Industrial property outpaces office and retail as SA rental growth diverges by city

South Africa's industrial property market continues to demonstrate resilience relative to the office and retail sectors, supported by demand for warehousing, distribution and manufacturing facilities, but investment opportunities vary significantly between the country's major centres, according to Marcus te Vaarwerk, industrial director at Swindon Property.

According to Rode's second-quarter 2026 research, prime industrial rentals for 500 square metre premises recorded year-on-year growth of approximately 11.7% in Cape Town, 8.4% in the Central Witwatersrand, 6.4% on the East Rand and 4.6% in Durban. Industrial vacancies in Cape Town averaged around 3.3% during the first half of 2026.

"South Africa's industrial property market continues to demonstrate resilience relative to the office and retail sectors," te Vaarwerk said, adding that location, tenant demand, building specifications and acquisition price are critical to long-term performance. He cautioned that rental growth alone does not determine investment performance, with the price paid, sustainable rental income, vacancy risk and future capital expenditure equally important.

Cape Town's established industrial precincts benefit from sustained occupier demand and constrained availability, which supports rental growth, but competition for quality space can push acquisition prices higher. "A R30 million budget may secure less floor area than in Johannesburg or Durban, while the purchase price may already reflect expectations of further rental growth," te Vaarwerk said.

Greater Johannesburg offers one of the country's most extensive industrial markets, supported by manufacturing, logistics and distribution, and R30 million can secure substantially more floor area than in Cape Town. However, property quality and risk vary considerably between nodes, competing supply can pressure rentals, and older buildings may require significant upgrades to power supply, eaves height, loading facilities or yard space.

Durban's market is closely linked to the Port of Durban and the N3 freight corridor, with precincts such as Riverhorse Valley, Springfield and Prospecton accommodating logistics, warehousing and manufacturing. Although its 4.6% rental growth was below Cape Town and the selected Johannesburg markets, te Vaarwerk said a well-positioned warehouse serving established distribution networks may still offer a compelling investment case.

Comparing assets requires more than measuring how much floor space a budget buys. Using two hypothetical R30 million properties, he noted that at a net initial yield of 8% a property would generate about R2.4 million in annual net operating income, rising to R2.7 million at 9% - a difference of R300,000 a year - but a higher yield may simply reflect an inferior location, an older building, a short lease, a weaker tenant or greater vacancy risk.

"Ultimately, the strongest investment is not necessarily the one offering the most floor space or the highest initial yield. It is the asset that combines an appropriate purchase price with sustainable income, manageable risk and the potential to remain competitive as occupier requirements and market conditions evolve," te Vaarwerk concluded.