South Africa Q2 reports 

South Africa is witnessing easing of restrictions. Covid-19 and economic pressures continue to create challenges for most corporate real estate sectors.

August 27, 2020
JLL: Positive outlook for SA’s Industrial and Warehousing sector  

South Africa, 27 August 2020 – While South Africa is witnessing the easing of restrictions, the impact of Covid-19, coupled with economic pressures, continues to create challenges for most corporate real estate sectors according to JLL’s latest report.

JLL’s Q2 city report provides an overview of the office, retail, industrial and hospitality sectors in Johannesburg, Cape Town and eThekwini.


Johannesburg is the largest metropolitan population in South Africa by size and GDP, with 5.8 million residents. It is also home to Africa’s largest stock exchange – the Johannesburg Stock Exchange (JSE).

Johannesburg is still reeling with an oversupplied office market that’s plagued with rising vacancy rates, accelerated by businesses downscaling or being forced to close as a result of the recent lockdown. While many organisations have continued to encourage working from home, a large amount of uncertainty between developers and landlords remains. Johannesburg’s office stock is growing at an annualized rate of 0.8% and is approximately 10.4 million square metres large. It is expected to rise by an additional 32,800 square metres as a result of Intaprop’s Oxford Park and Attacq’s Corporate Campus.

Currently there is very little growth potential in the market, with businesses unlikely to expand their physical footprint in the short to medium term. Many developments in the pipeline are being put on hold as a result of subdued demand. According to Michael Scott, Research analyst, Sub-Saharan Africa at JLL, “These challenges are not unique to Johannesburg as the impact of the nationwide lockdown has been largely felt throughout corporate South Africa. The months of April and May saw landlords receiving as little as 40-50% of their rent, restricting trade and forcing many corporates to close their operations.”

JLL maintains a positive outlook towards retail as well as supply chain driven warehousing and logistics spaces moving into the second half of 2020. Demand for logistics space remains resilient, as e-commerce consumer base steadily grows year-on-year. Accordingly, there is a greater requirement for quality logistics space with emphasis on stock-holding requirements. While the logistics and warehousing segment has not been immune to the effects of the global pandemic, there is great opportunity for new-generation warehousing and distributions spaces.

Johannesburg is a mature hotel market in a regional context, dominated by the presence of local owner operators, who appeal to domestic corporate demand. Operators are cautiously considering their own re-opening timeline from a demand perspective, despite regulation no longer being the determining factor. Occupancy levels in the City of Johannesburg reached levels of 34% by the end of June 2020. This equates to an annualised contraction of 45%, declining from 62% in May 2019. While the recovery is expected to be slow, according to JLL, it will last well into 2021.

Cape Town

Cape Town's local economy is predominantly service driven, accounting for 12% of the country’s GDP. A resilient commercial environment, coupled with a thriving tourism sector, means that the city is home to the second largest airport in South Africa.

The metropolitan has seen some of the best quality office space come to market over the past 5 years. The office sector finds itself transitioning into a cyclical downturn. Rentals across asset grade have peaked and are starting to decline. Commercial operators have shown a reluctance to go out to market and assess space options, despite the country’s revised lockdown regulations which now allow most sectors to trade again.

Corporate demand is expected to reduce, as businesses scale down and restructure their workspace requirements in order to prioritise the health and safety of employees. The city has approximately 19,000m2 of commercial office space currently in its pipeline.

All recent movement in the industrial sector has been in the logistics and warehousing segments. Cape Town’s industrial spaces have shown average vacancy levels in the logistics and warehousing space ranging between 7- 8%. With the peak of South Africa’s Covid-19 infections forecasted to strike at the end of August, industrial segments are set to remain tenant focused.

“The landlords’ focus is to retain tenants and to avoid long term vacancies and subsequent costs. Accordingly, we anticipate that current lease agreements may be temporarily re-negotiated to accommodate tenant’s affordability,” added Scott.

The implementation of global travel restrictions as well as South Africa’s impending lockdown have brought South Africa’s hotel industry to a standstill. All international borders and airports have been closed for tourism. Hotel occupancy levels in Cape Town reached record low levels of 10% by the end of June 2020. This equates to an annualized contraction of 80%, declining from 53% in June 2019.


eThekwini Metropolitan Municipality contributes 15% towards South Africa’s total GDP. The port city plays a key role in South Africa’s trade linkages with the rest of the world. It has maintained some of the highest office vacancy rates country-wide. Landlords are becoming increasingly aggressive with commercial lease agreements, as focus shifts towards tenant retention. Office supply in eThekwini is dominated by the Umhlanga, including La Lucia, node with several mixed-use schemes making up the commercial pipeline, reinforcing it as the preferred location of choice for corporate office users and citizens alike.

Although the nation-wide lockdown brought the construction industry to an abrupt stand still, eThekwini’s subdued commercial climate, coupled with an oversupply of office space, will continue to compress rentals whilst driving up vacancy rates. This will be primarily driven by weak corporate demand playing into the hands of occupiers as more competitive deals will be offered.

A healthy industrial project pipeline has been overshadowed by investors and developers alike pulling out of major deals. This is evident with current developments including Clairwood Industrial Park and Cornubia Industrial Business Estate, where no tenants have been secured yet. On existing leases, many landlords are being forced to bring down rentals and escalations, using extended lease adjustments to recover costs.

Though the spike in e-commerce sales has had a significant impact on the logistics and warehousing landscape, it is anticipated that many smaller operators will be heavily impacted by the economic slowdown.

eThekwini's hotels market relies primarily on domestic corporate travel but enjoys a higher weighting

of domestic leisure travel than other major markets in the country. The emergence of the Umhlanga node corporate center bodes well for hotels based in the surrounding area. However, continued urban decay and commercial decline, coupled with muted economic growth, is likely to hamper hotel performance in Durban CBD.

For more information, please find the full report attached.


There was an error submitting the form. Please try again. 



Jones Lang LaSalle (JLL), together with its subsidiaries and affiliates, is a leading global provider of real estate and investment management services. We take our responsibility to protect the personal information provided to us seriously.

Generally the personal information we collect from you are for the purposes of dealing with your enquiry.

We endeavor to keep your personal information secure with appropriate level of security and keep for as long as we need it for legitimate business or legal reasons. We will then delete it safely and securely. For more information about how JLL processes your personal data, please view our privacy statement.