

d le

vel i

nd

ust

rial

sta

nd

s in

qu

arte

r 2

01

1:3

(R

/m

² ex

cl V

AT)

A

rea

size

in m

² V

acan

cy

gra

de

a b

c

1.0

00

2

.00

0

5.0

00

1

0.0

00

Ros

slyn

50

0 47

5 50

0 50

0 3,

0 6,

140

0,00

1 0,

41

Pre

tori

a 6

75

6

19

6

71

6

27

1

,7

P

olok

wan

e

Le

bow

akgo

mo

- -

- -

- -

- -

Sup

erbi

a -

- -

- -

- -

- In

dust

ria

- -

- -

- -

- -

Ladi

ne

- -

- -

- -

- -

Futu

ra

- -

- -

- -

- -

Labo

ria

- -

- -

- -

- -

Mag

na V

ia

- -

- -

- -

- -

Ses

hego

-

- -

- -

- -

- P

olok

wan

e -

- -

- -

N

elsp

ruit

N

elsp

ruit

East

1

.000

1

.000

8

00

500

1,

0

9,04

1 -0

,058

-0

,99

Nel

spru

it W

est

1.0

00

1.0

00

800

5

00

1,0

9,

041

-0,0

58

-0,9

9 Roc

ky's

Drift

6

00

580

5

50

500

4,

0

6,93

6 -0

,011

-1

,00

Riv

ersi

de P

ark

1.0

00

1.0

00

950

8

50

5,0

7,

407

-0,0

17

-0,9

9 N

elsp

ruit

9

00

8

95

7

75

5

87

2

,8

D

urb

an

Spr

ingf

ield

Par

k 1.

550

1.55

0 1.

450

1.45

0 1,

5 7,

594

-0,0

35

-0,9

2 M

ayvi

lle

- -

- -

- -

- -

Phoe

nix

1.20

0 1.

200

975

975

2,5

7,86

3 -0

,109

-0

,92

Nor

th C

oast

Rd

/ Briar

dene

1.

375

1.37

5 1.

500

1.50

0 2,

0 -

- -

Rode's Report 2011:4 Industrial stand values 88

Tab

le 9

.1 (

con

tin

ued

) M

ean

mar

ket

valu

es f

or s

ervi

ced

an

d le

vel i

nd

ust

rial

sta

nd

s in

qu

arte

r 2

01

1:3

(R

/m

² ex

cl V

AT)

A

rea

size

in m

² V

acan

cy

gra

de

a b

c

1.0

00

2

.00

0

5.0

00

1

0.0

00

Briar

dene

Ind

ustr

ial P

ark

1.60

0 1.

600

1.60

0 1.

600

3,0

- -

- U

mge

ni R

d/ S

tam

ford

Hill

-

- -

- -

- -

- U

mbi

lo/

Syd

ney

Rd/

Gal

e St

- -

- -

- -

- -

Jaco

bs

- -

- -

- -

- -

Mob

eni

- -

- -

- -

- -

Pros

pect

on

- -

- 1.

250

1,0

- -

- Pi

neto

wn

Cen

tral

-

- -

- -

- -

- N

ew G

erm

any

1.70

0 1.

333

1.26

7 1.

200

2,0

8,33

1 -0

,138

-0

,91

Kw

a D

ebek

a In

dust

rial

Par

k 1.

167

1.16

7 1.

000

967

1,5

7,73

0 -0

,094

-0

,95

Isip

ingo

-

- -

- -

- -

- Ros

sbur

gh/

Sou

th C

oast

Rd

- 60

0 -

- 1,

0 -

- -

Edw

in S

wal

es D

rive

-

- -

- -

- -

- G

len

Ani

l -

- -

- -

- -

- Brick

field

Rd

- -

- -

- -

- -

Ver

ulam

-

- 80

0 -

1,0

- -

- Can

elan

ds

- -

- -

1,0

- -

- To

ngaa

t -

- -

450

1,0

- -

- N

ew W

estm

ead/

Mah

ogan

y Rid

ge

- -

- -

- -

- -

Wes

tmea

d 1.

433

1.40

0 1.

317

1.26

7 1,

0 7,

657

-0,0

56

-0,9

9

Mar

iann

Par

k/ S

outh

mea

d 1.

300

1.33

3 1.

250

1.20

0 1,

0 7,

466

-0,0

40

-0,8

7

Max

mea

d 1.

033

1000

85

0 81

7 3,

5 7,

731

-0,1

12

-0,9

7

Rin

groa

d In

dust

rial

Par

k 1.

300

1.36

6 1.

333

1.26

7 3,

5 7,

291

-0,0

13

-0,4

2

Avo

ca/

Red

Hill

/ N

orth

gate

-

- -

- -

- -

- Fa

lcon

Par

k -

1.00

0 -

- -

- -

-

Rode's Report 2011:4 Industrial stand values 89

Tab

le 9

.1 (

con

tin

ued

) M

ean

mar

ket

valu

es f

or s

ervi

ced

an

d le

vel i

nd

ust

rial

sta

nd

s in

qu

arte

r 2

01

1:3

(R

/m

² ex

cl V

AT)

A

rea

size

in m

² V

acan

cy

gra

de

a b

c

1.0

00

2

.00

0

5.0

00

1

0.0

00

Riv

er H

orse

Val

ley

Bus

ines

s Es

tate

-

1.00

0 1.

000

- 1,

0 -

- -

Mou

nt E

dgec

ombe

16

00

1600

18

00

1700

2,

0 7,

098

0,04

0 0,

72

Um

bogi

ntw

ini/

Sou

thga

te

- -

- -

- -

- -

Sou

thga

te I

ndus

tria

l Par

k -

1.00

0 1.

000

900

1,0

- -

- U

mge

ni P

ark

- -

- -

- -

- -

Ham

mer

sdal

e 45

0 38

3 36

7 35

0 5,

0 6,

768

-0,1

01

-0,9

3 Cat

o Rid

ge

500

500

483

483

4,5

6,34

1 -0

,018

-0

,92

Du

rban

1

.23

5

1.1

43

1

.09

0

1.0

32

2

,2

C

ape

Pen

insu

la

Vik

ing

Plac

e -

- -

- -

7,09

0 0,

000

- G

losd

erry

1.

500

1.50

0 1.

500

1.50

0 0,

0 7,

313

0,00

0 -

Paar

den

Eila

nd/

Met

ro

2.25

0 2.

000

1.75

0 1.

800

1,0

8,31

6 -0

,042

-0

,91

Mon

tagu

e G

arde

ns

1.75

0 1.

500

1.25

0 1.

500

1,0

8,08

2 -0

,026

-0

,49

Mar

coni

Bea

m

2.00

0 2.

000

1.80

0 1.

800

1,0

7,99

3 -0

,024

-0

,86

Kill

arne

y G

arde

ns

1.15

0 1.

050

1.00

0 1.

000

1,5

7,16

6 -0

,003

-0

,38

Rac

ing

Park

66

7 50

0 50

0 50

0 4,

5 7,

059

-0,0

12

-0,9

4 Atla

ntis

-

- -

- -

- -

- W

oods

tock

/ Sal

t Riv

er/

Obs

erva

tory

-

- -

- -

- -

- Ath

lone

1 &

2

- -

- -

- -

- -

Lans

dow

ne N

eris

sa

- -

- -

- -

- -

San

d In

dust

ria

- -

- -

- -

- -

Ott

ery

Hill

star

1.

000

1.00

0 1.

000

1.00

0 1,

0 6,

908

0,00

0 -

Ott

ery

Sun

set

1.00

0 1.

000

1.00

0 1.

000

1,0

6,90

8 0,

000

- D

iep

Riv

er

- -

- -

- -

- -

Elfin

dale

-

- -

- -

- -

-

Rode's Report 2011:4 Industrial stand values 90

Tab

le 9

.1 (

con

tin

ued

) M

ean

mar

ket

valu

es f

or s

ervi

ced

an

d le

vel i

nd

ust

rial

sta

nd

s in

qu

arte

r 2

01

1:3

(R

/m

² ex

cl V

AT)

A

rea

size

in m

² V

acan

cy

gra

de

a b

c

1.0

00

2

.00

0

5.0

00

1

0.0

00

Mon

woo

d/ P

hilip

pi E

ast

500

500

400

400

9,0

7,04

6 -0

,012

-0

,86

Phili

ppi W

est

(wes

t of

Van

guar

d D

r)

- -

- -

- -

- -

Gug

ulet

hu I

ndus

tria

l (Bro

wn

Farm

s)

- -

- -

- 7,

674

-0,0

24

-0,9

4 Ret

reat

/ Ste

enbe

rg

- -

- -

- 8,

625

-0,0

53

-0,9

3 Cap

rico

rn P

ark

850

850

700

650

6,0

8,52

5 -0

,050

-0

,91

Mai

tland

1.

400

1.25

0 1.

000

900

2,0

7,42

6 -0

,014

-0

,98

Nda

beni

1.

500

1.30

0 1.

100

925

1,5

7,58

4 -0

,021

-0

,99

Airpo

rt

1.30

0 1.

275

1.21

7 1.

100

3,7

8,14

0 -0

,037

-0

,92

Eppi

ng 1

& 2

1.

300

1.20

0 1.

100

925

1,5

7,24

9 -0

,014

-0

,94

WP

Park

1.

450

1.42

5 1.

000

900

1,0

7,90

6 -0

,029

-0

,92

Elsi

es R

iver

(ex

cl.

Cen

tral

Par

k)

825

800

725

700

1,5

7,90

5 -0

,028

-0

,85

Paro

w B

eaco

nval

e 1.

200

1.06

7 97

5 80

0 2,

3 8,

054

-0,0

36

-1,0

0 Ty

gerb

erg

Bus

ines

s Pa

rk

1.26

7 1.

167

9.83

90

0 2,

3 7,

984

-0,0

31

-0,9

1 Pa

row

Ind

ustr

ia

1.33

3 1.

067

975

800

2,3

- -

- Pa

row

Eas

t 1.

200

1.10

0 95

0 90

0 1,

0 7,

469

-0,0

17

-0,7

3 Bel

lvill

e O

akda

le

- -

- -

- 7,

721

-0,0

24

-0,9

4 Bel

lvill

e Stik

land

/ Kay

mor

1.

200

1.10

0 1.

200

1.00

0 3,

0 8,

223

-0,0

37

-0,9

6 Bel

lvill

e Tr

iang

le

925

875

750

700

- 6,

977

-0,0

11

-0,9

8 Bel

lvill

e Sou

th/

Sac

ks C

ircl

e 1.

000

900

750

650

- -

- -

Kra

aifo

ntei

n 65

0 65

0 32

5 55

0 2,

0 -

- -

Bra

cken

fell

Indu

stria

1.00

0 92

5 87

5 70

0 2,

0 7,

910

-0,0

31

-0,9

9 Ev

erite

Bra

cken

fell

1.05

0 1.

000

950

800

1,0

7,73

5 -0

,027

-0

,99

Kui

ls R

iver

75

0 70

0 65

0 50

0 1,

0 7,

780

-0,0

27

-0,9

9 Bla

ckhe

ath

625

575

500

500

3,0

7,14

8 -0

,013

-0

,84

Sax

enbu

rg I

ndus

tria

l Par

k 1.

100

1.00

0 90

0 70

0 3,

5 8,

117

-0,0

36

-0,9

8

Rode's Report 2011:4 Industrial stand values 91

Tab

le 9

.1 (

con

tin

ued

) M

ean

mar

ket

valu

es f

or s

ervi

ced

an

d le

vel i

nd

ust

rial

sta

nd

s in

qu

arte

r 2

01

1:3

(R

/m

² ex

cl V

AT)

A

rea

size

in m

² V

acan

cy

gra

de

a b

c

1.0

00

2

.00

0

5.0

00

1

0.0

00

Oka

vang

o Pa

rk

1.00

0 1.

000

900

800

1,0

7,62

7 -0

,023

-0

,99

Firg

rove

-

- -

- -

- -

- Th

e In

terc

hang

e (S

omer

set

Wes

t)

- -

- -

- -

- -

Str

and

Hal

t -

- -

- -

- -

- Bro

adla

nds

- -

- -

- -

- -

Cap

e P

enin

sula

1

.14

4

1.0

83

9

76

9

07

2

,4

G

eorg

e

Geo

rge

- -

- -

- -

- -

Geo

rge

- -

- -

-

Po

rt E

lizab

eth

D

eal P

arty

82

5 77

5 67

5 67

5 1,

0 7,

372

-0,0

16

-0,8

5 N

orth

End

95

0 95

0 82

5 82

5 1,

0 7,

382

-0,0

15

-0,8

6

Kor

sten

/ N

eave

/ Sid

wel

l/ S

yden

ham

85

0 80

0 77

5 77

5 1,

0 7,

001

-0,0

07

-0,7

6

Sou

th E

nd W

alm

er

1.00

0 92

5 87

5 87

5 0,

5 7,

292

-0,0

11

-0,7

9

Uite

nhag

e: V

olks

wag

en a

rea/

Nel

son

Man

dela

Bay

Lo

gist

ics

Park

40

0 40

0 30

0 30

0 -

7,06

3 -0

,012

-0

,86

Uite

nhag

e:H

ella

/ Kru

isrivi

er

150

150

100

50

- 8,

442

-0,0

12

-0,9

9

Str

uand

ale

500

500

500

400

- 6,

833

-0,0

11

-0,9

1 M

arkm

an T

owns

hip

162

162

162

150

6,0

5,31

3 -0

,001

-0

,91

Pers

ever

ance

52

5 52

5 51

5 49

0 2,

5 6,

473

-0,0

04

-0,9

9 W

alm

er

1.10

0 1.

100

1.02

5 97

5 1,

0 7,

405

-0,0

15

-0,9

8 G

reen

bush

es

375

375

262

250

4,0

7,39

0 -0

,015

-0

,89

Fairvi

ew

850

850

800

800

1,0

6,97

1 -0

,006

-0

,86

Po

rt E

lizab

eth

6

57

6

65

6

06

5

90

2

,0

Rode's Report 2011:4 Industrial stand values 92

Tab

le 9

.1 (

con

tin

ued

) M

ean

mar

ket

valu

es f

or s

ervi

ced

an

d le

vel i

nd

ust

rial

sta

nd

s in

qu

arte

r 2

01

1:3

(R

/m

² ex

cl V

AT)

A

rea

size

in

m²

Vac

ancy

g

rad

e a

b

c 1

.00

0

2.0

00

5

.00

0

10

.00

0

Blo

emfo

nte

in

Hilt

on

300

290

250

150

1,0

7,74

9 -0

,017

-0

,99

East

End

37

5 36

0 28

0 20

0 2,

0 7,

888

-0,0

20

-0,9

9 H

arve

y Roa

d

- -

- -

- -

- -

Old

Ind

ustr

ial

250

275

180

150

1,0

7,38

9 -0

,013

-0

,91

Ham

ilton

: M

ill S

t 20

0 18

0 18

0 80

1,

0 7,

785

-0,0

13

-0,9

4 H

amilt

on:

G L

ubbe

St

180

160

130

60

2,0

8,37

7 -0

,013

-1

,00

Esto

ir

450

420

400

300

2,0

7,24

5 -0

,016

-0

,98

Blo

emfo

nte

in

30

4

29

0

23

7

15

7

1,5

Win

dh

oek

N

orth

1.

700

1.70

0 1.

700

1.50

0 3,

0 7,

785

-0,0

22

-0,9

1 La

fren

z 1.

250

1.25

0 1.

250

1.00

0 4,

0 7,

749

-0,0

28

-0,9

1 Sou

th

3.00

0 3.

000

3.00

0 2.

700

1,0

8,29

8 -0

,034

-0

,91

Pros

perita

1.

700

1.70

0 1.

700

1.50

0 1,

0 7,

785

-0,0

22

-0,9

1 W

ind

ho

ek

1.9

12

1

.91

2

1.9

12

1

.67

5

2,2

Rode's Report 2011:4 Industrial stand values 93

Tab

le 9

.2

Sta

nd

ard

dev

iati

on f

rom

mea

n m

arke

t va

lues

for

ser

vice

d a

nd

leve

l in

du

stri

al s

tan

ds

in q

uar

ter

20

11

:3

(R/

m²

excl

VA

T)

A

rea

size

in m

² C

on

trib

uto

rs

1.0

00

2

.00

0

5.0

00

1

0.0

00

Cen

tral

Wit

wat

ersr

and

Cam

brid

ge P

ark

50,0

0 50

,00

50,0

0 50

,00

AP,

RA

Wyn

berg

pro

per

25,0

0 -

- -

AP,

RA

Str

ijdom

Par

k 10

0,00

10

0,00

10

0,00

50

,00

AP,

GB,

RA

Kya

San

d 25

,00

25,0

0 25

,00

25,0

0 AP,

RA

Cla

yvill

e/ O

lifan

tsfo

ntei

n 50

,00

62,3

6 62

,36

102,

74

AP,

BM

, M

R

Chl

oork

op

- -

- -

AP

Am

alga

m

- -

- -

AP

Cro

wn

Min

es

- -

- -

AP

Indu

stria

- -

- -

AP

Boo

ysen

s/ B

ooys

ens

Res

erve

/ O

phirto

n -

- -

- AP

Vill

age

Mai

n/ V

illag

e D

eep/

New

Cen

tre

- -

- -

AP

Ben

rose

47

,14

47,1

4 47

,14

50,0

0 AP,

BL,

RO

Ste

eled

ale/

Ele

ctro

n/ T

ulis

a Pa

rk

125,

00

100,

00

110,

00

70,0

0 AP,

RO

Aer

oton

-

- -

- AP

Dev

land

/ N

ance

field

-

- -

- AP

Cle

vela

nd/

Her

iotd

ale

55,0

0 55

,00

42,5

0 25

,00

AP,

RO

New

land

s/ M

artin

dale

-

- -

-

Kew

/ W

ynbe

rg E

ast

25,0

0 25

,00

50,0

0 -

AP,

GB

Bra

mle

y Vie

w/

Lom

bard

y W

est

50,0

0 50

,00

25,0

0 25

,00

AP,

AP

Mar

lbor

o Sou

th (

Ale

xand

ra)

23,5

7 23

,57

47,1

4 47

,14

AP,

GB,

RA

Hal

fway

Hou

se:

hi-t

echs

trip

75

,00

75,0

0 25

,00

75,0

0 AP,

AW

, M

R

Rode's Report 2011:4 Industrial stand values 94

Tab

le 9

.2 (

con

tin

ued

) S

tan

dar

d d

evia

tion

fro

m m

ean

mar

ket

valu

es f

or s

ervi

ced

an

d le

vel i

nd

ust

rial

sta

nd

s in

qu

arte

r 2

01

1:3

(R

/m

² ex

cl V

AT)

A

rea

size

in m

² C

on

trib

uto

rs

1.0

00

2

.00

0

5.0

00

1

0.0

00

Hal

fway

Hou

se:

Ric

hard

s D

rive

75

,00

75,0

0 25

,00

75,0

0 AP,

AW

Com

mer

cia

- -

- -

AP

Kra

mer

ville

/ Ea

stga

te X

12 &

X13

50

,00

50,0

0 50

,00

50,0

0 AP,

GB

Cen

turion

-

- -

- AP

Linb

ro P

ark

81,6

5 82

,92

70,7

1 11

1,80

AP,

BM

, G

B,

MR,

RA

Wes

co P

ark/

Eas

tgat

e X3,

X11

, X6,

X8/

Mar

lbor

o N

orth

(N

ew)

0,00

0,

00

0,00

50

,00

AP,

GB,

RA

City

Dee

p 25

,00

40,8

2 23

,57

108,

01

AP,

MR,

RO

Nor

th R

idin

g -

50,0

0 0,

00

100,

00

AP,

MR

Sam

rand

Cen

turion

-

- -

- AP

Bar

bequ

e D

owns

-

- -

- AP

Sel

by E

xt 1

2/ 1

3/ 1

5/ 1

9/ 2

0/ 2

4/ C

ity W

est

200,

00

225,

00

150,

00

125,

00

AP,

RA

Sel

by E

xt 5

/ 10

/ 14

/ 18

-

- -

- AP

Sel

by E

xt 1

1 -

- -

- AP

Sel

by E

xt 3

/ 4/

6

- -

- -

AP

Den

ver

(Old

) 25

,00

25,0

0 40

,00

25,0

0 AP,

RO

Den

ver

(New

) 25

,00

25,0

0 10

,00

20,0

0 AP,

RO

Kya

lam

i Bus

ines

s Pa

rk

- -

- -

AP

Reu

ven

- -

- -

AP

Sel

by (

Old

)/ S

elby

X2/

Par

k Cen

tral

20

0,00

22

5,00

15

0,00

12

5,00

AP,

RA

Rob

erts

ham

-

- -

- AP

Ford

sbur

g/ M

ayfa

ir

- -

- -

AP

Rode's Report 2011:4 Industrial stand values 95

Tab

le 9

.2(c

onti

nu

ed)

Sta

nd

ard

dev

iati

on f

rom

mea

n m

arke

t va

lues

for

ser

vice

d a

nd

leve

l in

du

stri

al s

tan

ds

in q

uar

ter

20

11

:3

(R/

m²

excl

VA

T)

A

rea

size

in m

² C

on

trib

uto

rs

1.0

00

2

.00

0

5.0

00

1

0.0

00

Wes

t R

and

Lea

Gle

n 10

0,00

10

0,00

87

,50

85,0

0 AP,

RO

Hon

eyde

w X

19,

20,

21

& 2

2 -

- -

- AP

Sto

rmill

25

,00

75,0

0 12

5,00

15

0,00

AP,

RO

Cha

mdo

r -

- -

- AP

Fact

oria

-

- -

- AP

Ran

dfon

tein

: D

elpo

rton

/ Aur

eus

- -

- -

AP

Bol

toni

a -

- -

- AP

Roo

depo

ort:

Tec

hnik

on/

Man

ufac

ta

- -

- -

AP

Indu

stria

Nor

th

- -

- -

AP

Rob

ertv

ille

25,0

0 25

,00

75,0

0 75

,00

AP,

RO

Lase

rpar

k -

- -

- AP

East

Ran

d

Elan

dsfo

ntei

n 15

0,00

15

0,00

15

0,00

15

,00

AP,

BM

Tunn

ey/

Gre

enhi

lls

150,

00

25,0

0 0,

00

50,0

0 AP,

MR,

RO

Hen

ville

-

- -

- AP

Mea

dow

broo

k/ W

ilbar

t 75

,00

75,0

0 89

,27

70,7

1 AP,

BM

, M

R,

RO

Sun

nyro

ck

- -

- -

AP

Rus

tivia

/ Act

ivia

Par

k -

- -

- AP

East

leig

h 0,

00

0,00

25

,00

25,0

0 AP,

GB

Seb

enza

Ext

14

25,0

0 25

,00

25,0

0 25

,00

AP,

MR,

RO

Spa

rtan

Ext

16

(Seb

enza

Lin

k) +

Ext

1,

3, 7

-

- -

- AP,

MR,

RO

Isan

do

- -

- -

AP,

RO

Rode's Report 2011:4 Industrial stand values 96

Tab

le 9

.2 (

con

tin

ued

) S

tan

dar

d d

evia

tion

fro

m m

ean

mar

ket

valu

es f

or s

ervi

ced

an

d le

vel i

nd

ust

rial

sta

nd

s in

qu

arte

r 2

01

1:3

(R

/m

² ex

cl V

AT)

A

rea

size

in m

² C

on

trib

uto

rs

1.0

00

2

.00

0

5.0

00

1

0.0

00

Isan

do 3

-

- -

- AP

Jet

Park

-

- -

- AP,

MR,

RO

Alrod

e &

Xs

75,0

0 75

,00

70,7

1 53

,54

AP,

BM

, RO

Alrod

e Sou

th

25,0

0 50

,00

50,0

0 62

,50

AP,

BM

Alb

erto

n -

- -

- AP

Aer

opor

t/ S

part

an E

xt 2

-

- -

- AP

Rus

tivia

-

- -

- AP

Del

ville

5,

00

15,0

0 17

,50

15,0

0 AP,

MR,

RO

Roo

deko

p -

- -

- AP,

RO

Wad

evill

e: I

ndus

tria

l zon

ing

84,9

8 12

,50

47,1

4 12

,50

AP,

MR,

RO

Rou

te 2

4/ M

eado

wda

le

- -

81,6

5 -

AP,

RO

Ger

mis

ton

S/

Indu

stries

E

51,6

9 62

,36

22,4

8 50

,00

AP,

MR,

RO

Drieh

oek/

Ind

ustr

ies

W

50,0

0 50

,00

40,0

0 75

,00

AP,

RO

Kni

ghts

35

,00

10,0

0 25

,00

40,0

0 AP,

RO

Spa

rtan

Pro

per

- -

- -

AP

Foun

ders

Vie

w

100,

00

94,2

8 10

0,00

10

0,00

AP,

GB,

MR

Long

mea

dow

15

0,00

14

1,42

15

0,00

15

0,00

AP,

GB,

MR,

RO

Far

East

Ran

d

Bok

sbur

g N

orth

& E

ast

- -

- -

AP

Ben

oni S

outh

-

- -

- AP

New

Era

/ Vul

cani

a -

- -

- AP

Nuf

field

-

- -

- AP

Rode's Report 2011:4 Industrial stand values 97

Tab

le 9

.2 (

con

tin

ued

) S

tan

dar

d d

evia

tion

fro

m m

ean

mar

ket

valu

es f

or s

ervi

ced

an

d le

vel i

nd

ust

rial

sta

nd

s in

qu

arte

r 2

01

1:3

(R

/m

² ex

cl V

AT)

A

rea

size

in m

² C

on

trib

uto

rs

1.0

00

2

.00

0

5.0

00

1

0.0

00

Fulc

rum

-

- -

- AP

Ape

x -

- -

- AP

Labo

re B

rakp

an

- -

- -

AP

Mor

ehill

Ext

8 B

enon

i -

- -

- AP

Pre

tori

a

Mitc

hell

St

- -

- -

AP

Pret

oria

Ind

ustr

ial T

owns

hip

- -

- -

AP

Koe

does

poor

t -

- -

- AP

Wal

tloo/

Des

patc

h -

25,0

0 -

- AI,

AP

Silv

erto

n/ S

ilver

tond

ale

- 10

0,00

-

- AI,

AP

Sam

cor

Park

-

- -

- AI

Sun

derlan

d Rid

ge

- -

- -

AP

Her

man

stad

-

- -

- AI

Kirkn

ey

- 25

,00

- -

AI,

AP

Hen

nops

park

X15

& X

7 -

- -

- AP

Gat

eway

-

- -

- AI,

AP

Lytt

leto

n M

anor

X4/

X6

- -

- -

AP

Pret

oria

Nor

th

- -

- -

Silv

erto

ndal

e X1

- 25

,00

- -

AI,

AP

Brits

-

- -

-

Kle

rkso

ord

- -

- -

Ros

slyn

-

25,0

0 -

- AI,

AP

Rode's Report 2011:4 Industrial stand values 98

Tab

le 9

.2 (

con

tin

ued

) S

tan

dar

d d

evia

tio

n f

rom

mea

n m

arke

t va

lues

for

ser

vice

d a

nd

leve

l in

du

stri

al s

tan

ds

in q

uar

ter

20

11

:3

(R/

m²

excl

VA

T)

A

rea

size

in m

² C

on

trib

uto

rs

1.0

00

2

.00

0

5.0

00

1

0.0

00

Pol

okw

ane

Lebo

wak

gom

o -

- -

- ES

Sup

erbi

a -

- -

- ES

Indu

stria

- -

- -

ES

Ladi

ne

- -

- -

ES

Futu

ra

- -

- -

ES

Labo

ria

- -

- -

ES

Mag

na V

ia

- -

- -

ES

Ses

hego

-

- -

- ES

Nel

spru

it

Nel

spru

it Ea

st

- -

- -

HH

Nel

spru

it W

est

- -

- -

HH

Roc

ky's

Drift

-

- -

- H

H

Riv

ersi

de P

ark

- -

- -

HH

Du

rban

Spr

ingf

ield

Par

k -

- 17

5,00

-

CR,

ML,

PC

May

ville

-

- -

- CR,

PC

Phoe

nix

- -

- -

CR,

MI,

PC

Nor

th C

oast

Rd/

Briar

dene

-

- -

- CR,

PC

Briar

dene

Ind

ustr

ial P

ark

- -

- -

CR,

ML,

PC

Um

geni

Rd/

Sta

mfo

rd H

ill

- -

- -

CR,

PC

Um

bilo

/ Syd

ney

Rd/

Gal

e St

- -

- -

CR,

PC

Rode's Report 2011:4 Industrial stand values 99

Tab

le 9

.2 (

con

tin

ued

) S

tan

dar

d d

evia

tion

fro

m m

ean

mar

ket

valu

es f

or s

ervi

ced

an

d le

vel i

nd

ust

rial

sta

nd

s in

qu

arte

r 2

01

1:3

(R

/m

² ex

cl V

AT)

A

rea

size

in m

²

Con

trib

uto

rs

1.0

00

2

.00

0

5.0

00

1

0.0

00

Jaco

bs

- -

- -

CR,

ML,

PC

Mob

eni

- -

- -

CR,

ML,

PC

Pros

pect

on

- -

- -

CR,

ML,

PC

Pine

tow

n C

entr

al

250,

00

235,

70

205,

48

200,

00

CR,

LS,

ML,

PC

New

Ger

man

y 12

4,72

12

4,72

16

3,30

12

4,72

CR,

LS,

ML,

PC

Isip

ingo

-

- -

- PC

Ros

sbur

gh/

Sou

th C

oast

Rd

- -

- -

CR,

ML

Edw

in S

wal

es D

rive

-

- -

- CR,

MI

Gle

n Ani

l -

- -

- CR,

PC

Brick

field

Rd

- -

- -

CR,

PC

Ver

ulam

-

- -

- CR

Can

elan

ds

- -

- -

PC

Tong

aat

- -

- -

CR,

ML

New

Wes

tmea

d/ M

ahog

any

Rid

ge

169,

97

141,

42

131,

23

94,2

8 CR,

LS,

ML,

PC

Wes

tmea

d 30

0,00

23

5,70

25

0,00

20

0,00

CR,

LS,

ML,

PC

Mar

iann

Par

k/ S

outh

mea

d 94

,28

81,6

5 70

,71

62,3

6 LS

, M

L, P

C

Max

mea

d 30

0,00

26

2,47

24

9,44

20

5,48

CR,

LC,

ML,

PC

Rin

g ro

ad I

ndus

tria

l Par

k -

- -

- PC

Avo

ca/

Red

Hill

/ N

orth

gate

-

- -

- PC

Falc

on P

ark

- -

- -

LS,

PC

Riv

er H

orse

Val

ley

Bus

ines

s Es

tate

-

- 20

0,00

10

0,00

CR,

PC,

MI

Mou

nt E

dgec

ombe

-

- -

- CR,

PC,

MI

Rode's Report 2011:4 Industrial stand values 100

Tab

le 9

.2 (

con

tin

ued

) S

tan

dar

d d

evia

tion

fro

m m

ean

mar

ket

valu

es f

or s

ervi

ced

an

d le

vel i

nd

ust

rial

sta

nd

s in

qu

arte

r 2

01

1:3

(R

/m²

excl

VA

T)

A

rea

size

in m

² C

on

trib

uto

rs

1.0

00

2

.00

0

5.0

00

1

0.0

00

Um

bogi

ntw

ini/

Sou

thga

te

- -

- -

PC

Sou

thga

te I

ndus

tria

l Par

k -

- -

-

Um

geni

Par

k -

- -

- PC

Ham

mer

sdal

e 50

,00

102,

74

84,9

8 70

,71

CR,

LS,

ML,

PC

Cat

o Rid

ge

100,

00

100,

00

62,3

6 62

,36

CR,

LS,

ML,

PC

Cap

e P

enin

sula

Vik

ing

Plac

e -

- -

- BR

Glo

sder

ry

- -

- -

GB

Paar

den

Eila

nd/

Met

ro

250,

00

0,00

25

0,00

-

AN

, BR,

DN

Mon

tagu

e G

arde

ns

250,

00

0,00

25

0,00

-

AN

, BR,

DN

Mar

coni

Bea

m

- -

- -

AN

, BR

Kill

arne

y G

arde

ns

50,0

0 50

,00

- -

AN

, BR,

DN

Rac

ing

Park

11

7,85

-

- -

AN

, BR,

DL,

DN

, LE

Atla

ntis

-

- -

-

Woo

dsto

ck/

Sal

tRiv

er/

Obs

erva

tory

-

- -

-

Ath

lone

1 &

2

- -

- -

Lans

dow

ne N

eris

sa

- -

- -

San

d In

dust

ria

- -

- -

Ott

ery

Hill

star

-

- -

- G

B

Ott

ery

Sun

set

- -

- -

GB

Die

p Riv

er

- -

- -

Elfin

dale

-

- -

-

Mon

woo

d/ P

hilip

pi E

ast

- -

- -

AW

Phili

ppi W

est

(wes

t of

Van

guar

d D

r)

- -

- -

Rode's Report 2011:4 Industrial stand values 101

Tab

le 9

.2 (

con

tin

ued

) S

tan

dar

d d

evia

tion

fro

m m

ean

mar

ket

valu

es f

or s

ervi

ced

an

d le

vel i

nd

ust

rial

sta

nd

s in

qu

arte

r 2

01

1:3

(R

/m²

excl

VA

T)

A

rea

size

in m

² C

on

trib

uto

rs

1.0

00

2

.00

0

5.0

00

1

0.0

00

Gug

ulet

hu I

ndus

tria

l(Bro

wn

Farm

s)

- -

- -

Ret

reat

/ Ste

enbe

rg

- -

- -

Cap

rico

rn P

ark

- -

50,0

0 -

GB,

WA

Mai

tland

-

- -

- G

Y

Nda

beni

-

- -

- G

Y

Airpo

rt

100,

00

75,0

0 23

,57

100,

00

AN

, BR,

DN

, G

Y

Eppi

ng 1

& 2

-

- 10

0,00

75

,00

AW

, BR,

GY

WP

Park

50

,00

75,0

0 -

- AN

, BR,

GY

Elsi

es R

iver

(exc

l. Cen

tral

Par

k)

125,

00

100,

00

125,

00

100,

00

AN

, G

Y

Paro

w B

eaco

nval

e 0,

00

94,2

8 23

,57

0,00

AN

, D

N,

GY

Tyge

rber

g Bus

ines

s Pa

rk

94,2

8 47

,14

0,00

0,

00

AN

, D

N,

GY

Paro

w I

ndus

tria

94

,28

94,2

8 25

,00

100,

00

AN

, D

N,

GY

Paro

w E

ast

- -

- -

GY

Bel

lvill

e O

akda

le

- -

- -

AN

, D

N

Bel

lvill

e Stik

land

/ Kay

mor

0,

00

100,

00

- -

AN

, D

N

Bel

lvill

e Tr

iang

le

75,0

0 25

,00

- -

AN

, D

N

Bel

lvill

e Sou

th/S

acks

Circl

e -

- -

- AN

Kra

aifo

ntei

n 50

,00

50,0

0 25

,00

- AN

, D

N

Bra

cken

fell

Indu

stria

100,

00

75,0

0 12

5,00

-

AN

, D

N

Ever

ite B

rack

enfe

ll 50

,00

0,00

50

,00

- AN

, D

N

Kui

ls R

iver

-

- -

- AN

Bla

ckhe

ath

25,0

0 75

,00

0,00

-

AN

, D

N

Sax

enbu

rg I

ndus

tria

l Par

k 10

0,00

0,

00

- -

AN

, D

N

Rode's Report 2011:4 Industrial stand values 102

Tab

le 9

.2 (

con

tin

ued

) S

tan

dar

d d

evia

tion

fro

m m

ean

mar

ket

valu

es f

or s

ervi

ced

an

d le

vel i

nd

ust

rial

sta

nd

s in

qu

arte

r 2

01

1:3

(R

/m²

excl

VA

T)

A

rea

size

in m

² C

on

trib

uto

rs

1.0

00

2

.00

0

5.0

00

1

0.0

00

Oka

vang

o Pa

rk

- -

- -

AN

Firg

rove

-

- -

-

The

Inte

rcha

nge

(Som

erse

t W

est)

-

- -

-

Str

and

Hal

t -

- -

-

Bro

adla

nds

- -

- -

Geo

rge

Geo

rge

ZB

Por

t El

izab

eth

Dea

l Par

ty

329,

06

315,

71

312,

58

321,

39

MJ,

PS

Nor

th E

nd

50,0

0 12

5,00

17

5,00

17

5,00

M

J, P

S

Kor

sten

/ N

eave

/ Sid

wel

l/ S

yden

ham

-

50,0

0 25

,00

25,0

0 M

J, P

S

Sou

th E

nd W

alm

er

- 75

,00

75,0

0 75

,00

MJ

Uite

nhag

e: V

olks

wag

enar

ea/

Nel

son

Bay

Lo

gist

ics

Park

-

- -

- M

J

Uite

nhag

e: H

ella

/ Kru

isrivi

er

- -

- -

MJ

Str

uand

ale

- -

- -

MJ

Mar

kman

Tow

nshi

p 37

,50

37,5

0 37

,50

50,0

0 M

J, P

S

Pers

ever

ance

17

5,00

17

,00

165,

00

190,

00

MJ,

PS

Wal

mer

10

0,00

10

0,00

17

5,00

22

5,00

M

J, P

S

Gre

enbu

shes

12

5,00

12

5,00

13

7,50

15

0,00

M

J, P

S

Fairvi

ew

150,

00

150,

00

200,

00

200,

00

MJ,

PS

Blo

emfo

nte

in

Hilt

on

- 10

,00

- -

CC,

EK

East

End

25

,00

40,0

0 -

- CC,

EK

Rode's Report 2011:4 Industrial stand values 103

Tab

le 9

.2 (

con

tin

ued

) S

tan

dar

d d

evia

tion

fro

m m

ean

mar

ket

valu

es f

or s

ervi

ced

an

d le

vel i

nd

ust

rial

sta

nd

s in

qu

arte

r 2

01

1:3

(R

/m

² ex

cl V

AT)

A

rea

size

in m

² C

on

trib

uto

rs

1.0

00

2

.00

0

5.0

00

1

0.0

00

Har

vey

Roa

d -

- -

- CC,

EK

Old

Ind

ustr

ial

- 75

,00

- -

CC,

EK

Ham

ilton

: M

ill S

t -

- -

- CC,

EK

Ham

ilton

: G

Lub

be S

t -

- -

- CC,

EK

Esto

ir

- -

- -

CC,

EK

Win

dh

oek

Lafr

enz

- -

- -

TE

Sou

th

- -

- -

TE

Pros

perita

-

- -

- TE

Nor

th

- -

- -

TE

Rode’s Report 2011:4 Flats market 104

90

100

110

120

130

140

2005 2006 2007 2008 2009 2010 2011

FlatsHousesTownhouses

National residential rentals

Inde

x (2

005:

1=10

0)

Source of data: Rode's database

90

100

110

120

130

140

150

160

2005 2006 2007 2008 2009 2010 2011

JohannesburgPretoriaDurbanCape Town

Movement in nominal flat rentals (all sizes)(based on matched pair methodology)

Inde

x (2

005:

1=10

0) (

log

scal

e)

Source of data: Stats SA; Rode

Chapter 10: Flats market

What’s up? Residential rentals stutter while retail sales are booming

Written by Anneke Meijers

In this chapter we analyse the curious rela-tionship between residential rentals and retail sales.

We first consider the most recent trends in residential rentals. Nationally, these con-tinue to cruise along, showing mediocre growth of below 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.

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 Johan-nesburg (+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 ad-justed). The explanation for the high corre-lation is that they have a common driver,

Rode’s Report 2011:4 Flats market 105

-10

-5

0

5

10

15

2005 2006 2007 2008 2009 2010 2011

Retail salesFlat rentals

Growth in real flat rentals (national)vs

growth in real retail sales

Gro

wth

(%

; y-

o-y)

Source of data: Rode's database; Stats SA

r² = 0,8

viz. the financial well-being of the consum-er, but holding constant the consumer’s willingness to incur debt. We see the debt factor playing itself out during the hot boom years of 2005-2008 (retail sales ac-celerating much faster than flat rentals) and again since the end of 2009.

This suggests that the current spurt in re-tail sales is also credit fuelled. This is con-firmed by value of credit card purchases processed by banks still being up by 13% in September 2011.

One can tentatively deduce from this anal-ysis that the current quickening in retail sales might not be sustainable into 2012. 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? Here’s a clue: the tenant and the “reckless” con-sumer are not exactly the same person. The consumer who spends with such gay abandon is not necessarily staying in the

middle-class rented flat (or house or town-house) 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 non-residential property’s capitalization rates. As a rule of thumb, to convert gross in-come yields to net, deduct 1,5 percentage points from gross. This deduction takes in-to account operating expenses such as in-surance and maintenance, as well as as-sessment rates. In this regard, one should bear in mind that, in the case of sectional-title properties, assessment rates are now-adays paid by the owner; hence, this im-portant 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 respec-tive 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 per-ceived risk of the location. This is so be-cause investors require a higher initial yield to compensate for an expected poorer in-come growth or higher potential variability of that cash flow.

This section is concluded by the flat-rental tables that follow. ■

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 re-quiring 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.

Rode’s Report 2011:4 Flats market 106

Table 10.1 Gross-income yields (%): Flats

Quarter 2011:3 Bachelor 1-Bedroom 2-Bedroom 3-Bedroom Eastern Cape Port Elizabeth * Summerstrand/Humewood/ South End N/A N/A N/A 5,8%

* Walmer 6,6% N/A N/A N/A * Central / North End N/A 7,5% 9,0% N/A Queenstown 6,5% 6,6% 7,6% 7,6% Free State Bloemfontein 11,2% 11,8% 9,9% 8,9% Gauteng Boksburg N/A 9,9% 8,2% 9,1% Mpumalanga Ermelo 9,9% 9,6% 8,3% 6,1%

Northern Cape Kuruman N/A 10,3% 10,8% 12,0%

Western Cape Durbanville 8,6% 7,8% 8,3% 7,9%

Rode’s Report 2011:4 Flats market 107Ta

ble

10

.2

Flat

ren

tals

: st

and

ard

un

its

Ave

rag

e ra

nd

s p

er m

on

th a

s at

qu

arte

r 2

01

1:3

B

ach

elo

r 1

-Bed

roo

m

2-B

edro

om

3

-Bed

roo

m

Bro

ker

con

trib

uto

rs

M

ean

S

D

Mea

n

SD

M

ean

S

D

Mea

n

SD

Joh

ann

esb

urg

ave

rag

e R

2.4

70

R3

.06

2

R

3.9

85

R4

.51

4

City

(in

cl.

Joub

ert

Park

/Bra

amfo

ntei

n/

Hill

brow

/Ber

ea/P

arkt

own)

R2.

600

R78

1

R2.

850

-

R3.

500

-

R3.

900

-

CQ

, TR

Ye

ovill

e/Bel

levu

e/H

ighl

ands

-

- -

- -

- -

-

Jepp

esto

wn/

Ford

sbur

g/M

alve

rn/

Ken

sing

ton/

Lore

ntzv

ille

- -

- -

- -

- -

N

orth

-Eas

tern

Sub

urbs

(in

cl.

Kew

/

Cyr

ilden

e/Fa

irm

ount

/Wav

erle

y/Ly

ndhu

rst

/Bra

mle

y/Sav

oy)

- -

- -

- -

- -

M

arai

sbur

g/Cro

sby/

Brixt

on

- -

- -

- -

- -

M

elde

ne (

Mel

ville

, W

estd

ene,

Auc

klan

d

Park

) R3.

533

R50

3

R3.

825

R95

5

R4.

350

R91

9

R5.

075

R1.

308

JL

, RF,

TR

Ros

eban

k/Kill

arne

y/Illo

vo

- -

- -

- -

- -

Gre

ensi

de/V

icto

ry

Park

/Em

mar

entia

/Lin

den/

Park

view

/

Park

hurs

t R2.

950

-

R3.

300

-

R4.

625

R1.

237

R4.

600

-

JL,

TR

Ran

dbur

g: F

ernd

ale/

Font

aine

blea

u R2.

500

R28

3

R3.

350

R49

5

R4.

050

R63

6

R4.

900

R1.

273

BS,

JL

Ran

dbur

g &

Sub

urbs

R2.

517

R22

5

R3.

067

R29

3

R3.

483

R12

6

R4.

850

R1.

202

BS,

JL,

TR

Win

dsor

: Ea

st/W

est

R2.

075

R24

7

R2.

600

R14

1

R3.

450

R49

5

R3.

925

R81

3

BS,

JL

Cra

igha

ll/Cra

igha

ll Pa

rk

- -

- -

- -

- -

San

dton

: N

orth

& F

ar N

orth

(in

cl.

Bry

anst

on/F

ourw

ays/

Lone

hill/

D

ougl

asda

le)

R2.

800

-

R4.

600

-

R6.

000

-

R7.

000

-

BS

San

dton

: Sou

th t

o Cen

tral

(in

cl.

San

dow

n/Riv

onia

/Mor

ning

side

/

Sun

ning

hill/

Kya

lam

i)

- -

- -

- -

- -

Rode’s Report 2011:4 Flats market 108Ta

ble

10

.2 (

con

tin

ued

) Fl

at r

enta

ls:

stan

dar

d u

nit

s A

vera

ge

ran

ds

per

mon

th a

s at

qu

arte

r 2

01

1:3

B

ach

elor

1

-Bed

roo

m

2-B

edro

om

3

-Bed

roo

m

Bro

ker

con

trib

uto

rs

M

ean

S

D

Mea

n

SD

M

ean

S

D

Mea

n

SD

Bed

ford

view

-

- -

- R5.

600

-

- -

TR

Old

Sou

th (

incl

. Ros

ette

nvill

e/

Turf

font

ein/

Ken

ilwor

th)

- -

- -

- -

- -

N

ew S

outh

(in

cl.

Sou

thda

le/M

onde

or/

G

lenv

ista

/Lin

mey

er)

R1.

400

-

R1.

750

-

R2.

200

-

R2.

900

-

DV

Ger

mis

ton

ave

rag

e R

1.5

10

R2

.12

9

R

2.6

40

R2

.88

1

Prim

rose

R1.

830

-

R2.

160

-

R2.

670

-

R2.

810

-

PH

Ger

mis

ton

C &

S

R1.

270

-

R1.

830

-

R2.

070

-

R2.

390

-

PH

Ger

mis

ton

Sou

th -

sub

urbs

R1.

480

-

R2.

300

-

R3.

050

-

R3.

560

-

PH

Elsb

urg

- -

R2.

260

-

R2.

880

-

- -

PH

Pre

tori

a av

erag

e R

2.4

54

R2

.80

7

R

3.5

04

R4

.06

6

Aka

sia

R2.

500

R42

4

R2.

750

R35

4

R3.

450

R21

2

R3.

800

R14

1

HK,

TR

Pret

oria

Nor

th/D

oran

dia/

Flor

auna

R2.

200

R36

1

R2.

433

R30

6

R3.

167

R20

8

R3.

900

R14

1

CI,

HK,

TR

Ann

lin/W

onde

rboo

m/S

inov

ille/

Mon

tana

R2.

467

R35

1

R2.

967

R20

8

R3.

500

R14

1

R4.

300

R42

4

CI,

HK,

TR

Die

Moo

t/Q

ueen

swoo

d R2.

600

R17

3

R2.

900

R10

0

R3.

417

R20

2

R3.

750

R35

4

CI,

HK,

TR

East

lynn

e/Ee

rste

rust

R2.

000

R0

R2.

350

R71

R2.

750

R35

4

R3.

300

R28

3

HK,

TR

Silv

erto

n/M

eyer

spar

k/La

Mon

tagn

e R2.

400

R0

R2.

867

R11

5

R3.

700

R10

0

R4.

050

R71

CI,

HK,

TR

East

ern

subu

rbs

(Men

lo P

ark/

Ash

lea

G

arde

ns/a

ll Ly

nnw

oods

/Die

Wilg

ers/

Fa

erie

Gle

n/G

arsf

onte

in/P

reto

rius

park

/

Con

stan

tia/W

ater

kloo

f G

len/

Er

asm

uskl

oof)

R2.

850

R35

4

R3.

150

R21

2

R4.

200

R0

R5.

050

R49

5

HK,

TR

Gro

enkl

oof/

Bro

okly

n/m

ost

Wat

erkl

oofs

/

Mon

umen

tpar

k/Er

asm

usra

nd

R3.

250

R77

8

R3.

700

R70

7

R4.

650

R21

2

R5.

200

R28

3

HK,

TR

Rode’s Report 2011:4 Flats market 109Ta

ble

10

.2 (

con

tin

ued

) Fl

at r

enta

ls:

stan

dar

d u

nit

s A

vera

ge

ran

ds

per

mo

nth

as

at q

uar

ter

20

11

:3

B

ach

elo

r 1

-Bed

roo

m

2-B

edro

om

3

-Bed

roo

m

Bro

ker

con

trib

uto

rs

M

ean

S

D

Mea

n

SD

M

ean

S

D

Mea

n

SD

Sou

th-e

aste

rn s

ubur

bs (

Elar

dusp

ark/

W

inga

te P

ark/

Mor

elet

apar

k/Pi

erre

van

Ryn

evel

d/W

ater

kloo

f)

R3.

050

R63

6

R3.

350

R49

5

R4.

200

R14

1

R4.

650

R21

2

HK,

TR

Sun

nysi

de

R2.

433

R25

2

R2.

833

R58

6

R3.

700

R43

6

R4.

100

R26

5

CI,

HK,

TR

Arc

adia

R2.

500

R17

3

R2.

933

R32

1

R3.

700

R55

7

R4.

067

R49

3

CI,

HK,

TR

Pret

oria

Cen

tral

R2.

400

R20

0

R2.

800

R20

0

R3.

633

R51

3

R4.

067

R30

6

CI,

HK,

TR

Pret

oria

Wes

t R2.

300

R26

5

R2.

617

R18

9

R3.

217

R28

4

R4.

033

R20

8

CI,

HK,

TR

Kw

agga

sran

d/W

est

Park

R2.

250

R35

4

R2.

550

R21

2

R3.

133

R20

8

R3.

900

R26

5

CI,

HK,

TR

Elan

dspo

ort/

Dan

ville

R1.

950

R21

2

R2.

250

R71

R2.

700

R28

3

R3.

300

R42

4

HK,

TR

Att

erid

gevi

lle/L

audi

um

- -

- -

- -

- -

Nel

spru

it a

vera

ge

R1

.60

0

R

3.1

53

R3

.89

4

R

4.9

51

Nel

inda

-

- -

- -

- -

-

Nel

spru

it CBD

R1.

600

-

R2.

800

-

R3.

600

-

R4.

700

-

FN

Wes

t Acr

es a

nd e

xten

sion

s -

- -

- R3.

800

-

R4.

500

-

FN

Son

heuw

el a

nd e

xten

sion

s -

- R2.

800

-

R3.

500

-

R4.

900

-

FN

Nel

spru

it an

d ex

tens

ions

-

- R4.

000

-

R4.

800

-

R5.

800

-

FN

Nel

svill

e -

- -

- -

- -

-

Du

rban

ave

rag

e R

2.5

58

R3

.18

0

R

3.9

55

R4

.62

7

Upp

er h

ighw

ay:

Klo

of/H

illcr

est

- -

- -

- -

- -

Pine

tow

n ar

ea/Q

ueen

sbur

gh

R2.

600

R14

1

R3.

050

R71

R3.

900

R14

1

R4.

500

-

TR,

WK

Wes

tvill

e ar

ea

R2.

100

-

R3.

000

-

R4.

000

-

R5.

800

-

WK

Cen

tral

City

(in

cl.

Low

er B

erea

) R2.

500

-

R3.

000

-

R3.

300

-

R3.

500

-

TR

Ber

ea /

Mor

ning

side

/ G

lenw

ood

R2.

742

R83

R3.

317

R23

R4.

258

R46

0

R5.

125

R88

4

TR,

WK

Sou

th a

nd N

orth

Bea

ch

R2.

775

R35

R3.

350

R21

2

R4.

375

R53

0

R5.

000

-

TR,

WK

Rode’s Report 2011:4 Flats market 110Ta

ble

10

.2 (

con

tin

ued

) Fl

at r

enta

ls:

stan

dar

d u

nit

s A

vera

ge

ran

ds

per

mo

nth

as

at q

uar

ter

20

11

:3

B

ach

elor

1

-Bed

room

2

-Bed

roo

m

3-B

edro

om

B

roke

r co

ntr

ibu

tors

Mea

n

SD

M

ean

S

D

Mea

n

SD

M

ean

S

D

Dur

ban

Nor

th/L

a Lu

cia/

Um

hlan

ga

- -

- -

- -

- -

Nor

th (

Dol

phin

) Coa

st/B

allit

o -

- -

- -

- -

-

Mon

tcla

ire/

Yello

ww

ood

Park

R2.

700

-

R3.

400

-

R4.

000

-

R4.

500

-

WK

Blu

ff a

rea/

Dur

ban

Sout

h -

- R3.

150

R49

5

R3.

900

R14

1

R4.

200

-

TR,

WK

Dur

ban

Sou

th/A

man

zim

toti/

War

ner

Bea

ch a

rea

- -

R3.

200

-

R4.

000

-

R4.

750

-

WK

Cap

e To

wn

ave

rag

e R

2.5

69

R3

.23

4

R

4.1

33

R5

.24

1

Cam

ps B

ay/C

lifto

n/Ban

try

Bay

R4.

025

R67

2

R5.

450

R71

R7.

400

R84

9

R12

.000

-

SQ

, TR

Sea

Poi

nt

R3.

250

-

R4.

250

-

R5.

500

-

R6.

500

-

TR

Gre

en P

oint

/Thr

ee A

ncho

r Bay

R3.

367

R11

5

R4.

267

R40

4

R5.

633

R47

3

R8.

000

-

PF,

SQ

, TR

City

Bow

l (ex

clud

ing

Hig

gova

le)

R3.

667

R28

9

R4.

583

R38

2

R6.

300

R60

8

R8.

333

R1.

041

JL

, SQ

, TR

City

Cen

tre

R4.

050

R63

6

R4.

750

R35

4

R6.

250

R35

4

R8.

600

R56

6

TR,

SQ

Wat

erfr

ont

- -

- -

- -

- -

Ron

debo

sch/

Ros

eban

k/Cla

rem

ont

R3.

050

R71

R4.

183

R67

1

R4.

933

R75

1

R6.

450

R91

9

PF,

SQ

, TR

Ken

ilwor

th/W

ynbe

rg/P

lum

stea

d R2.

850

R13

2

R3.

633

R76

R4.

367

R30

6

R4.

800

-

PF S

Q,

TR

Mui

zenb

erg/

Kal

k Bay

/ Fi

sh H

oek

R2.

575

R10

6

R3.

250

R42

4

R3.

975

R38

9

R4.

800

-

SQ

, TR

Hou

t Bay

R2.

900

-

R3.

500

-

R4.

600

-

R5.

800

-

EM

Miln

erto

n/San

ddrift

R2.

580

R40

1

R3.

270

R21

7

R3.

960

R49

7

R5.

075

R49

1

LA,

PF,

RS,

TR

Tabl

evie

w/P

arkl

ands

R2.

700

R40

0

R3.

233

R58

R4.

188

R81

5

R4.

575

R10

6

LA,

PF,

RS,

TR

Blo

uber

g/M

elkb

os

R2.

725

R24

7

R3.

225

R24

7

R4.

075

R31

8

R4.

925

R53

0

LA,

TR

Ath

lone

R1.

650

-

R2.

300

-

R3.

200

-

R4.

050

-

TR

Mitc

hell'

s Pl

ain

R1.

950

-

R2.

250

-

R2.

800

-

R3.

500

-

TR

Pine

land

s R2.

850

R21

2

R3.

500

R0

R4.

350

R21

2

R5.

250

R35

4

LA,

TR

Bro

okly

n/Rug

by/M

aitla

nd

R2.

033

R40

4

R2.

567

R45

1

R3.

167

R30

6

R3.

900

R42

4

LA, SQ

, TR

Rode’s Report 2011:4 Flats market 111Ta

ble

10

.2 (

con

tin

ued

) Fl

at r

enta

ls:

stan

dar

d u

nit

s A

vera

ge

ran

ds

per

mo

nth

as

at q

uar

ter

20

11

:3

B

ach

elor

1

-Bed

roo

m

2-B

edro

om

3

-Bed

roo

m

Bro

ker

con

trib

uto

rs

M

ean

S

D

Mea

n

SD

M

ean

S

D

Mea

n

SD

Mon

teVis

ta/G

oodw

ood/

Paro

w/B

ellv

ille

Cen

tral

R2.

450

R31

2

R2.

967

R32

1

R3.

833

R55

1

R4.

350

R21

2

LA,

SQ,

TR

Tyge

r Val

ley

area

/Dur

banv

ille

R2.

300

R20

0

R2.

933

R37

9

R3.

925

R25

0

R4.

700

R17

3

LA,

PF,

RS,

TR

Bra

cken

fell/

Kui

ls R

iver

R1.

900

R30

0

R2.

475

R31

0

R3.

238

R18

9

R4.

125

R10

6

LA,

PF,

RS,

TR

Som

erse

t W

est

R1.

900

R17

3

R2.

200

R17

3

R2.

833

R28

9

R3.

700

R52

0

GE,

LA,

TR

Str

and

R1.

963

R18

9

R2.

465

R22

8

R2.

988

R34

2

R3.

967

R92

9

GE,

LA,

SQ

, TR

G

ordo

n's

Bay

R1.

917

R20

2

R2.

383

R10

4

R2.

950

R87

R4.

233

R68

1

GE,

LA,

TR

Po

rt E

lizab

eth

ave

rag

e R

2.2

18

R2

.60

5

R

3.0

08

R3

.58

7

Sum

mer

stra

nd/H

umew

ood/

Sou

th E

nd

R2.

925

R24

7

R3.

650

R21

2

R4.

600

R10

0

R5.

867

R1.

002

CD

, JP

, ZB

Wal

mer

R2.

475

R62

4

R2.

750

R52

7

R3.

300

R70

0

R4.

500

-

CD

, JP

, ZB

Cen

tral

/Nor

th E

nd

R2.

100

R14

1

R2.

417

R33

3

R2.

625

R31

8

R3.

500

-

CD

, ZB

New

ton

Park

R2.

275

R60

1

R2.

750

R35

4

R2.

725

R17

7

R3.

000

-

CD

, JP

, ZB

Wes

tering

R2.

050

R71

R2.

350

R21

2

R2.

733

R20

2

R3.

150

R21

2

CD

, JP

Kab

ega

R2.

100

R14

1

R2.

500

R42

4

R3.

125

R38

9

R3.

500

-

CD

, JP

, ZB

Alg

oa P

ark

R1.

775

R17

7

R2.

075

R31

8

R2.

400

R56

6

R2.

500

-

CD

, JP

Ea

st L

on

do

n a

vera

ge

R2

.34

7

R

2.4

90

R2

.99

6

R

3.3

58

Sou

ther

nwoo

d/Q

uign

ey B

each

/CBD

R2.

500

-

R2.

375

R53

0

R3.

025

R31

8

R3.

375

R53

0

LP,

TR

Ber

ea

R2.

750

-

R3.

075

R17

7

R3.

525

R35

R3.

800

-

LP,

TR

Am

alin

da

R2.

350

-

R2.

450

R71

R2.

850

R21

2

R3.

050

-

LP,

TR

Gon

ubie

Par

k R2.

000

-

R2.

150

-

R2.

650

-

R3.

250

-

TR

Blo

emfo

nte

in a

vera

ge

R1

.48

3

R

2.2

30

R2

.83

1

R

3.3

63

Blo

emfo

ntei

n

R1.

550

R42

4

R2.

150

R63

6

R2.

650

R49

5

R2.

800

-

ED,

MI

Wes

tden

e R1.

625

R17

7

R2.

250

R35

4

R2.

800

R0

R3.

750

R35

4

ED,

EK,

MI

Will

ows

R1.

683

R34

0

R2.

267

R49

3

R2.

967

R61

1

R3.

275

R67

2

ED,

EK,

MI

Nav

alsi

g R1.

300

-

R2.

233

R46

2

R2.

850

R50

7

R3.

250

R91

9

ED,

EK,

MI

Arb

oret

um

R1.

300

-

R2.

250

R77

8

R2.

900

R84

9

R3.

850

R1.

485

ED

, M

I

Rode’s Report 2011:4 Flats market 112Ta

ble

10

.3

Flat

ren

tals

: u

pm

arke

t u

nit

s A

vera

ge

ran

ds

per

mo

nth

as

at q

uar

ter

20

11

:3

B

ach

elor

1

-Bed

roo

m

2-B

edro

om

3

-Bed

roo

m

Bro

ker

con

trib

uto

rs

M

ean

S

D

Mea

n

SD

M

ean

S

D

Mea

n

SD

Joh

ann

esb

urg

ave

rag

e R

2,7

68

R3

,84

6

R

4,6

89

R5

,07

5

Nor

th-E

aste

rn S

ubur

bs (

incl

. Kew

/

Cyr

ilden

e/Fa

irm

ount

/Wav

erle

y/

Lynd

hurs

t/Bra

mle

y/Sav

oy)

- -

- -

- -

- -

M

arai

sbur

g/C

rosb

y/Bri

xton

-

- -

- -

- -

-

Mel

dene

(M

elvi

lle,

Wes

tden

e,

Auc

klan

d Pa

rk)

R3.

250

-

R3.

450

-

R4.

250

-

R4.

900

-

JL

Ros

eban

k/Kill

arne

y/Illo

vo

R4.

200

-

R5.

500

-

- -

- -

TR

Gre

ensi

de/V

icto

ry

Park

/Em

mar

entia

/Lin

den/

Park

view

/

Park

hurs

t R3.

250

-

R3.

750

-

R4.

300

-

R4.

900

-

JL

Ran

dbur

g: F

ernd

ale/

Font

aine

blea

u R2.

750

R35

4

R3.

625

R53

0

R4.

867

R70

9

R5.

700

R1.

131

BS,

JL,

TR

Ran

dbur

g &

Sub

urbs

R2.

750

R35

4

R3.

400

R14

1

R4.

375

R31

8

R5.

450

R77

8

BS,

JL

Win

dsor

: Ea

st/W

est

R2.

175

R24

7

R2.

825

R24

7

R3.

625

R53

0

R4.

275

R74

2

BS,

JL

Cra

igha

ll/C

raig

hall

Park

-

- -

- -

- -

-

San

dton

: N

orth

& F

ar N

orth

(in

cl.

Bry

anst

on/F

ourw

ays/

Lone

hill/

D

ougl

asda

le)

R3.

000

-

R5.

000

R0

R6.

500

R0

R8.

000

-

BS,

TR

San

dton

: Sou

th t

o Cen

tral

(in

cl.

San

dow

n/R

ivon

ia/M

orni

ngsi

de/

Sun

ning

hill/

Kya

lam

i)

- -

R5.

500

-

R7.

500

-

- -

TR

Bed

ford

view

-

- -

- -

- -

-

Old

Sou

th (

incl

. Ros

ette

nvill

e/

Turf

font

ein/

Ken

ilwor

th)

- -

- -

- -

- -

Rode’s Report 2011:4 Flats market 113Ta

ble

10

.3 (

con

tin

ued

) Fl

at r

enta

ls:

up

mar

ket

un

its

Ave

rag

e ra

nd

s p

er m

on

th a

s at

qu

arte

r 2

01

1:3

B

ach

elor

1

-Bed

roo

m

2-B

edro

om

3

-Bed

roo

m

Bro

ker

con

trib

uto

rs

M

ean

S

D

Mea

n

SD

M

ean

S

D

Mea

n

SD

New

Sou

th (

incl

. Sou

thda

le/M

onde

or/

G

lenv

ista

/Lin

mey

er)

R1.

575

-

R2.

700

R1.

131

R3.

400

R1.

556

R3.

400

-

DV,

TR

Ger

mis

ton

ave

rag

e R

1.8

23

R2

.44

0

R

2.9

62

R3

.31

4

Prim

rose

R2.

020

-

R2.

710

-

R3.

130

-

R3.

460

-

PH

Ger

mis

ton

C &

S

R1.

850

-

R2.

120

-

R2.

450

-

R2.

690

-

PH

Ger

mis

ton

Sou

th -

sub

urbs

R1.

620

-

R2.

530

-

R3.

390

-

R3.

910

-

PH

Elsb

urg

- -

- -

- -

- -

P

reto

ria

aver

age

R2

.50

0

R

2.7

00

R3

.40

0

R

3.8

00

Aka

sia

- -

- -

- -

- -

Pr

etor

ia N

orth

/Dor

andi

a/Fl

orau

na

R2.

500

-

R2.

700

-

R3.

400

-

R3.

800

-

TR

Ann

lin/W

onde

rboo

m/S

inov

ille/

Mon

tana

-

- -

- -

- -

-

Die

Moo

t/Q

ueen

swoo

d -

- -

- -

- -

-

Silv

erto

n/M

eyer

spar

k/La

Mon

tagn

e -

- -

- -

- -

-

East

ern

subu

rbs

(Men

lo P

ark/

Ash

lea

G

arde

ns/a

ll Ly

nnw

oods

/Die

Wilg

ers/

Fa

erie

Gle

n/G

arsf

onte

in/P

reto

rius

park

/

Con

stan

tia/W

ater

kloo

f G

len/

Er

asm

uskl

oof)

-

- -

- -

- -

-

Gro

enkl

oof/

Bro

okly

n/m

ost

Wat

erkl

oofs

/

Mon

umen

tpar

k/Er

asm

usra

nd

- -

- -

- -

- -

Sou

th-e

aste

rn s

ubur

bs (

Elar

dusp

ark/

W

inga

te P

ark/

Mor

elet

apar

k/Pi

erre

van

Ryn

evel

d/W

ater

kloo

f)

- -

- -

- -

- -

Sun

nysi

de

- -

- -

- -

- -

Arc

adia

-

- -

- -

- -

-

Rode’s Report 2011:4 Flats market 114Ta

ble

10

.3 (

con

tin

ued

) Fl

at r

enta

ls:

up

mar

ket

un

its

Ave

rag

e ra

nd

s p

er m

on

th a

s at

qu

arte

r 2

01

1:3

B

ach

elo

r 1

-Bed

roo

m

2-B

edro

om

3

-Bed

roo

m

Bro

ker

con

trib

uto

rs

M

ean

S

D

Mea

n

SD

M

ean

S

D

Mea

n

SD

Pret

oria

Wes

t -

- -

- -

- -

-

Kw

agga

sran

d/W

est

Park

-

- -

- -

- -

-

Elan

dspo

ort/

Dan

ville

-

- -

- -

- -

-

Att

erid

gevi

lle/L

audi

um

- -

- -

- -

- -

N

elsp

ruit

ave

rag

e R

2.0

00

R3

.47

2

R

4.3

79

R5

.73

5

Nel

inda

-

- -

- -

- -

-

Nel

spru

it C

BD

R2.

000

-

R3.

000

-

R3.

800

-

R5.

000

-

FN

Wes

t Acr

es a

nd e

xten

sion

s -

- -

- R4.

400

-

R5.

700

-

FN

Son

heuw

el a

nd e

xten

sion

s -

- R3.

100

-

R4.

000

-

R5.

500

-

FN

Nel

spru

it a

nd e

xten

sion

s -

- R4.

500

-

R5.

500

-

R6.

900

-

FN

Nel

svill

e -

- -

- -

- -

-

Du

rban

ave

rag

e R

2.8

86

R3

.75

2

R

4.4

46

R5

.30

7

Upp

er h

ighw

ay:

Klo

of/H

illcr

est

- -

- -

- -

- -

Pi

neto

wn

area

/Que

ensb

urgh

R2.

800

-

R3.

300

-

R4.

200

-

- -

TR

Wes

tvill

e ar

ea

- -

- -

- -

- -

Cen

tral

City

(in

cl.

Low

er B

erea

) R2.

800

-

R3.

300

-

R3.

800

-

R4.

000

-

TR

Ber

ea /

Mor

ning

side

/ G

lenw

ood

R2.

900

-

R4.

000

-

R4.

533

-

R5.

750

-

TR

Sou

th a

nd N

orth

Bea

ch

R3.

050

R21

2

R4.

000

R28

3

R5.

400

R84

9

R6.

500

-

TR,

WK

Dur

ban

Nor

th/L

a Lu

cia/

Um

hlan

ga

- -

- -

- -

- -

N

orth

(D

olph

in)

Coa

st/B

allit

o -

- -

- -

- -

-

Mon

tcla

ire/

Yello

ww

ood

Park

-

- -

- -

- -

-

Blu

ff a

rea/

Dur

ban

Sou

th

- -

- -

- -

- -

D

urba

n Sou

th/A

man

zim

toti/

War

ner

Bea

ch a

rea

- -

- -

- -

- -

Rode’s Report 2011:4 Flats market 115

Ta

ble

10

.3 (

con

tin

ued

) Fl

at r

enta

ls:

up

mar

ket

un

its

Ave

rag

e ra

nd

s p

er m

on

th a

s at

qu

arte

r 2

01

1:3

B

ach

elo

r 1

-Bed

roo

m

2-B

edro

om

3

-Bed

roo

m

Bro

ker

con

trib

uto

rs

M

ean

S

D

Mea

n

SD

M

ean

S

D

Mea

n

SD

Cap

e To

wn

ave

rag

e R

3.3

87

R4

.21

9

R

5.4

88

R7

.26

4

Cam

ps B

ay/C

lifto

n/Ban

try

Bay

R5.

125

R53

0

R6.

750

R35

4

R10

.000

R1.

414

R16

.000

R2.

828

SQ

, TR

Sea

Poi

nt

- -

- -

- -

- -

G

reen

Poi

nt/T

hree

Anc

hor

Bay

R4.

183

R85

2

R4.

933

R1.

235

R6.

833

R1.

258

R9.

250

R1.

061

PF

, SQ

, TR

City

Bow

l (ex

clud

ing

Hig

gova

le)

R4.

817

R27

5

R6.

133

R32

1

R8.

533

R46

2

R10

.000

R0

JL

, SQ

, TR

City

Cen

tre

R4.

950

R63

6

R6.

125

R17

7

R7.

900

R14

1

R11

.250

R1.

061

SQ

, TR

W

ater

fron

t R5.

000

-

R6.

500

-

R9.

000

-

R15

.000

-

TR

Ron

debo

sch/

Ros

eban

k/Cla

rem

ont

R4.

183

R96

5

R5.

167

R94

5

R7.

000

R1.

323

R10

.250

R1.

061

PF

, SQ

, TR

Ken

ilwor

th/W

ynbe

rg/P

lum

stea

d R4.

150

R21

2

R4.

775

R24

7

R6.

225

R1.

025

R7.

825

R1.

167

SQ

, TR

M

uize

nber

g/ K

alk

Bay

/ Fi

sh H

oek

R3.

725

R31

8

R4.

450

R70

7

R5.

450

R1.

485

R7.

000

R1.

414

SQ

, TR

H

out

Bay

-

- -

- -

- -

-

Miln

erto

n/San

ddrift

R3.

125

R55

6

R3.

875

R49

2

R4.

825

R83

4

R6.

350

R1.

021

LA

, PF

, RS,

TR

Tabl

evie

w/P

arkl

ands

R3.

138

R51

2

R3.

933

R23

1

R4.

850

R87

0

R6.

333

R1.

041

LA

, PF

, RS,

TR

Blo

uber

g/M

elkb

os

R3.

350

R32

8

R3.

925

R53

0

R4.

975

R1.

025

R6.

525

R95

5

LA,

PF,

TR

Ath

lone

R2.

550

-

R3.

050

-

R4.

050

-

R5.

050

-

TR

Mitc

hell'

s Pl

ain

R2.

650

-

R3.

950

-

R4.

650

-

R5.

650

-

TR

Pine

land

s R3.

775

R35

R4.

500

R0

R5.

750

R35

4

R7.

000

R70

7

LA ,

TR

Bro

okly

n/Rug

by/M

aitla

nd

R2.

717

R44

8

R3.

200

R36

1

R4.

133

R35

1

R5.

067

R51

3

LA ,

SQ

, TR

M

onte

Vis

ta/G

oodw

ood/

Paro

w/B

ellv

ille

Cen

tral

R2.

933

R25

2

R3.

417

R33

3

R4.

483

R44

8

R5.

483

R48

0

LA,

SQ

, TR

Ty

ger

Valle

y ar

ea/D

urba

nvill

e R2.

775

R31

8

R3.

717

R24

7

R4.

688

R26

6

R6.

700

R1.

131

LA

, PF

, SF,

TR

Bra

cken

fell/

Kui

ls R

iver

R2.

250

R30

4

R2.

913

R29

0

R3.

838

R23

6

R4.

575

R10

6

LA,

PF,

SF,

TR

Som

erse

t W

est

R2.

450

R87

R3.

383

R20

2

R4.

083

R72

2

R5.

617

R1.

828

G

E, L

A,

TR

Rode’s Report 2011:4 Flats market 116

Tab

le 1

0.3

(co

nti

nu

ed)

Flat

ren

tals

: u

pm

arke

t u

nit

s A

vera

ge

ran

ds

per

mo

nth

as

at q

uar

ter

20

11

:3

B

ach

elor

1

-Bed

room

2

-Bed

roo

m

3-B

edro

om

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Rode’s Report 2011:4 House market 117

120

160

200

240

280

320

70 75 80 85 90 95 00 05 10

Real house pricesTrend line

Real national house-price cycle(Nominal prices deflated by BER BCI)

Inde

xof

rea

l hou

se p

rice

s

Source: ABSA; BER BCI; Rode calculations

Chapter 11: House market

Houses overvalued by 25%

Written by Erwin Rode and Anneke Meijers

House prices are still far above their long-term 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.

Here’s how to interpret the data:

In theory, the trend line should be more or less horizontal (0% real

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 long-term 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.

Rode’s Report 2011:4 House market 118

-10

0

10

20

30

40

-60

-40

-20

0

20

40

60

80

100

00 01 02 03 04 05 06 07 08 09 10 11

House pricesMortgage loans (smoothed)

Growth in house pricesvs

Growth in value of new mortgage loans

Gro

wht

in h

ouse

price

s(%

; y-

o-y)

Grow

th in new m

ortgage loans(%

; y-o-y)

Source of data: SARB; Absa

r=0,8

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.

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 wasn’t 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). None-theless, 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; it’s only a question of time and speed.

As for current growth rates, national no-

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.

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.

Rode’s Report 2011:4 House market 119

Table 11.1 Gross-income yields (%) on houses by price class

Quarter 2011:3

Low Middle High

Eastern Cape Port Elizabeth 4,8% 4,9% 6,5%

Summerstrand/Humewood 4,8% 4,9% 5,1% Fernglen/ Sunridge Park / Framesby N/A N/A 8,1% Summerstrand/Humewood 4,8% 4,9% 5,1%

Queenstown 6,6% 7,1% 7,0% Free State Bloemfontein 6,4% 6,6% 6,7%

Houses north of Nelson Mandela Blvd. (incl. Rayton and Groenvlei) 5,8% 5,9% 5,9%

Houses south of Nelson Mandela Blvd. 7,0% 6,6% 7,8% Langenhoven Park N/A 7,3% 6,4%

Gauteng Pretoria 8,2% 8,5% 8,6%

Akasia 5,3% 4,4% 5,0% Pretoria North / Dorandia / Florauna 6,9% 8,0% 9,3% Annlin/Wonderboom/Sinoville/Montana 8,1% 6,5% 10,0% Die Moot / Queenswood 10,5% 9,5% 12,8% Eastlynne/Eersterust 9,0% 10,4% 7,5% Silverton / Meyerspark / La Montagne 7,0% 7,1% 6,3% Eastern suburbs 6,0% 7,7% 10,0% Groenkloof/Brooklyn/most

Waterkloofs/Monumentpark/Erasmusrand 7,5% 10,3% 12,8% South-eastern suburbs 6,7% 10,6% 14,2% Sunnyside 7,9% 10,7% 5,5% Arcadia 9,0% 9,6% 7,3% Pretoria Central 16,1% 12,3% 7,7% Pretoria West 11,7% 11,4% 10,7% Kwaggarand / West Park 7,7% 6,0% 7,1% Elandspoort/Danville 8,0% 7,6% 9,3%

Centurion 7,5% 7,1% 6,4% Kloofsig/Lyttelton

Manor/Doringkloof/Zwartkop 11,4% 12,0% 11,5% Heuweloord 8,3% 8,8% 9,7%

Rode’s Report 2011:4 House market 120

Table 11.2 Gross-income yields (%) of townhouses by price class

Quarter 2011:3

Standard High-priced Eastern Cape Port Elizabeth 7,9% 7,4%

Summerstrand / Humewood / South End 8,0% 7,9% Walmer/Charlo/Fairview/Lorraine 7,3% 6,4% Kabega 8,3% N/A

Queenstown 6,1% 6,7% Free State Bloemfontein 6,5% 5,0%

Houses north of Nelson Mandela Blvd. 5,9% 3,5% Houses south of Nelson Mandela Blvd. 7,1% 4,9% Langenhoven Park (incl. surrounding

smallholding area) 6,7% 7,2% Gauteng Benoni 9,8% 9,5%

Benoni Central 10,5% 8,2% Lakefield 10,8% 9,0% Westdene 9,6% 9,6% Farrarmere 9,6% 8,0% Morehill 8,6% 8,0% Rynfield 9,3% 10,7% Northmead 10,2% 12,3% Crystal Park 10,5% 10,1%

Centurion 8,0% 9,2% Pierre van Ryneveld 7,9% 7,5% Irene 8,3% 12,8% Kloofsig/Lyttleton

Manor/Doringkloof/Zwartkop 8,3% 11,3% Highveld and extensions 7,9% 8,8% Clubviews/Eldoraigne / Wierda park /

Cranebrook/Bronberrick / Rooihuiskraal North 7,4% 8,9%

Rooihuiskraal / The Reeds 7,2% 9,6% Heuweloord 8,3% 7,7% Valhalla 9,0% 8,3%

Rode’s Report 2011:4 Building activity and building costs

121

-10

-5

0

5

10

15

20

01 02 03 04 05 06 07 08 09 10 11

BER BCIHay lett

BER BCI vs Haylett

% c

han

ge (

y-o-

y)

smoothed

Source of data: BER, JBCC CPAP Haylett formula

-20

-10

0

10

20

30

02 03 04 05 06 07 08 09 10 11

Growth in cement salesG

row

th (

%;

y-o-

y)

Source of data: PPC

Smoothed

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 contrac-tors to cut their profit margins to the bone. As the graph shows, the result of this has been weaker growth in overall tender pric-es — which includes profit margins — rela-tive 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 possi-bility now of even more upward pressure on tender prices. It seems that the build-ing-construction sector is moving into a period of stagflation (stagnant orders and rising cost-push inflation).

In this environment, a puzzling feature is the fact that cement sales are improving.

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 BER’s ‘soft’ surveys do not bear this out (see be-low). Thus the only explanation we can of-fer for this contradiction is that the cement sales are from a very low base (the old ref-uge 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 build-ing contractors remain downbeat (see cor-responding graph). In one of their quarter-ly surveys, the Bureau for Economic Re-search (BER) asks a panel of residential

Rode’s Report 2011:4 Building activity and building costs

122

-120

-80

-40

0

40

80

01 02 03 04 05 06 07 08 09 10 11

non-residentialresidential

Growth in building activityNon-residential vs residential contractors

Net

% b

alan

ce

Source: BER Building and Construction Survey

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 sub-tracted 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 nega-tive since the start of 2008 and is still neg-ative by a wide margin.

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 me-treage 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 Ta-ble 12.2).

In sum, building activity is stagnant. In-creasing tender prices are thus, for now, being fuelled by cost-push instead of de-mand-pull pressures. Another name for this is stagflation.

This concludes our section on building ac-tivity 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.

Rode’s Report 2011:4 Building activity and building costs

123

Table 12.1 New non-residential buildings (private sector) (m²)

% change on a year earlier

Offices Shopping space

Industrial buildings Other* Total

12 months ended September 2011 (% change on a year earlier)

Completed -25,9% -18,0% -40,0% - -30,11%

Plans passed -2,4% -11,8% -12,9% - -10,6%

6 months ended September 2011 (% change on a year earlier)

Completed -21,6% -6,6% -37,8% - -24,4% Plans passed 5,5% -21,3% -7,0% - -7,5% * Other non-residential space includes churches, sports and recreation clubs, schools, crèches, hospitals and all other non-residential space.

Source of data: Stats SA

Table 12.2 New residential buildings (private sector) (m²)

% change on a year earlier

Houses

Flats & townhouses Other* Total Smaller than

80 m² Larger than

80 m²

12 months ended September 2011 (% change on a year earlier) Completed 3,9% -10,3% -32,6% - -13,9% Plans passed -4,0% 0,5% 13,2% - 2,2% 6 months ended September 2011 (% change on a year earlier) Completed 30,7% 1,7% -29,4% - -2,2% Plans passed 18,8% -1,5% 40,3% - 9,8% * 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

Rode’s Report 2011:4 Annexure 1

I

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 building-construction 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 open-market 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.

Rode’s Report 2011:4 Annexure 1

II

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 present-value 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 investor’s own, subjective forecast of rentals and maybe the investor’s unique or different in-house 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

Rode’s Report 2011:4 Annexure 1

III

calculated by taking the geometric mean of a portfolio’s 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 company’s 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. 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 m (excluding micro/ mini units);

f. Clear spans;

g. On ground level;

h. Adequate three-phase electrical power.

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.

Rode’s Report 2011:4 Annexure 1

IV

Comparative grading of industrial and office space

Industrial Offices

Prime + A

Prime B

Prime - C

Secondary D

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 year’s 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 5-yearly 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

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 open-market (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 Forecasting Associates, construction economists 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.

Rode’s Report 2011:4 Annexure 1

V

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; air-conditioning; 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 on-site parking; unlikely to be centrally air-conditioned; 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 m².

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 open-market 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

tenant’s own). Security. Management (excluding head office

overheads). All leasing expenses: broker’s

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 landlord’s 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. Tenant’s own electricity and water. Tenant installations/relocations

recovered. Internal maintenance. Recoverable refuse & sewerage.

Rode’s Report 2011:4 Annexure 1

VI

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 tenant’s 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 company’s 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.

Rode’s Report 2011:4 Annexure 1

VII

20

30

40

50

60

70

80

90

93 94 95 96 97 98 99 00 01 02

A graphic portrayal of a rental time seriesQuarterly frequency

R/m

² p

er m

onth

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.

Shopping centre types:

Super regional: More than 100.000 rentable m² 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 m² 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

m² 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);

Constantia Centre (Port Elizabeth); Brandwag Centre (Bloemfontein); Beacon Bay Retail Park (East London).

Neighbourhood: 3.000 to 10.000 rentable m² of shop space; principal tenant is a supermarket; 15 to 40 shops.

Convenience: 300 to 1.200 rentable m² of shop space; principal tenant is a café or grocer like Kwik Spar; 5 to 15 shops.

Retail warehouse: Stand-alone; single tenant; >10.000m²; air-conditioned, no ceiling, warehouse-like finishes, e.g. Makro, Hypermarket, Game, Dion.

Value centre: Multi-tenanted strip centre; >10.000m²; warehouse type finishes in order to deliver lower prices to consumers.

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 government’s statistics department. Previously known as Central Statistical Services (CSS) and even earlier as the Department of Statistics.

Time series

Rode’s Report 2011:4 Annexure 1

VIII

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 national-income or property data, monthly for prices, and weekly, daily, or even minute-by-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. 

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)

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 Council of Shopping Centres

2. Sapoa

3. Bureau of Market Research, University of South Africa

Rode’s Report 2011:4 Annexure 2

IX

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:

o Track actual transactions, like the rental levels of lettings or the capitalization rates at which sales are concluded. Valuers (appraisers) call these ‘comparables’.

o 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:

o A paucity of transactions in most nodes, making statistical inferences impossible.

o Hence the danger of relying on outlier data (mainly the result of small samples)

o Dated transactions

o The cost

o The unwillingness of the parties to report the details of individual deals.

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.

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)

Rode’s Report 2011:4 Annexure 2

X

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 m² excluding VAT?” The questionnaire also asks for the typical rent-free period in months, the gross current-year operating costs per rentable m² 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 250m² in the case of grades A+, A & B and 150m² in the case of grade C (150m² 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 put to developers or brokers is:

Office bulk: In your opinion, what is the market value (R/bulk m²)* 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 m²)a of vacant stands appropriately zonedb and with the necessary bulk for the following shopping centres?

a. The bulk that is legally permissible and economically viable.

b. 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, off-ramps, 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 m² for prime industrial buildings for the townships and lease sizes indicated below?”

Rode’s Report 2011:4 Annexure 2

XI

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: 250m², 500m², 1.000m², 2.500m² and 5.000m². 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% 10 – 20% >20%

0

Nil

1 2 3

Low

4 5 6

Medium

7 8 9

High

Thus, the reported vacancies do not represent percentages.

Industrial land values: The question put to panellists is:

“In your opinion, what are the current market values per m² for vacant, serviced levelled land in the townships and for the

stand sizes indicated below? Where land is only leased, provide the rent per m² 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 1.000m², 2.000m², 5.000m² and 10.000m².

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 m².

Rode’s Report 2011:4 Annexure 3

XII

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 m² 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 m². Use your financial calculator and proceed as follows: Assume the following equation: ln Y = 3,8855 — (0,2263(ln X)) where X = 750 m². 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 m² 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 m².

Rode’s Report 2011:4 Annexure 4

XIII

Approximate building cost rates as at September 2011

Source: Property and construction handbook, Davis Langdon, an AECOM company, March 2010.

The following, unless otherwise stated, is a list of approximate building cost rates per m² 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 m² 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.

Rode’s Report 2011:4 Annexure 4

XIV

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 1. Low-rise office park development with standard specification /m² R5.200 – R6.300 2. Low-rise prestigious office park development /m² R6.700 – R10.000 3. High-rise tower block with standard specification /m² R7.400 – R10.000 4. High-rise prestigious tower block /m² 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.

Parking on grade including integral landscaping and ground preparation

/m²

R350 – R450

2. Structured parking above ground /m² R2.800 – R3.600 3. Parking in semi-basement /m² R2.800 – R3.800 4. Parking in basement /m² R3.000 – R4.500 Retail 1. Local Convenience centre (not exceeding 5.000m²) /m² R5.000– R6.500 2. 3.

Neighbourhood centres (5.000 – 12.000m²) Community centres (12.000 – 25.000m²)

/m² /m²

R5.000– R7.000 R5.500 – R7.500

4. Minor regional centres (25.000 – 50.000m²) /m² R6.000 – R8.000 5. 6.

Regional centres(50.00 – 100.000m²) Super regional centres (exceeding 100.000m²)

/m² /m²

R7.000 – R8.500 R7.000 – R9.500

Note: The above rates include the cost of tenant requirements and specifications of national chain stores. Industrial 1.

Industrial warehouse including small office area and change facilities within structure (architect/engineer-designed)

1.1 Steel frame, corrugated steel cladding and roof sheeting /m² R2.500 – R3.800 1.2

Steel frame, brickwork to ceiling height, corrugated steel cladding above and roof sheeting

/m²

R3.000 – R4.200

1.3 Administration offices, ablution and change room block /m² R4.800 – R6.000 1.4 Cold storage facilities /m² R8.900 – R12.700 Residential 1. Site services to low cost housing stand (250 – 350m²) /no R22.000 – R34.000 2. RDP houding /m² R1.200 – R1.400 3. Low-cost housing /m² R2.000 – R3.200 4. Simple low-rise apartment block /m² R4.700 – R6.600 5. Duplex townhouse — economic /m² R4.700 – R6.700 6. Prestige apartment block /m² R9.000 – R14.000 7. Private dwelling houses: Economic /m² R3.400

Rode’s Report 2011:4 Annexure 4

XV

Standard /m² R4.600 Middle Class /m² R5.500 Luxury /m² R7.800 Exclusive /m² R11.600 Exceptional (‘Super luxury’) /m² R18.000 – R36.000 8. Outbuildings /m² R2.000 – R3.400 9. Carport (shaded): Single /no R2.900 Double /no R5.600 10. Carport (covered): Single /no R4.500 Double /no R8.300 11. Swimming pool Not exceeding 50kl /no R60.000

Exceeding 50kl and not exceeding 100kl /no R60.000 – R100.000

12. Tennis court Standard /no R215.000 Floodlit /no R280.000 Clinics 1.

Clinic: 150-bed, 5-theatre (excluding doctors' accommodation)

/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 35m² 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. Studios: dancing, art exhibitions, etc. /m² R8.900 – R12.700 Conference Centres 1. Conference centre to international standards /m² R16.000 – R21.000

Building type Retirement Centres 1. Dwelling house middle class /m² R5.300 luxury /m² R7.400 2. Apartment block middle class /m² R5.500 luxury /m² R8.500 3. Community centre middle class /m² R7.100

Rode’s Report 2011:4 Annexure 4

XVI

luxury /m² R10.500 4. Frail care /m² R8.500 Note: The above rates exclude frail care facilities. Schools 1. Primary school /m² R4.500 – R5.700 2. Secondary school /m² R4.800 – R6.300 Stadiums

1.

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.

/seat

R22.000 – R34.000

2.

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.

/seat

R50.000 – R67.000

3. Stadium pitch to FIFA standards R14.000.000 – R17.000.000

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. Office buildings — standard installation /m² R325 – R575 2. Office buildings — sophisticated installation /m² R460 – R750 3. Office buildings – UPS, substations, standby generators /m² R230 – R320 4. Residential /m² R525 – R675

5. Shopping centres /m² R500 – R650

6. Hotels /m² R680 – R850

7. Hospitals /m² R800 – R1.050

Building services Electronic installation 1. Offices - standard installation /m² R340 – R425

2. Offices – sophisticated installation /m² R440 - 560

3. Residential /m² R180 - 230

4. Shopping centres /m² R400 – R550

5. Hotels /m² R360 – R450

Rode’s Report 2011:4 Annexure 4

XVII

6. Hospitals /m² R370 – R460

Fire protection installation (offices) 1.

Sprinkler system including hydrants and hose reels (excluding void sprinkler)

/m²

R140 – R230

Air-conditioning installation 1. Ventilation to parking/services areas /m² R150 – R300 2. Office buildings: console units /m² R450 – R600 3. Office buildings: console/split units /m² R520 – R675 4. Office buildings: package units /m² R725 – R900 5. Office buildings: central plant /m² R950 – R1.400 6. Office buildings: Variable Refrigerant Flow /m² R950 – R1.550 7. Residential: split units /m² R675 – R1.200 8. Shopping centres: split units /m² R625 – R750 9. Shopping centres: package units /m² R650 – R1.200 10. Shopping centres: evaporative cooling /m² R310 – R775 11. Hotels: public areas /m² R950 – R1.650 12. Hospitals: split units to wards /m² R1.350 – R1.550 13. Hotels: console units /key R12.000 – R18.000 14. Hotels: split units /key R26.000 – R36.000 15. Hotels: central plants /key R40.000 – R67.000 16. Hospitals: operating theatres /theatre R210.000 - R780.000 Note: see note with regard to hotels.

Notes 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.

Rode’s Report 2011:4 Annexure 5

XVIII

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Rode’s Report 2011:4 Annexure 6 XIX

Absa home building-cost index

2000 = 100

Quarter Index

% change on

previous year

Quarter Index

% change on

previous year

1996:1 68,3 4,5% 2004:1 163,6 19,1% 1996:2 68,2 3,6% 2004:2 170,2 18,9% 1996:3 68,9 3,0% 2004:3 175,3 17,6% 1996:4 69,4 1,3% 2004:4 180,3 15,4% 1997:1 71,0 4,1% 2005:1 185,9 13,6% 1997:2 74,0 8,4% 2005:2 192,1 12,9% 1997:3 77,1 11,9% 2005:3 198,2 13,0% 1997:4 79,7 14,8% 2005:4 204,3 13,3% 1998:1 82,3 15,8% 2006:1 208,3 12,1% 1998:2 83,5 12,8% 2006:2 211,5 10,1% 1998:3 84,0 9,1% 2006:3 219,6 10,8% 1998:4 84,2 5,7% 2006:4 227,0 11,1% 1999:1 86,6 5,2% 2007:1 230,8 10,8% 1999:2 89,4 7,1% 2007:2 236,7 11,9% 1999:3 92,2 9,7% 2007:3 240,0 9,3% 1999:4 96,1 14,1% 2007:4 245,2 8,0% 2000:1 99,4 14,8% 2008:1 254,0 10,1% 2000:2 101,5 13,5% 2008:2 256,0 8,2% 2000:3 103,0 11,7% 2008:3 258,7 7,8% 2000:4 105,3 9,6% 2008:4 261,9 6,7% 2001:1 107,4 8,1% 2009:1 264,0 3,9% 2001:3 111,4 9,7% 2009:2 272,5 6,5% 2001:4 115,9 12,5% 2009:3 277,4 7,2% 2002:1 118,9 12,9% 2009:4 278,4 6,3% 2002:2 122,1 13,7% 2010:1 285,9 8,3% 2002:3 126,7 13,8% 2010:2 292,3 7,3% 2002:4 131,8 13,8% 2010:3 296,2 6,8% 2003:1 137,4 15,5% 2010:4 304,4 9,3% 2003:2 143,1 17,3% 2011:1 305,4 6,8% 2003:3 149,0 17,6% 2011:2 302,7 3,6% 2003:4 156,2 18,5% 2011:3 310,2 4,7% Source: ABSA. Calculated from Absa home mortgage data, viz. value of houses to be built divided by number of m².

:

Rode’s Report 2011:4 Annexure 7 XX

BER Building Cost Index (non-residential tender prices)

2005=100

First quarter Second quarter Third quarter Fourth

quarter Average

2005 96,5 97,8 101,0 104,7 100,0 % ch 20,2 16,5 16,3 15,6 17,1 2006 103,0 109,2 110,6 117,7 110,1 % ch 6,8 11,7 9,5 12,4 10,1 2007 113,9 132,8 122,9 138,4 127,0 % ch 10,6 21,6 11,2 17,6 15,3 2008 135,4 147,0 141,2 157,5 145,3 % ch 18,9 10,6 14,9 13,8 14,4 2009 138,7 151,0 140,9 145,6 144,0 % ch 2,4 2,7 -0,2 -7,6 -0,9 2010 145,7 144,8 141,3 140,1 143,2 %ch 5,1 -4,1 0,3 -3,8 -0,6 2011 140,8 147,0 150,0 %ch -3,4 1,5 5,6 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.

Rode’s Report 2011:4 Annexure 8

XXI

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