Rode s Report 2018:3

Transcription

1 Rode s Report 2018:3 w w w. r o d e. c o. z a Listed property companies under the cosh Office rentals weaken Industrial rentals shine House prices disappoint Cap rates mostly unchanged

2 Rode s Report 2018:3 i Rode s Report on the South African Property Market 2018:3 Vol. 29 no. 3 Erwin G. Rode (editor-in-chief) Kobus Lamprecht (editor) Editor-in-chief Erwin G. Rode Editor Kobus Lamprecht Survey administrator Samantha Harkers-Kies Advertising Lynette Smit Subscriptions Juwayra Januarie Annual subscription: 4 issues: R5.700,00 (excl. VAT) Published by Rode & Associates (Pty) Ltd. Reg. No: 2009/005600/07 PO Box 1566, Bellville 7535 Tel Fax kobus@rode.co.za Website: Cover illustration Konrad Rode Printing Shumani Mills Communications willie@shumanimills.com Rode & Associates (Pty) Ltd., September All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher. While all reasonable precaution is taken to ensure the accuracy of information, Rode & Associates (Pty) Ltd. shall not be liable to any person for inaccurate information or opinions contained in this publication. Portions of this report may be reproduced for legitimate academic or review purposes provided due attribution is cited.

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7 Rode s Report 2018:3 vi Rode staff Rode staff Erwin Rode BA, MBA (Stell): CEO Kobus Lamprecht BCom (NWU), BComHons and MCom (NWU) Berchtwald Rode BA (Stell), MTRP (UOFS) Juliana Dommisse BEconHons (Stell) Karen E Scott BComHons (Stell), BComHons (UCT) Monique Vernooy BTech(QS), NDREES (Unisa), MSc (UCT) Tobi Retief BA (Stell), NDREES (UNISA) Madeniah Jappie BScHons (Property Studies) (UCT) Stephan van der Walt MA (Stell) Marlene Tighy BSc (Wits) Hons (OR) (RAU), MBL (UNISA), Pr Sci Nat Janelle Van Harte Paralegal (School of Paralegal Studies) National Diploma in Real Estate (CPUT) Samantha Harkers-Kies ND: HRM (CPUT) Lynette Smit Elizma Hawksley Juwayra Januarie Abigail Van Wyk Shimonay Jonas

8 Rode s Report 2018:3 vii Contents Contents State of the property market State of the property market in quarter 3 of Capitalization rates Cap rates more or less unchanged 3 How to estimate capitalization rates anywhere 14 Listed property Listed property companies under the cosh 17 Office rentals, operating expenses, and office demand & vacancies Office rentals weaken 21 Vacancy rates remain high 44 Industrial rentals and vacancies and industrial stand values Industrial rentals shine 63 Stand values still going strong 94 Residential market Flats market 118 House prices disappoint 146 Building activity & building costs Poor prospects for building activity 149

9 Rode s Report 2018:3 viii Tables Tables Table 1.1: Rental performance in quarter 2018:3 Table 2.1: Prime industrial leaseback escalation rates Table 2.2: Survey of capitalization rates (%): Office buildings Table 2.3: Change in capitalization rates (%): Office buildings Table 2.4: Survey of capitalization rates (%): Industrial buildings Table 2.5: Change in capitalization rates (%): Industrial buildings Table 2.6: Survey of capitalization rates (%): Shopping centres Table 2.7: Change in capitalization rates (%): Shopping centres Table 2.8: Survey of capitalization rates (%): Street-front shops Table 2.9: Change in capitalization rates (%): Street-front shops Table 4.1: Asset class performance: Total returns Table 4.2: Annual total returns on listed property funds to September 2018 Table 4.3: Change in distributions for half- and full-year ended June 2017/18, as well as 2019 guidance 20 Table 5.1: Pioneer office rentals Table 5.2: Market rental rates for office buildings Table 5.3: Standard deviation of market rental rates for office buildings Table 5.4: Typical rent-free period in months Table 5.5: Market parking rentals Table 5.6: Office rental escalation rates on new leases (%) Table 5.7: Escalation rates on operating costs Table 6.1: Sapoa office vacancy factors (%) Table 6.2: Sapoa office stock (m²) Table 6.3: Sapoa new office developments Table 7.1: Pioneer industrial rentals Table 7.2: Mean prime industrial market rentals Table 7.3: Standard deviation from mean prime industrial market rentals Table 7.4: Predominant market escalation rates (%) for industrial leases

10 Rode s Report 2018:3 ix Tables Table 7.5: Indicative operating expenses for industrial buildings Table 8.1: Sensitivity of land value to changes in rent Table 8.2: Mean market values for industrial stands Table 8.3: Standard deviation for industrial stands Table 9.1: Flat vacancies as in quarter 2018:3 Table 9.2: Flat rentals: standard-quality block of flats Table 9.3: Flat rentals: upmarket-quality block of flats Table 9.4: Flat parking rentals Table 10.1: Change in nominal house price by metros Table 10.2: Change in nominal house prices in Cape Town by area Table 10.3: Change in nominal house prices in Johannesburg by area Table 11.1: New non-residential buildings (private sector)(m²) Table 11.2: New residential buildings (private sector)(m²)

11 Rode s Report 2018:3 x Annexures Annexures Annexure 1 Glossary of property terms and abbreviations I Annexure 2 Technical background to the Rode surveys IX Annexure 3 How to interpolate industrial rental rates and land values XII Annexure 4 Approximate building cost rates as at 1 July 2018 XIII Annexure 5 Monthly forecast of Haylett by MFA XIX Annexure 6 BER Building Cost Index XX Annexure 7 Prime overdraft rate at month-end (%) XXI

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13 Rode s Report 2018:3 xii Panellist codes Panellist codes Code Company Telephone number ABA Abacus Divisions ACU Acumen Properties AI Aida Pretoria AKW Akwaba Africa Properties AM Abreal AN Annenberg Property Group ANV ANVIL Property Smith AP API Property Group AP API Property Group AP API Property Group Tshwane AV 5th Avenue Properties AW Watprop AX Avron Commercial Industrial Properties BC CC Barclay Elcott & Associates BD Bruce McWilliams Industries BL Benchmark Property Group BM Jones Lang LaSalle BR Broll Property Group BR Broll Property Group BR Broll Property Group BR Broll Property Group BR Broll Property Group BR Broll Property Group BS B-Sure Group Holdings BV Bordiss Properties BVF Boshoff Visser Property Group CA Chas Everitt CAP Capprop CE Cenprop Real Estate CHR Chris Batting Properties CI City Property Administration CIR Circle Properties CM Capitol Commercial Properties CPS 3Cube Property Solutions CR Colliers International CRE Commercial Realtor of Excellence CRI CRI Properties CUS Cushman and Wakefield Excellerate DAL Dalena Properties DD Diamond Properties DD Diamond Properties DE Dedekind Real Estate DN David Newham Property Management DT Deltahof DVG DVG Investment Group DW Divaris Property Brokers EB ERA Sun Properties EK Ellenberger & Kahts EQV Equity Valuers ER Associated Property Brokers ES Eli Ströh ETC Etchells and Young Property Brokers EXH Executive Homes FO Fosprops Properties/Homenet FS Find a Space FWR Find a Warehouse FWR Find a Warehouse GAM Granite Asset Management GB Knight Frank GB Knight Frank GH Gradion Property Investments GI Growthpoint Properties

14 Rode s Report 2018:3 xiii Panellist codes GI Growthpoint Management Services GO Pam Golding Properties GRV Garden Route Valuers GT Black Pepper Properties GW Goldswain Investments GY GDP Industrial Property HH Hendrik Tryhou Property Consultants HN Harcourts Patrick & Co HN Harcourts - Maritz HN Harcourts Midrand HOU House of Realtors HP Horizon Capital HS Summerton Edelson Commercial HZM Huizemark IK Ikon Property Group IKP Ikon/Phoenix Consultants IPC IPC/Rob Lopes Rentals JR J Margolius & Associates JUS Just Property Helderberg JUS Just Property Atlantic Seaboard KEL Kellaprince Properties Nelspruit KF Kesler Fulford Corporate Property LA Landlords "We do Rentals" LF Leon Fisser LIB Liberty 2 Degrees LM Louis Kruger Property Management MAS Massyn Acquisitions ME Mendace Properties MER Meridian Realty MHP My House Properties MI Platinum Global ML Mindry Properties MO Moolman Group of Companies MP Monarch Rentals MPR Millar's Properties MR Marder Properties MUL Multi Properties MY Mike Shefer Estates NAN Nangate Investments NB North Point Group NE Newbridge Property Services NET Networth Group NEX Nexus Property Group NH Netwater Properties NR National Real Estate NRG SA National Realtors Group Commercial NX Maxigroup OF Omnigro OS Osher Property Solutions OSO Office Space Online PC Propco (1985) PCP Port Commercial Properties PF Permanent Trust Property Group PF Permanent Trust Property Group PH President Estate & General Agents PL Pears Property Consultants PM PDL Property Management PN Propergation Property Solutions PO Propertuity PPG Pulse Property Group PPR Parallel Property PRS ProperSell PRU Properties R US PW Property Window

15 Rode s Report 2018:3 xiv Panellist codes PX Pillay Properties QP Share-List Property QS Commercial Space QU Quadrant Properties RA Real Estate & Property Services RAP Rapid Rentals REN Renico Construction REW Real Work RF Carleon Properties RIZ Rize Property Professionals RK Renprop RM Remax Border East London RM Remax Tricolor RO Reef Property Consultants RPR Rennie Property Broking RR RealNet Premier RR RealNet Premier RR RealNet Stellenbosch RR RealNet Stellenbosch RS Rawson Helderberg Commercial RS Rawson Properties RY Stipec Eiendomskonsultante RZ Oriprops SC Stockton Property Consultants SCM Sotheby's Commercial SCS Sentinel Commercial Services SF Seeff SF Seeff SF Seeff Polokwane SQ Steer And Company SRE Sirago Real Estate SS Serendipityremix SWI Swindon Property Brokers SWI Swindon Property Brokers SWI Swindon Property Brokers SYN Synprop TE Trust & Estate Co TG Theo Goosen Estate Agents TH Trevor Hosiosky Investment Properties TI Torva Property Investments TR Trafalgar TR Trafalgar TR Trafalgar TR Trafalgar TR Trafalgar TR Trafalgar VAR Vartrust Real Estate WA Core Property Group WD Webprop WHF Warehouse Finder WK Wakefields WK Wakefields Ballito ZL Zylmari Properties ZO Zotos Property Group ZZ Anonymous

16 Rode s Report 2018:3 xv Acknowledgements Acknowledgements The writers of Rode's Report express their sincere thanks to: 1. Sapoa, for use of the basic data from their office vacancy and office stock surveys, which we analysed further. 2. The Bureau for Economic Research (BER) and Medium-Term Forecasting Associates (MFA), for the use of their buidling cost data (Haylett and BER BCI) AECOM AFRICA PROPERTY AND CONSTRUCTION COST GUIDE 2018, for the use of their building cost data for various building types. 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 p. xii. 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. Loraine West, who has the task of making sure that all gross grammar mistakes are corrected. 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. 7. Samantha Harkers-Kies, who manages the surveys and compiles the annexures and Lynette Smit and Juwayra Januarie for their technical assistance. 8. The JSE Securities Exchange, Statistics South Africa and the Bond Exchange of South Africa for the use of their data.

17 Rode s Report 2018:3 xvi Foreword Foreword Dear Reader Welcome to the third issue of Rode s Report on the South African Property Market (RR) for The property market is under pressure, as reflected by the dire performance of the listed sector. Let s not forget that the economy is in recession. The new administration in the Union Buildings is trying to prop up the economy through its foreign investment drive and a domestic stimulus package, but time will tell whether this will bear fruit. As usual, we report on the movements of several critical property variables, ranging from capitalization rates, market rentals, operating costs, escalation rates, land values and house prices. If you want to communicate with a specific niche market, you can contact Lynette Smit on for RR advertising rates. Lynette and Samantha Harkers-Kies are in charge of expanding our survey panel. Their job is to give you access to the opinions of as many property experts as possible. We appeal to all market participants who feel they have sufficient property market knowledge to become a panellist, to please contact Lynette or Samantha on it s for the benefit of everyone in the industry. As a panellist you will also get invaluable exposure. Vigilant readers will notice the ongoing expansion of our coverage for the South African property market. In this issue some of the areas we have added include Dube Tradeport (industrial township, Durban), Durbanville Industrial Park (Cape Town) and Waverley/Bramley (office node, Johannesburg). We are also growing our coverage for flats and have added the following areas: Stellenbosch Campus, Milnerton Burgundy Estate, Sandown/Sunningdale (Cape Town) and Hatfield (Pretoria). Readers are welcome to contact Rode if they have a strong case for the inclusion of other areas. Happy reading and all the best for the last stretch of 2018! Kobus Lamprecht Editor 8 October 2018

18 Property is constantly in the limelight and investors are searching for meaningful, property-specific information. This makes a compelling argument for finely-targeted advertising in the Rode s Report on the SA Property Market. This independent analysis is one of the most widely-read publications of its kind. Advertise your services and products to excellent effect Target audience: Rode s Report is targeted at investors and property practitioners such as property developers, property managers, landlords, merchant banks, commercial banks and non-residential property brokers. Continued exposure: A quarterly publication, Rode s Report is used as a reference source with a long shelf life. Rates and special advertising offers: Take advantage of Rode s special advertising offer: an offer, extended to first-time advertisers only, entitles the advertiser to a 25% discount. Normal rates appear on the Rode website. Advertise on Rode s website: For an extension of your marketing, also consider an advertisement on the Rode website. Bookings and more information: Telephone: lynette@rode.co.za Website:

19 Rode s Property Valuation Services Rode s field of expertise includes property valuations, real estate economics, property research (various Rode publications) and property consultancy. As one of South Africa's largest independent property valuation firms, Rode has over the past twelve months valued property with a total market value of more than R30 billion. These properties include: Shopping Centres: Rode is considered one of South Africa's premier shopping-centre valuers. Agricultural property Commercial and industrial property: Rode provides listed companies, private companies and financial institutions, amongst others, with non-residential property valuations. Bare dominiums Specialised properties Why use Rode's valuation services? Rode's valuation approach is underpinned by, inter alia, regular and rigorous market surveys, capitalization rate estimates based on regression models and techniques, and the opportunity cash flow (OCF) method. This ensures uniform and realistic market valuations, and largely avoids forecasting. In addition, Rode operates nationally which results in a unique overview of the South African property market. Rode performs all types of valuations for our clients, from DCF to income capitalization to comparable sales, as well as everything in between. Rode is currently the annual top performer in the pmr.africa awards which recognises excellence in the industry.

20 Rode s Report 2018:3 1 State of the Property Market Chapter 1: State of the property market State of the property market in quarter 3 of 2018 The property market is under pressure, as reflected by the dire performance of the listed sector. The threat of land expropriation without compensation is not helping, although the situation appears to be somewhat calmer now as it seems the government is not going to go the whole hog. The industrial property market remains the best performer among the different property types, but here growth is also starting to slow, with vacancies creeping up from low levels. The good news is that rental growth is still outpacing buildingcost inflation (as measured by the BER BCI). However, the same can t be said about office rentals and house prices. Let s not forget that the economy is in recession, which can be expected to hold back the demand for space. The new administration in the Union Buildings is trying to prop up the economy through its foreign investment drive and a domestic stimulus package, but time will tell whether this will bear fruit as all the immediate remedies are politically unpalatable, not to mention that many constraints are structural (long-term problems) that cannot be rectified in the short term. Thus, in the short term the economy will need all the support it can get without endangering the long-term prospects. A good example of this caveat is that more government debt will be the road to ruin. Whiffs of Italy. Therefore, tough times are probably here to stay for a while. 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 2018:3) with that collected a year ago. Office market In the third quarter of 2018, the office market failed to build on the better second-quarter performance. Nevertheless, national rentals still managed to grow (+4%) in line with building-cost inflation, but this is mostly thanks to continued stellar growth in Cape Town (+10%). Rentals in other major cities mostly disappointed a symptom of an oversupply. Johannesburg decentralized rentals rose by about 4%, on par with building-cost inflation. Rental rates in Pretoria decentralized increased by 1%, while they fell by 1% in Durban. Industrial market Industrial property continues to be the shining light in the property market due to its superior rental growth and lower vacancy rates. However, Rode s latest data indicate the market is starting to cool somewhat, with third-quarter national rental growth slowing to 6% from 7,5% in the previous quarter. A summary of the main findings per property type follows.

21 Rode s Report 2018:3 2 State of the Property Market Table 1.1 Rental performance in quarter 2018:3 % change from four quarters ago (on smoothed data) Nominal Real* A-grade decentralized office rentals Sandton CBD 2,1-2,0 Randburg Ferndale 4,2 0,0 Brooklyn/Waterkloof 3,5-0,7 Hatfield -3,1-7,0 Berea (Durban) -2,4-6,3 La Lucia/Umhlanga Ridge -1,5-5,6 Claremont Upper 22,7 17,8 Tyger Valley 12,4 7,9 Century City 16,5 11,8 Prime industrial rentals (500 m² units) Central Witwatersrand 4,8 0,5 East Rand 3,1-1,0 Durban metro 3,9-0,3 Cape Peninsula 14,9 10,3 * Nominal values deflated by BER Building Cost Index Nationally, industrial rental growth was largely driven by the Cape Peninsula, where nominal market rentals grew by an incredible 15% year on year. This sharp growth is in line with Rode s vacancyfactor data, which indicate the region has the least amount of vacant space in the country. Rentals in the Central Witwatersrand, Durban and East Rand grew by 5%, 4% and 3% respectively. Rentals in the West Rand declined by 3%. This implies that rentals managed to grow in real terms only in the Cape Peninsula and the Central Witwatersrand. Housing market In the first eight months of 2018, national nominal house prices grew by 3,5% year on year as the market remains under pressure from weak demand. This implies that house prices are still declining in real terms. By metro, Cape Town still stands out, with growth of 8,7% in the second quarter of 2018, although growth has slowed over the past two years. In comparison, prices in Johannesburg, Ekurhuleni and Pretoria all grew by around 3%.

22 Rode s Report 2018:3 3 Standard capitalization rates Chapter 2: Capitalization rates Capitalization rates are more or less unchanged Kobus Lamprecht Capitalization rates on directly held nonresidential property in South Africa in the third quarter of 2018 were about the same as in the second quarter. However, the data in this chapter look slightly better (still declining) because the smoothed time series include declining cap rates of previous quarters. In the national time series, Cape Town was the biggest driver of the slightly better national cap rates. (Note again, all time series in this chapter are smoothed.) In the third quarter, the respective national cap rates were 9,5% for prime multi-tenanted office property, 9,1% for prime industrial leaseback capitalization rates and 7,8% for regional shopping centres, as shown in the chart. % Regional shopping centres 8 Industrial leasebacks Decentralized offices Source of data: Rode's Time Series National capitalization rates by property type The declining cap rates earlier in the year we ascribe to Ramaphoria that existed at the time. However, this trend has been stopped in its tracks as South Africans contemplate the harsh reality of the state of the economy. Below, we first briefly discuss the outlook for capitalization rates, followed by the movement in capitalization rates for the different property types by region. Outlook for capitalization rates The outlook for the growth in income streams from directly held non-residential property continues to be marred by poorly performing property fundamentals, such as above-average vacancy rates and subinflation rental growth. The consensus view of economists is that interest rates will increase over the next few years. The weak economy has been a strong deterrent to rate hikes thus far. However, rates might increase within the next year to contain inflation, which is picking up due to the weak rand and record-high fuel prices, which could lead to second-round inflation (workers demanding wage increases to compensate them for rising cost of living). Also, given rising interest rates in the USA, interest rates here will have to go up eventually to keep or attract muchneeded portfolio investments. The above discussion was about shortterm interest rates. Long interest rates can affect the total returns (hurdle rates) investors expect on property through three channels, viz. (1) the substitution principle (alternative, long-term investments like 10-year bonds now yield a higher or lower return), (2) the cost of

23 Rode s Report 2018:3 4 Standard capitalization rates financial gearing (shorter-term interest rates), and (3) the market s rating of listed property funds like REITs that can affect the profitability of purchasing directly held property. The result could be that property investors will require higher income returns capitalization rates when investing in property. Higher capitalization rates of course mean lower prices (of directly held properties) holding all other factors constant. and/or the higher the perceived risk of the location. % Smoothed Capitalization rates Prime Johannesburg decentralized offices Bryanston Rivonia Sunninghill Randburg Office capitalization rates A look at Johannesburg decentralized nodal levels reveals that third-quarter 2018 office capitalization rates were unchanged from the second quarter. In other words, our panellists remained of the opinion that investors currently require a minimum net income return of about 9,7% to induce them to buy or sell grade-a multi-tenanted property in Johannesburg decentralized. This is 0,9 percentage points higher than in Cape Town. Source of data: Rode's Time Series Capitalization rates in prime Pretoria decentralized office nodes were also unchanged in the third quarter of 2018 as rate gains in Brooklyn offset worsening rates in Centurion. Capitalization rates stayed stable in Hatfield and Midrand Smoothed Capitalization rates Prime Pretoria decentralized offices Brooklyn Hatfield Centurion Midrand Capitalization rates in most Johannesburg nodes either stayed the same (see first chart) or declined (second chart). % Smoothed Capitalization rates Prime Johannesburg decentralized offices Source of data: Rode's Time Series % Sandton CBD Parktown Rosebank Midrand The average capitalization rate for prime Durban decentralized office property declined slightly to 9,6%. Note the worsening La Lucia/Umhlanga Ridge cap rates, which are probably due to weaker market rentals as vacancies rise (see Chapters 5 and 6). Source of data: Rode's Time Series During the quarter, capitalization rates on grade-a multi-tenanted properties in Johannesburg decentralized ranged from 9% in the Sandton CBD to as high as 10,5% in Randburg. The difference in capitalization rates between, for example, nodes such as Sandton CBD and Randburg, can be used as a guide to the market s perception of these nodes. The higher the capitalization rate, the worse the expected growth in income streams % Smoothed Capitalization rates Prime Durban decentralized offices Umhlanga Ridge Westway Essex Terrace Berea Source of data: Rode's Time Series

24 Rode s Report 2018:3 5 Standard capitalization rates Grade-A capitalization rates in Cape Town decentralized improved to 8,8% in the third quarter, from just above 9% in the previous quarter. Cape Town has the lowest cap rates in the country. The cap rates of the different nodes mostly improved (declined) as shown in the chart. % Smoothed Capitalization rates Prime Cape Town decentralized offices Claremont Tyger Valley Century City Westlake Source of data: Rode's Time Series Shopping centre capitalization rates Capitalization rates of regional shopping centres in the major conurbations also showed mild improvement (declined). In the third quarter of 2018, investors in regional centres required a net income return of between 7,5% and 8% to induce them to buy or sell regional centres. Note that regional centres are the secondlargest type of centre, after superregional centres. The latter s capitalization rates are, of course, even lower. We found that the national cap rates for the smaller community and neighbourhood centres were 8,5% and 9,2% respectively Capitalization rates Regional shopping centres Industrial capitalization rates In the third quarter of 2018, capitalization rates on industrial leasebacks in the country s major industrial areas declined slightly from previous-quarter levels. Our respondents believed investors in prime industrial property (with a leaseback covenant) required a minimum net income yield of 9% in the country s top cities and nodes. Most regions recorded an improvement in cap rates. This is in line with generally low vacancy rates and above-inflation rental growth in most of the major regions. However, rentals do seem to be slowing (see discussion in Chapter 7). The Cape Peninsula (8,3%) had the lowest capitalization rate, which is not surprising, given its superior rental and vacancy rates. % Source of data: Rode's Time Series Capitalization rates Prime industrial leasebacks Cape Peninsula Durban Pretoria Central Witwatersrand % Pretoria Cape Peninsula Central Witwatersrand Durban Source of data: Rode's Time Series The prospects for income-stream growth from shopping centres remain weak due to the poor outlook for consumer spending amid a surfeit of shop space. The outcome of this could mean investors eventually requiring higher returns when investing in shopping centres, and consequently, higher market capitalization rates. Leaseback escalation rates Table 2.1 shows that the average leaseback escalation rate (on new leases) in the third quarter of 2018 was 8,0%. The standard deviation of 0,3% suggests the leaseback escalation rate can be as low as 7,7% or as high as 8,3%. The escalation rate is an (often unsuccessful) attempt by the market to forecast the average growth in market rentals until the expiry of the lease. Note that we define a leaseback as a lease agreement that has, inter alia, a term at inception of 10 years or longer.

25 Rode s Report 2018:3 6 Standard capitalization rates This concludes our analysis of capitalization rates. The capitalization rate tables follow. Table 2.1 Prime industrial leaseback escalation rates Quarter 2018:3 Mean SD N Change 2018:3 less 2018:2 Broker contributor codes 8,0 0,3 17 0,3 AKW,AW,BR,BVF,CAP,EK,ER,FO,GY,HN,HS, MAS,MUL,NRG,PC,QP,REW,RR,TG,TH 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 article are smoothed. A standard capitalization rate (colloquially referred to as a cap rate) is the expected net operating income for year 1, assuming the entire building is let at open-market rentals, divided by the purchase price. This calculation ignores VAT, transfer duty and income tax, and assumes a cash transaction. All references in Rode s Report to cap rates and capitalization rates mean standard capitalization rates. Capitalization rates for CBDs (excluding the Cape Town CBD) are of little use because when office properties are sold, they are invariably converted to flats. The high standard deviation from the mean capitalization rate for office and industrial properties in some nodes, as reported in the accompanying capitalization rate tables, is indicative of the uncertainty prevailing in these nodes or areas. With few sales taking place, the evidence on ruling capitalization rates is thin and opinions vary more than in the more popular areas. This means 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. xii.

26 Rode s Report 2018:3 7 Standard capitalization rates Best location Table 2.2 Survey of capitalization rates (%) Office buildings Means for quarter 2018:3 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 10,5 0,5 5 10,1 0,6 5 11,3 0,2 4 13,3 0,5 3 Braamfontein 10,5 0,3 5 9,9 0,4 4 11,4 0,4 4 12,8 0,2 3 Parktown 9,9 0,1 2 9,4 0,1 3 10,8 0,2 3 12,1 0,9 2 Rosebank 9,1 0,5 5 8,9 0,3 4 10,5 0,0 3 11,8 0,8 2 Bedfordview 10,0 0,0 2 9,5-1 10,9 0,1 2 11,3-1 Sandton CBD 9,0 0,4 6 8,8 0,2 3 9,9 0,4 5 11,5 1,0 2 Rivonia 9,7 0,4 3 9,4 0,3 3 10,6 0,4 4 11,9 0,6 2 Bryanston 9,3 0,3 3 9,2 0,1 3 10,7 0,6 4 11,8 0,8 2 Sunninghill 9,8 0,6 3 9,6 0,4 3 10,9 0,1 3 11,8 0,5 3 Randburg Ferndale 10,5 0,2 5 10,3 0,2 4 11,5 0,3 5 12,8 0,4 3 Midrand 10,3 0,8 4 10,0 0,4 4 10,9 0,7 4 11,7 0,2 3 Germiston CBD 12,5-1 10,8 0,3 2 11,5-1 13,3 0,3 2 Pretoria CBD 10,1 0,4 2 9,9 0,4 3 11,0 0,0 3 12,3 0,6 3 Hatfield 9,8-1 9,3-1 10,3-1 10,8-1 Brooklyn 9,5-1 9,0-1 10,0-1 10,5-1 Centurion 9,8 0,6 4 9,6 0,1 2 10,4 0,9 5 11,5-1 Nieuw Muckleneuk 9,5-1 9,0-1 10,5-1 11,0-1 Menlyn/Lynnwood 9,5-1 9,0-1 10,0-1 10,5-1 Vaal Triangle 10,3 0,3 2 10,0 0,0 2 11,1 0,1 2 11,9 0,4 2 Nelspruit 10,0 0,4 6 9,9 0,4 2 10,6 0,3 6 11,7 0,3 6 Polokwane 10,1 0,6 2 9,5 0,6 3 10,8 0,4 3 11,8 0,3 3 Durban CBD 10,3 0,3 2 10,0 0,7 3 10,9 0,2 4 11,6 0,6 2 Berea 9,8-1 9,3-1 10,6 0,4 2 10,8-1 Essex Terrace Westway La Lucia Ridge 9,7 1,0 3 9,2 0,6 3 9,4 0,3 3 10,3 0,3 2 Pietermaritzburg 10,0 0,3 2 9,8 0,0 2 10,9 0,1 2 11,8 0,5 2 Cape Town CBD 9,1 0,5 5 8,5 0,3 6 9,8 0,6 6 11,0 0,7 6 Bellville CBD 9,2 0,1 3 9,3 0,2 3 10,1 0,3 4 10,9 0,8 3 Bellville Tygervalley 9,0 0,5 5 9,2 0,2 3 10,0 0,5 5 11,0 0,8 4 Century City 8,5 0,4 4 8,5 0,0 3 9,3 0,3 4 10,2 0,2 3 Westlake 8,4 0,4 2 8,4 0,3 3 9,4 0,1 2 10,5-1 Claremont 8,6 0,6 2 8,7 0,2 3 9,4 0,3 3 10,1 0,4 3 Port Elizabeth 9,9 0,1 5 9,6 0,3 5 10,8 0,5 4 11,7 0,8 4 East London 9,6 0,5 5 9,5 0,4 4 10,9 0,2 5 12,4 0,8 4 Bloemfontein CBD 9,3 0,4 4 9,3 0,2 3 10,3 0,2 3 11,3 0,4 4 George 9,3 0,2 3 9,0 0,0 2 9,6 0,1 2 9,6 0,1 2 Windhoek n = Number of respondents - = Not available or fewer than two respondents SD = See Glossary of terms and abbreviations in Annexure 1.

27 Rode s Report 2018:3 8 Standard capitalization rates Best location Table 2.3 Change in capitalization rates (% points) Office buildings Means for quarter 2018:3 less quarter 2018:2 Grade A: Multitenant Grade A: Lease-back Grade B: Multitenant Grade C: Multitenant Broker & owner contributors Johannesburg CBD 0,1 0,3 0,3 0,1 AKW,IK,QU,REW,TH Braamfontein 0,1 0,1 0,4 0,2 AKW,IK,QU,REW,TH Parktown 0,0-0,1-0,7-0,2 QU,REW,TH Rosebank 0,0-0,1-0,3-0,1 AW,AKW,QU, REW,TH Bedfordview 0,0-0,3 0,5-0,3 IK,TH Sandton CBD 0,0-0,2-0,9-0,4 AKW,AW,IK,QU,REW, TH Rivonia -0,1 0,1 0,6-0,4 IK,QU,REW,TH Bryanston 0,0 0,1-0,1-0,1 IK,QU,REW,TH Sunninghill -0,2 0,2 0,4-0,5 QU,REW,TH Randburg Ferndale 0,1 0,2 0,7 0,8 AKW,IK,QU,REW,TH Midrand 0,3 0,2-0,2-0,4 AW,IK,QU,TH Germiston CBD 2,2 0,8 0,7 0,3 QU,TH Pretoria CBD -0,1-0,3-0,2-0,1 QU,REW,TH Hatfield/Hillcrest -0,1-0,3-0,8-0,8 TH Brooklyn 0,0-0,3-0,3-0,8 TH Nieuw Muckleneuk 0,4 0,3 0,4 1,2 TH Centurion 0,0-0,3 0,9-0,3 AI,HN,IK,QU,TH Menlyn/Lynnwood 0,0-0,3 0,0-0,8 TH Vaal Triangle - 0,2 1,1-0,4 QU,TH Nelspruit 0,0 0,0-0,2 0,2 HH,KEL,PM,QU,RZ,TH Polokwane 0,0-0,2 0,3-0,2 QU,TG,TH Durban CBD 0,1 0,2 0,1-0,9 IK,QU,SRE,TH Berea 0,1-0,3-0,4-1,1 SRE,TH Essex Terrace SRE Westway SRE La Lucia/Umhlanga 0,4 0,0-0,6-0,4 QU,SRE,TH Ridge Pietermaritzburg -0,2-0,1 0,8-0,8 QU,TH Cape Town CBD 0,2 0,0-1,2 0,1 IK,PF,RR,QU,REW,TH, WA Bellville CBD -0,3-0,1 0,2-0,7 IK,PF,TH,WD Bellville Tyger -0,3 0,2-0,6-0,2 CA,IK,PF,RR,TH,WD Valley Century City -0,4 0,0-0,9-0,7 CA,IK,PF,QU,TH Westlake - 0,4-0,1 - IK,QU,WA Claremont -0,7 0,1 - -0,2 IK,TH,WA Port Elizabeth -0,1-0,2 1,3 0,2 BR,HS,NRG,QU,TH East London -0,4 0,1 0,4-0,3 CAP,CHR,ER,QU,TH Bloemfontein CBD -0,4-0,2-0,6-0,3 EK,EQV,NR,TH George -0,2 0,2-0,9-1,1 BVF,MUL,TH Windhoek

28 Rode s Report 2018:3 9 Standard capitalization rates Best location Table 2.4 Survey of capitalization rates (%) Industrial buildings Means for quarter 2018:3 Prime leaseback (AAA Tenant) Prime quality non-leaseback Secondary quality building Prime industrial park Mean SD n Mean SD n Mean SD n Mean SD n Central Wits 8,9 0,6 7 9,6 0,2 5 10,4 0,2 5 9,8 0,5 7 West Rand 9,8 0,6 3 10,5 0,8 4 11,1 0,5 4 10,3 0,7 4 East Rand 9,2 0,5 6 9,8 0,6 6 10,8 0,8 6 9,8 0,7 6 Far East Rand 9,8 0,9 3 10,3 0,8 3 10,3 0,7 3 11,1 0,7 3 Pretoria 9,5 0,5 2 9,8 0,3 2 10,0 0,3 4 9,3 0,5 4 Vaal Triangle 9,0-1 9,5-1 10,3-1 9,3-1 Nelspruit 9,3-1 9,4 0,2 5 11,3 0,4 5 9,1 0,2 5 Polokwane 9,1 0,1 2 10,1 0,4 2 11,0 0,5 2 9,3 0,3 2 Durban greater 8,9 0,5 6 9,3 0,3 6 10,6 0,7 5 9,8 0,4 6 Pietermaritzburg 9,0-1 9,5-1 10,3-1 9,3-1 Cape Peninsula 8,3 0,2 6 9,3 0,4 6 9,9 0,5 8 9,3 0,4 6 Port Elizabeth 8,9 0,1 3 9,8 0,4 4 10,3 0,3 5 9,9 0,3 5 East London 9,4 0,1 2 9,9 0,4 5 11,5 0,7 5 10,1 0,5 5 Bloemfontein 10,2 0,8 3 9,9 0,1 2 11,2 0,6 3 9,8 0,2 3 George 8,9 0,1 2 9,6 0,3 3 10,3 0,5 3 9,2 0,6 3 Windhoek n = Number of respondents - = Not available fewer than two respondents SD = See Glossary of terms and abbreviations in Annexure 1.

29 Rode s Report 2018:3 10 Standard capitalization rates Best location Table 2.5 Change in capitalization rates (% points) Industrial buildings Means for quarter 2018:3 less quarter 2018:2 Prime leaseback Prime nonleaseback Secondary quality building Prime Industrial park Broker & owner contributors Central Wits -0,1-0,1-0,3-0,2 AKW,AW,FWR,IK,QU, TH,REW West Rand -0,1 0,0-0,1-0,3 AKW,FWR,QU,TH East Rand -0,1-0,2-0,3-0,1 AKW,FWR,ME,QU, REW,TH Far East Rand -0,4-0,2-0,9 0,8 FWR,QU,TH Pretoria 0,1 0,2-0,1 0,0 AI,HN,MAS,QU,TH Vaal Triangle -0,2 0,0-0,3-0,6 TH Nelspruit 0,2 0,0 0,0 0,0 HH,KEL,PM,RZ,TH Polokwane 0,0 0,4 0,3-0,7 TG,TH Durban 0,0 0,2 0,8 0,3 IK,PC,QP,QU,SRE,TH Pietermaritzburg -0,2 - -0,1-0,3 TH Cape Peninsula -0,1-0,2-0,1-0,3 DD,GY,IK,PF,QU,RR, TH,WA Port Elizabeth -0,1-0,2-0,1 0,3 BR,HS,NRG,QU,TH East London -0,1-0,1 0,1 0,1 CAP,CHR,QU,ER,TH Bloemfontein 0,3-0,1 0,1-0,4 EK,EQV,TH George -0,1 0,1-0,2-0,5 BVF,MUL,TH Windhoek Table 2.6 Survey of capitalization rates (%): shopping centres Means for quarter 2018:3 Best location Super-regional Regional Community Mean SD n Mean SD n Mean SD n Witwatersrand 7,2 0,3 5 7,8 0,3 6 8,3 0,5 5 Pretoria 7,3 0,3 4 7,8 0,3 4 8,5 0,7 5 Vaal Triangle 8,3 0,3 2 8,0 0,4 3 8,8 0,8 2 Nelspruit 7,8 0,5 3 8,1 0,4 8 8,1 0,3 6 Polokwane 7,7 0,6 4 8,2 0,5 4 9,1 0,5 3 Durban 7,4 0,4 4 7,9 0,4 4 8,8 0,5 4 Pietermaritzburg 8,0 0,3 2 8,3 0,4 3 9,0 0,7 4 Cape Town 7,1 0,3 4 7,6 0,3 4 8,3 0,4 4 Port Elizabeth 7,9 0,4 4 8,4 0,5 7 9,3 0,6 7 East London 8,0 0,4 3 8,8 0,4 4 9,9 0,4 5 Bloemfontein 8,1 0,1 2 8,3 0,4 3 9,5 0,3 5 Platteland 8,0 0,5 2 8,5 0,5 2 9,5 0,2 3 Townships 8,3-1 8,4 0,4 2 9,4 0,1 3 George 7,8 0,3 2 8,3 0,3 2 9,3 0,3 2 Windhoek n = Number of respondents - = Not available SD = See Glossary of terms and abbreviations in Annexure 1.

30 Rode s Report 2018:3 11 Standard capitalization rates Table 2.6 (continued) Survey of capitalization rates (%): shopping centres Means for quarter 2018:3 Best location Neighbourhood Local convenience Retail warehouse Mean SD n Mean SD n Mean SD n Witwatersrand 9,4 0,5 5 10,3 0,4 5 9,9 0,6 6 Pretoria 9,1 0,7 5 9,7 0,9 6 9,6 0,9 6 Vaal Triangle 9,8 0,2 3 10,6 0,3 3 9,9 0,7 4 Nelspruit 9,3 0,4 8 10,2 0,4 8 9,8 0,5 8 Polokwane 9,9 0,2 4 10,1 0,4 3 9,8 0,7 5 Durban 9,5 0,4 4 10,5 0,4 3 9,8 0,5 4 Pietermaritzburg 9,7 0,3 4 10,6 0,3 3 9,6 0,3 3 Cape Town 8,8 0,6 5 9,8 0,7 5 9,5 0,3 4 Port Elizabeth 9,8 0,4 7 10,6 0,4 7 9,8 0,6 7 East London 9,9 0,5 6 10,6 0,3 6 10,0 0,5 5 Bloemfontein 9,8 0,2 6 10,5 0,3 5 10,4 0,5 5 Platteland 10,3 0,4 4 10,7 0,3 4 10,5 0,6 4 Townships 9,8 0,2 4 10,6 0,4 4 10,3 0,6 3 George 9,6 0,2 4 10,2 0,5 5 9,4 0,1 2 Windhoek n = Number of respondents - = Not available SD = See Glossary of terms and abbreviations in Annexure 1. Table 2.7 Change in capitalization rates (% points): shopping centres Means for quarter 2018:3 less quarter 2018:2 Best location Super regional Regional Community Broker & owner contributors Witwatersrand -0,2 0,0 0,3 AKW,IK,QU,REW,SYN,TH Pretoria -0,2-0,3-0,4 HN,IK,MAS,QU,REW,TH Vaal Triangle -0,1-0,8-0,2 IK,QU,REW,TH Nelspruit - 0,2 0,1 HH,IK,KEL,PM,QU,REW,RZ,TH Polokwane 0,1 0,0-0,1 IK,QU,REW,TG,TH Durban -0,2-0,1-0,1 IK,QU,REW,TH Pietermaritzburg -0,3 0,3 0,1 IK,QU,REW,TH Cape Town 0,0 0,1-0,2 IK,QU,REW,RR,TH Port Elizabeth -0,5-0,1 0,0 BR,HS,IK,NRG,QU,REW,TH East London -0,3 0,2 0,4 CAP,CHR,ER,IK,QU,REW,TH Bloemfontein -0,7-1,3 0,3 EK,EQV,IK,QU,REW,TH Platteland -0,8-0,5-0,3 FO,IK,MAS,QU,TH Townships -0,1-0,1-0,1 IK,QU,REW,TH George -0,3 0,4 0,4 BVF,IK,MUL,REW,TH Windhoek - - -

31 Rode s Report 2018:3 12 Standard capitalization rates Table 2.7 (continued) Change in capitalization rates (% points): shopping centres Means for quarter 2018:3 less quarter 2018:2 Best location Neighbourhood Local convenience Retail warehouse Broker & owner contributors Witwatersrand 0,1-0,1 0,1 AKW,IK,QU,REW,SYN,TH Pretoria -0,1 0,4 0,5 HN,IK,MAS,QU,REW,TH Vaal Triangle -0,2-0,3 0,1 IK,QU,REW,TH Nelspruit 0,0-0,1 0,2 HH,IK,KEL,PM,QU,REW,RZ,TH Polokwane -0,9-1,1 0,0 IK,QU,REW,TG,TH Durban 0,0 0,0 0,4 IK,QU,REW,TH Pietermaritzburg -0,2-0,3-0,2 IK,QU,REW,TH Cape Town 0,1-0,1 0,1 IK,QU,REW,RR,TH Port Elizabeth 0,0-0,1 0,0 BR,HS,IK,NRG,QU,REW,TH East London -0,2-0,1 0,0 CAP,CHR,ER,IK,QU,REW,TH Bloemfontein -0,3-0,2 0,1 EK,EQV,IK,QU,REW,TH Platteland 0,4 0,8 0,8 FO,IK,MAS,QU,TH Townships -0,1 0,3 0,8 IK,QU,REW,TH George 0,3 0,1 0,3 BVF,IK,MUL,REW,TH Windhoek Table 2.8 Survey of capitalization rates (%): street-front shops Means for quarter 2018:3 Best location Metro CBD Decentralized Mean SD n Mean SD n Johannesburg 10,5 0,4 3 10,2 0,6 3 Pretoria 10,3 0,6 4 9,9 0,7 4 Vaal Triangle 10,8 0,9 4 10,4 0,4 3 Nelspruit 11,9 0,6 7 10,8 0,2 6 Polokwane 10,7 0,5 3 10,3 0,2 3 Durban 10,3 0,2 3 9,8 0,3 2 Pietermaritzburg 10,6 0,4 4 10,5 0,5 3 Cape Town 9,6 0,4 5 9,7 0,2 3 Port Elizabeth 11,1 0,7 6 11,0 0,8 5 East London 9,9 0,7 3 10,7 0,4 4 Bloemfontein 10,3 0,4 5 10,1 0,2 4 George 10,1 0,7 5 10,0 0,6 4 Windhoek n = Number of respondents - = Not available SD = Standard deviation. See Glossary of terms and abbreviations in Annexure 1.

32 Rode s Report 2018:3 13 Standard capitalization rates Table 2.9 Change in capitalization rates (% points): street-front shops Means for quarter 2018:3 less quarter 2018:2 Best location Metro CBD Decentralized Broker & owner contributors Johannesburg 0,6 0,7 AKW,IK,QU,REW,TH Pretoria 0,4 0,3 HN,IK,MAS,QU,REW,TH Vaal Triangle 0,5 0,4 IK,QU,REW,TH Nelspruit 0,1 0,0 HH,IK,KEL,PM,QU,REW,RZ,TH Polokwane 0,5-0,4 QU,REW,TG,TH Durban 0,2-0,2 IK,QU,REW,TH Pietermaritzburg 0,2 0,4 IK,QU,REW,TH Cape Town 0,1 0,4 DD,IK,REW,RR,TH Port Elizabeth 0,2 0,2 BR,HS,IK,NGR,REW,TH East London -0,6 0,2 CHR,ER,REW,TH Bloemfontein 0,0-0,4 EK,EQV,IK,REW,TH George 0,3 0,0 BVF,IK,MUL,REW,TH Windhoek - -

33 Rode s Report 2018:3 14 Capitalization rate equations Chapter 3: Capitalization rate equations How to estimate capitalization rates anywhere Kobus Lamprecht This chapter provides the reader with a handy, updated tool to estimate the market capitalization rates of office and industrial property anywhere in South Africa, provided he or she is confident about the subject property s gross market rental rate. As the reader will see below, market rental rates are amazingly successful in explaining the level of capitalization rates. On reflection, though, this should not be all that surprising, considering that all the good and bad news pertaining to a property is encapsulated in the ruling market rental rate. Here we think of rental-level drivers such as: Office building equation In our regression analysis of office buildings, we use the market capitalization rates (dependent variables) and gross market rental rates (predictors) of grade 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 54 observations in mainly decentralized nodes. The updated equation is: office capitalization rate % = 13,865 (0,0313 * gross rental) Location Risk (examples of varying risk profiles are a leaseback compared with a multi-tenanted property; the robustness of the covenant) Grade/age. where: gross rental = the gross market rental rate per rentable m 2 per month for grade A, B or C office buildings in quarter 2018:3. An important risk factor typically not reflected in a rental is the design of the building, as it affects its ability to be relet. Here one thinks of purpose-built buildings. The r-squared = 0,65 (which means the level of market rentals explains 65% of the variation in capitalization rates, without controlling for other predictors). The standard error (SE) is 0,6 and n = 54. Thus, the moderately strong relationship between market rental rates and capitalization rates allows the researcher to build a regression model with which to estimate the capitalization rate. Readers should note that it is not advisable to use this function for gross market rental rates that fall much outside the range of R70/m²/month to R182/m²/month.

34 Rode s Report 2018:3 15 Capitalization rate equations Example: If the gross office rental rate is R80 per rentable m 2 per month, then the office capitalization rate % is: = 13,865 (0,0313 * 80) = 11,4%. Industrial property equation This national equation expresses the relationship between the capitalization rates and gross market rental rates of prime non-leasebacks and secondary industrial buildings. Please note, the gross market rental rates are those applicable to m 2 units. The source of the data is this issue of Rode s Report. The industrial regression equation, which is based on 16 observations, includes all primary and secondary industrial cities. The updated equation is: industrial capitalization rate % = 12,905 (0,0678 * gross rental) where: gross rental = the gross market rental per rentable m 2 per month as in quarter 2018:3 for prime nonleaseback or secondary industrial space of m 2, located in primary and secondary industrial cities. The r-squared = 0,66 (which means market rental levels explain 66% of the variations in capitalization rates, without controlling for other predictors). The standard error (SE) is 0,4 and n = 16. It is not advisable to use this function for gross market rental rates that fall much outside the range of R26/m²/month to R57/m²/month. Also, remember to use the rental rate applicable to a notional floor area of m² (even if the actual floor area is completely different). Example: If the gross industrial rental for a m² building, located in a primary or secondary industrial city, is R50 per rentable m 2 per month, then the industrial capitalization rate % is: = 12,905 (0,0678 * 50) = 9,5%. Warning: To guard against volatility in the latest survey data, the reader is advised also to consult the regression equation and its applicable rental rate in the previous issue of RR, and to consider using a two-quarter average capitalization rate (unsurveyed) if necessary.

35 Rode s Report 2018:3 16 Capitalization rate equations

36 Rode s Report 2018:3 17 Listed property Chapter 4: Listed property Listed property companies under the cosh Kobus Lamprecht Listed property funds continued to struggle in the third quarter, with the SA listed property index ending September 22% lower compared to September In fact, prices have declined every month since the start of the year. The price declines pushed up income yields, as can be observed in the graph. Change in price (%; y-o-y) SAPY yield SAPY price Source of data: JSE Yearly change in listed property prices vs Yearly change in listed property yields This makes SA listed property still the worst performer among the traditional asset classes (see Table 4.1), with its total return down 22% in the first nine months of Cash (+7,3%) and bonds (+7,1%) had the best total returns over the same period. In Table 4.2 we show the individual performances of listed property funds for different periods to the end of September In the first nine months of this year, the share prices of most companies struggled, with the Resilient stable of companies particularly under the cosh. However, some companies performed very well, such as Emira, Transcend, Octodec, Grit and Fairvest Change in yields (%-points; y-o-y) Grit is the only Africa-focused real estate company on the JSE and seems to be benefiting from better sentiment towards property in Africa in a tough South African environment, which includes a weak rand. Fairvest owns shopping centres in lowerincome areas and has constantly delivered inflation-beating dividend growth for the past six years. In Table 4.3 we show the change in distributions of various SA-focused listed property companies for the half- and fullyear periods ended June It is evident in the table that many companies declared distributions that were worse than in the previous comparable period. This was of course to be expected in view of the poor performance of market rentals over the past few years. Regarding the prospects for short-term earnings and distribution growth for the listed property sector, the macroenvironment within which property funds operate will remain tough. Therefore it is not a surprise that all the companies mentioned in Table 4.3 expect distribution growth to slow further (Growthpoint, Hyprop) or even decline in their next financial period. It seems that single-digit distribution growth (or even less than zero) is the new normal.

37 Rode s Report 2018:3 18 Listed property The wild card is the performance of offshore properties. Here, the performance of the rand plays an important role for real estate investment trusts (REITs) reporting in rand currency. At present (September 2018), the weak rand is a positive factor for such companies. Table 4.1 Asset class performance Total returns (including income yield and capital return) Index Jan-Sep months to Sep 2018 JSE All Share -3,8% 3,3% SA listed property (SAPY) -22,2% -15,7% All property (ALPI) -20,0% -13,6% Cash 5,4% 7,3% Bonds 4,8% 7,1% Source: Catalyst Fund Managers; I-Net Bridge

38 Rode s Report 2018:3 19 Listed property Table 4.2 Annual total returns on listed property funds to September 2018 Individual stock performance Jan-Sep months 3 years Accelerate -12,2% -11,6% -3,7% Arrowhead -11,2% -27,4% -8,7% Delta Prop -1,2% -6,3% 4,0% Balwin -28,6% N/A N/A Dipula A 1,7% 9,3% 6,6% Dipula B -18,5% -14,5% -1,0% Emira 21,7% 23,6% 4,3% Equites -1,8% 3,5% 26,8% Fairvest 26,6% 22,9% 20,4% Fortress A -0,7% 6,9% 9,9% Fortress B -59,5% -55,9% -16,4% Gemgrow A 1,5% 6,4% 2,6% Gemgrow B 1,3% 2,8% 4,6% Greenbay -45,2% N/A N/A Grit 25,0% N/A N/A Growthpoint -9,1% 3,5% 4,4% Hospitality -8,2% -22,5% 4,5% Hyprop -15,2% -5,9% -2,8% Indluplace 0,8% -3,5% 0,5% Investec Prop -5,2% 6,2% 6,7% Liberty Two Degrees (L2D) -7,6% -12,8% - MAS -21,7% N/A N/A Nepi Rockcastle -35,7% N/A N/A Octodec 13,1% -1,4% 1,8% Rebosis -28,8% -31,9% -5,2% Redefine -2,3% 2,4% 3,1% Resilient -55,7% -49,6% -14,3% SA Corporate -10,1% -11,6% 0,0% Safari -13,9% -16,8% -5,2% Spear -2,6% 0,5% - Stor-Age 6,6% 17,2% - Texton -7,5% -14,4% -6,8% Tower 0,3% -4,6% -2,7% Transcend 11,4% N/A N/A Vukile 2,1% 11,1% 12,5% Source: SA REIT Association; Catalyst Fund Managers

39 Rode s Report 2018:3 20 Listed property Table 4.3 Change in distributions for the half- and full year ended June 2017/18, as well as 2019 guidance Company Distribution change Distribution change Distribution change Period * Emira -2,0% 2,5% N/A Full year Fairvest 10,0% 9,9% 8,0 to 9,0% Full year Fortress-A 4,5% 5,0% 5,0% Full year Fortress-B 25,1% 4,1% -2,2 to 2,2% Full year Growthpoint 6,5% 6,5% 4,5% Full year Hyprop 12,1% 8,8% 5,0 to 7,0% Full year L2D N/A -2,3% N/A Half-year Resilient 16,1% -0,3% -0,9 to - 2,7% Full year SA Corporate 4,4% -3,1% N/A Half-year *Distribution growth expected by company Source: Financial results of the various listed property funds

40 Rode s Report 2018:3 21 Office rentals Chapter 5: Office rentals Office rentals weaken Kobus Lamprecht In the third quarter of 2018 the office market failed to build on the better second quarter performance. Nevertheless, national rentals still managed to grow in line with building-cost inflation, but this is mostly thanks to continued stellar growth in Cape Town. Rentals in other major cities mostly disappointed a symptom of an oversupply. Let s not forget that the economy is in recession, which can be expected to hold back the demand for office space. Therefore, tough times are probably here to stay for a while. Below we first discuss the national rental performance, before delving into trends in the major cities. No other major region managed to beat inflation. Johannesburg decentralized rentals increased by about 4%, roughly in line with building-cost inflation. Rental rates in Pretoria decentralized increased by 1%, while they fell by 1% in Durban. In the third quarter of 2018, several nodes in Johannesburg recorded rentals that were lower than in the second quarter of 2018, which is not a surprise given that the city is the economic heartland of South Africa. However, there were some nodes that managed to beat inflation in year-on-year terms, like Rivonia (+17%), Midrand (+13%) and Hyde Park (+13%). Extraordinary growth rates like these can typically be ascribed to the base effect (a year earlier rental levels were very low). National rental growth driven by Cape Town Nationally, market rentals for grade A office space grew by 4% in the third quarter of 2018, slowing from the 6% growth recorded in the second quarter. All major cities performed worse than in the previous quarter, except for Cape Town, where rentals added 10%. R/m² (log scale) Smoothed Nominal decentralized grade-a office rentals Pretoria Johannesburg Durban Cape Town Source of data: Rode's Time Series The sharp rise in Rivonia rentals gels with the recent improvement in its vacancy rate (see Chapter 6), not to mention the base effect. Given Rivonia s excellent access to the N1 bypass, it is surprising that it has been a laggard for quite some time. Rentals in Rosebank (4%) and Sandton (2%) did grow, but slower than the 5% year-on-year pace both nodes grew at in the second quarter. Sandton s average vacancy rate is 16,5% due to weak demand and new developments. Astonishingly, m² of grade A + office space came online in the last year. To put this into perspective, the current grade A + office space in Cape Town, Durban, Port Elizabeth and Pretoria combined totals m². The scary part is that 50% of national developments still to open are in these two nodes. For more details on where the biggest office developments are happening, see Table 6.3 in Chapter 6.

41 Rode s Report 2018:3 22 Office rentals R/m² (log scale) Smoothed Nominal Johannesburg decentralized grade-a office rentals Parktown Rosebank Rivonia Sandton CBD Source of data: Rode's Time Series nodes of Brooklyn/Waterkloof (+4%) and Menlyn (+2%) grew the fastest. Rentals in most of the other nodes declined. Hatfield s rental rate declined by 3%, not surprising as it is the node with the highest grade A vacancy rate (28%) in Pretoria Smoothed Nominal Pretoria decentralized grade-a office rentals Smoothed Real Johannesburg decentralized grade-a office rentals R/m² (log scale) Centurion Brooklyn/Waterkloof Hatfield Menlyn R/m² (log scale) Source of data: Rode's Time Series Parktown Rosebank Rivonia Sandton CBD Smoothed Real Pretoria decentralized grade-a office rentals Source of data: Rode's Time Series Smoothed Nominal Johannesburg decentralized grade-a office rentals R/m² (log scale) Centurion Brooklyn/Waterkloof Hatfield Menlyn R/m² (log scale) Source of data: Rode's Time Series R/m² (log scale) Randburg Ferndale Bryanston Illovo Sandton CBD Source of data: Rode's Time Series Smoothed Randburg Ferndale Bryanston Illovo Sandton CBD Real Johannesburg decentralized grade-a office rentals Note that in real terms, Pretoria decentralized rentals have been trending down since 2002, no doubt the result of continued enthusiastic additions to the inventory of office space. Sooner or later, developers will get the message and moderate new additions to the stock. Given the current building construction costs and the low level of grade A rentals, new developments simply aren t viable unless one can sign up a long lease at well above ruling market rental levels a lease with no reversion before the end of year Source of data: Rode's Time Series In Pretoria decentralized, nominal office rentals increased by 1% from the third quarter of 2017 as vacancy rates remained in double digits. Rentals in the Rental rates in Durban continue to perform dismally, with rentals in most nodes declining compared to a year ago. Westville rentals fell slightly, but improved compared to the second quarter of 2018, which might indicate that growth in year-on-year terms is not far away. The

42 Rode s Report 2018:3 23 Office rentals rental rate in the most popular node, La Lucia/Umhlanga, declined for the fourth consecutive quarter. The vacancy rate of this node continues to worsen (6%), but remains the best in the city. This is also the node for which most developments are earmarked. R/m² (log scale) Smoothed Nominal Cape Town decentralized grade-a office rentals Our comments on Pretoria viabilities evidently also apply to Durban (see chart) Source of data: Rode's Time Series Tyger Valley Claremont Upper Century City Smoothed Nominal Durban decentralized grade-a office rentals Smoothed Real Cape Town decentralized grade-a office rentals R/m² (log scale) R/m² (log scale) Berea La Lucia Ridge Westville 60 Tyger Valley Claremont Upper Century City Source of data: Rode's Time Series Source of data: Rode's Time Series Smoothed Real Durban decentralized grade-a office rentals Pioneer rentals 90 R/m² (log scale) Berea La Lucia Ridge Westway Table 5.1 shows the difference between pioneer rentals and grade A market rentals as in the third quarter of This the reader can use as a rough indication of prospects for eventual market rental growth, should the deus ex machina come down from the skies. Source of data: Rode's Time Series Cape Town s decentralized office nodes continued their remarkable performance in the third quarter of 2018, with year-onyear rental growth of 10%, in line with their low average vacancy rate of 5%. Most nodes recorded rental growth above building-cost inflation. The strongest growth was recorded by Claremont Upper (23%), Century City (17%) and Tyger Valley (12%). Nodes that disappointed include the V&A Waterfront and Rondebosch/Newlands. Pioneer rental levels often represent leases signed on newly erected ondemand buildings, and these reflect today s building costs as developers naturally expect a fair initial yield on their development costs. Thus, when the economy eventually climbs out of its current lethargy, market rentals will in the wake of renewed economic growth shoot up to the levels of these pioneer rentals.

43 Rode s Report 2018:3 24 Office rentals Note in Table 5.3 that the standard deviations are higher than in normal market circumstances, especially where rentals are north of R150/m². There are two possible reasons for this. First, as the mean rents rise, it is to be expected that the standard deviation will grow in absolute terms. For this reason, a case can be made that one should rather track the coefficient of variation (the standard deviation divided by the mean). Second, with the huge amount of new space coming on stream, often at pioneer rentals, the market is battling to find a stable mean for grade A space. Thus, the widening spread between the highest and lowest grade A rentals. 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 inflation. Rode mostly deflates nominal rentals using 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 could have it built (replaced) for R100? When rentals are low relative to replacement costs, the upside potential for rentals is great and vice versa. Thus high real rentals (relative to previous periods) may be an indication of a market that is vulnerable to a downswing, and low real rentals indicate great upside potential. Grateful thanks to our expert panellists for the information they supplied. Codes of the brokers and landlords who contributed to this quarter's survey appear in the table on p. 25. An explanation of the codes can be found on p. xii. Table 5.1 Pioneer office rentals Highest gross nominal market rental rate achieved Quarter 2018:3 Rands per rentable m², gross leases (excl. VAT) Pioneer Normal grade A mean Inferred growth potential Johannesburg dec % Pretoria dec % Durban dec % Cape Town dec %

44 Rode s Report 2018:3 25 Office rentals Table 5.2 Market rental rates for office buildings Quarter 2018:3 Rands per rentable m² per month, gross leases (excl VAT) Grade A + Grade A Grade B Grade C Broker contributor codes mean mean mean mean Johannesburg CBD - 96,00 84,17 66,00 AM,AV,BM,BR,CR,CUS,REW,WHF Braamfontein - 96,29 86,67 71,63 AM,ANV,AV,BM,BR,CR,CUS,GB,LIB, QU,REW Sandton CBD 222,36 170,77 135,23 108,65 AM,AV,AW,BM,BR,CR,CUS,GB,GH, GT,OSO,QU,REW,SWI,WHF,ZO Dunkeld West 182,50 146,67 124,58 95,00 AM,ANV,BM,BR,CUS,GB,GH,OSO, QU,WHF Wierda Valley 172,50 139,81 122,25 95,00 AM,AV,BM,BR,CR,CUS,GB,GH,OSO, QU,SWI,WHF Randburg Ferndale 107,50 95,88 83,89 70,00 AM,BM,BR,CR,CUS,GB,GH,NH,PRS, SWI Rivonia - 132,19 101,20 80,71 AM,AV,BM,BR,CR,CUS,GB,GH,GT, SWI,WHF Rosebank 239,50 182,14 136,67 112,22 AM,ANV,AV,AW,BM,BR,CR,CUS,GB, GH,GT,OSO,QU,WHF Illovo 205,00 172,00 141,25 102,50 AM,BM,BR,CR,CUS,GB,GH,OSO, QU,SWI,WHF Illovo Boulevard 213,50 174,00 145,00 107,86 BM,BR,CR,CUS,GB,GH,GT,QU,SWI Chislehurston 175,00 142,50 120,38 99,00 BM,BR,CUS,GB,GH,GT,OSO, QU,SWI Parktown - 126,38 106,40 85,25 AM,ANV,BM,BR,CR,CUS,GB,GH, OSO,QU,WHF,ZZ Richmond/Milpark - 110,00 83,75 68,75 BR,CUS Bedfordview 145,00 137,00 117,50 89,00 AM,AV,BM,BR,CR,CUS,GB,LIB,ZZ Bruma - 100,71 83,75 74,17 AM,BM,BR,CR,CUS,GB,LIB,WHF,ZZ Woodmead 152,00 129,72 101,50 84,17 AM,AV,AW,BM,BR,CR,CUS,GB,GH, GT,MR,SWI,WHF Sunninghill 130,00 95,42 90,31 79,69 AM,AV,BM,BR,CR,CUS,GB,GH,QU, SWI Bryanston/Epsom Downs 195,45 150,42 121,18 95,45 AM,AV,AW,BM,BR,CR,CUS,GB,GH, GT,OSO,QU,SWI,WHF,ZO Fourways 181,00 143,13 113,13 94,29 AM,AV,BM,BR,CR,CUS,GB,GH,GT, OSO,SWI,WHF,ZZ Houghton 173,50 147,50 117,43 103,33 ANV,BM,BR,CUS,GB,GH,GT,OSO, QU Melrose Arch 227,86 213,00 160,00 - ANV,AV,AW,BM,BR,CR,CUS,GB,GH, GT,OSO,QU,REW,SWI Hyde Park 173,33 155,71 129,29 108,20 AM,ANV,BM,BR,CUS,GB,GH,GT, OSO,QU Eastgate/Kramerville ,50 70,00 CUS,GH,MR Ormonde ,50 70,00 BM,CUS Midrand 177,80 128,75 99,50 72,78 AM,AW,BM,BR,CR,CUS,GB,GH,MR, WHF,ZZ Hendrik Potgieter - 117,83 93,75 79,00 BM,BR,CUS,RA,REN,ZO Corridor Waterfall 210,36 185, BM,BR,CR,CUS,GB,GH,GT,MR,QU For definitions, see Glossary of terms and abbreviations in Annexure 1 or visit

45 Rode s Report 2018:3 26 Office rentals Table 5.2 (continued) Market rental rates for office buildings Quarter 2018:3 Rands per rentable m² per month, gross leases (excl VAT) Grade Grade A Grade B Grade C A + mean mean mean mean Broker contributor codes Waverley/Bramley 160,83 132,50 109,50 84,00 ANV,BR,CUS,GB,GH East Rand Germiston Benoni CBD Benoni dec Pretoria CBD - 91,67 85,00 68,33 AP,BR,CI,CRI,WHF Lynnwood Glen - 110,00 105,00 76,67 ABA,AP,CRI,WHF Lynnwood - 122,50 110,00 70,00 BR,CRI,WHF Lynnwood Manor - 143,33 140,00 95,00 AP,CRI,WHF Lynnwood Ridge - 140,00-95,00 AP,CRI,WHF Faerie Glen 160,00 142,50 135,00 120,00 AP,BR,CRI Val de Grace ,00 - CI,CRI Menlyn 195,00 172,50 136,67 115,00 AP,BR,CRI,WHF Menlo Park (Brooks St) 180,00 161,67 136,67 88,33 AP,BR,CRI Brooklyn/Waterkloof 190,00 165,00 133,33 102,50 AP,BR,CRI Nieuw Muckleneuk 180,00 152,50 133,33 111,67 AP,BR,CRI Hatfield/Hillcrest 170,00 130,00 116,67 80,00 AP,BR,CI,CRI,WHF Centurion - 135,00 103,33 86,67 AP,CRI,HN,WHF Highveld Technopark 157,50 135,00 113,33 98,33 AP,CRI,HN,WHF Sunnyside ,00 72,50 AP,BR,CI,CRI Arcadia 140,00 117,50 86,67 75,00 AP,BR,CI,CRI Murrayfield 150,00 135,00 130,00 100,00 AP Route 21 Corp. Park 147,50 125,50 122,50 107,50 ABA,AP,MAS Irene (excl. Route 21 Corp. Park) 180,00 130,00 120,00 110,00 AP Silver Lakes 200,00 190,00 170,00 150,00 AP Nelspruit CBD ,00 75,00 HH,KEL,PM,RZ Nelspruit dec. 165,00 150,00 125,00 85,00 HH,KEL,PM,RZ Polokwane 172,50 138,63 105,67 77,50 ES,MO,RY,SF,TG Bloemfontein CBD - 115,00 85,00 72,33 EK,EQV,NR Westdene 135,00 120,00 93,33 77,50 EK,EQV,MI,NR Durban CBD - 101,67 76,67 60,00 ACU,BR,SRE Durban Berea - 118,33 105,00 90,00 ACU,BR,SRE Essex Terrace - 116,67 103,33 96,67 ACU,BR,RM,SRE,SWI Westway - 131,25 120,00 110,00 ACU,BR,SRE,SWI La Lucia Ridge 180,88 143,33 131,67 115,00 ACU,BR,GI,RM,SRE,SWI Westville CBD 126,67 120,00 117,00 102,50 ACU,BR,GI,SRE,SWI Pinetown - 92,50 85,00 70,00 BR,SRE,SWI Hillcrest-Kloof (Upper 137,50 110,00 102,50 - BR,SRE Highway) Umhlanga 173,33 145,63 136,67 - ACU,BR,GI,SRE,SWI Ballito 130,00 117,50 110,00 - BR,SRE Port Elizabeth CBD 80,00 75,00 63,33 56,25 BR,HS,NRG,TR Greenacres: Parks 123,33 106,67 83,33 65,00 BR,HS,MY,NRG Greenacres: Single 101,25 90,00 76,25 67,50 BR,HS,MY,NRG For definitions, see Glossary of terms and abbreviations in Annexure 1 or visit

46 Rode s Report 2018:3 27 Office rentals Table 5.2 (continued) Market rental rates for office buildings Quarter 2018:3 Rands per rentable m² per month, gross leases (excl VAT) Grade A + Grade A Grade B Grade C mean mean mean mean Broker contributor codes Walmer Park 1, 2 & 3 102,50 92,50 80,00 75,00 BR,MY South End 110,00 100,00 85,00 70,00 BR,NRG Humerail/Humewood 144,50 115,00 92,50 75,00 BR,NRG Newton Park/Cape 120,00 103,33 80,00 67,50 BR,HS,MY,NRG,TR Road East London CBD - 85,00 65,00 60,00 CHR,ER,GW Southernwood 122,00 103,50 88,50 75,00 CHR,EB,ER Berea 119,00 102,33 91,75 66,67 CAP,CHR,EB,ER Chiselhurst - 110,00 80,00 60,00 CHR,ER Beacon Bay 146,67 116,67 93,33 70,00 CAP,CHR,ER Vincent 117,50 105,00 88,33 62,50 CAP,CHR,ER Cape Town CBD 184,17 147,00 115,00 92,50 AN,AP,CR,IK,JR,NX,PCP,RPR WHF Sea Point 173,33 150,00 115,00 102,50 AN,CR,IK,NX,RPR,WHF Waterfront: 216,67 180,00 140,00 - AN,CR,IK,NX,PCP,RPR Portswood Ridge Waterfront: Silo 221,25 188, CR,IK,NX,PCP,RPR District Granger Bay 185,00 178, AN,CR,IK,NX,RPR Salt River 130,00 120,00 101,67 76,67 AN,CR,DN,IK,NX,WHF Woodstock 150,00 138,33 106,25 78,33 AN,CR,IK,NX Observatory 138,75 133,33 86,25 75,00 CR,DN,IK,NX,PL,RPR,RR Mowbray 130,00 121,67 94,25 75,00 CR,IK,IKP,NX,PL,RPR,WA, WHF Kenilworth 130,00 121,25 105,00 - CR,IK,NX, RPR,RR,WA (Racecourse) Rondebosch 145,00 131,25 108,75 95,00 CR,IK,NX,PL,PX,RPR,WA,WHF Newlands 208,00 165,00 127,50 - AP,CR,IK,NX,RPR,WA Wynberg 115,00 110,00 80,00 77,50 CR,IK,NX,PL,RPR,WA Westlake 137,50 129,80 120,00 - CR,IK,IKP,NX,RPR,RR,WA Tokai 135,00 127,00 109,00 70,00 CR,IK,NX,RPR,RR,WA,WHF Claremont Lower* - 128,50 105,00 - AP,CR,NX,RPR,WA Claremont Upper 215,00 170,00 138,75 97,50 AP,CR,IK,NX,RPR,WA Hout Bay 90,00 - CR Noordhoek (Sun Valley) Central (Pinelands & - 123,33 103,00 95,00 CR,DW,GAM,IK,NX,RPR,RR Black River Office Park) Athlone Milnerton - 120,00 95,00 - AP,CR,NX Panorama - 150,00 135,00 110,00 CR,RR Table View/Parklands ,00 - CR Century City 186,00 158,78 127,86 111,67 AN,AP,CR,DD,IK,LIB,NX,PF, RR,WHF *Claremont Lower: east of Main Road For definitions, see Glossary of terms and abbreviations in Annexure 1 or visit

47 Rode s Report 2018:3 28 Office rentals Table 5.2 (continued) Market rental rates for office buildings Quarter 2018:3 Rands per rentable m² per month, gross leases (excl VAT) Grade A + Grade A Grade B Grade C mean mean mean mean Broker contributor codes Maitland - 122,50 86,67 77,50 CR,NX,WHF Goodwood (N1 City) 120,00 113,75 100,00 77,50 AP,CR,DD,NX,PF Tygerberg Hills 161,67 150,00 122,50 100,00 AN,AP,CR,NE,NX,PF,RR Bellville CBD 130,00 115,00 96,00 81,00 CR,DD,DN,NE,NX,OF,PF, WD,WHF Tyger Valley area 172,56 131,00 116,00 101,25 AN,AP,CA,CR,DD,DN,NE, NX,OF,PF,PN,RR,WD Durbanville 140,00 123,75 103,00 82,50 CR,DN,NE,NX,PF,WD,WHF Mitchell s Plain ,00 CR Airport CR Khayelitsha Kuils River 95,00 85,00 80,90 75,00 CR,OF,PF Paarl - 124,00 87,50 62,50 CR,NX,PRU Wellington - 120,00 60,00 40,00 SF Stellenbosch The Vineyard Technopark Other Helderberg Somerset West CBD - 110, OF Somerset West Mall area Strand Gordon s Bay George Central 142,50 120,00 80,00 63,33 BVF,GRV,MUL George dec. 110,00 100,00 80,00 - BVF Pietermaritzburg 120,00 100,00 85,00 65,00 HN Core CBD Peripheral CBD 135,00 120,00 100,00 75,00 HN Pietermaritzburg dec. 165,00 135,00 110,00 85,00 HN Richards Bay Empangeni 90,00 70,00 60,00 50,00 FO Windhoek 250,00 220,00 150,00 100,00 TE For definitions, see Glossary of terms and abbreviations in Annexure 1 or visit

48 Rode s Report 2018:3 29 Office rentals Table 5.3 Standard deviation of market rental rates for office buildings Quarter 2018:3 Rands per month Grade A + Grade A Grade B Grade C Johannesburg CBD - 8,60 4,49 5,83 Braamfontein - 5,23 6,67 7,23 Sandton CBD 25,04 19,37 11,72 11,71 Dunkeld West 10,31 10,67 9,83 7,75 Wierda Valley 10,90 10,07 6,04 13,54 Randburg Ferndale 7,50 11,79 12,42 7,64 Rivonia - 15,68 9,48 6,23 Rosebank 15,56 9,58 8,98 14,93 Illovo 10,00 9,27 8,93 12,50 Illovo Boulevard 5,39 8,60 10,80 13,32 Chislehurston 7,07 9,35 7,81 6,63 Parktown - 6,85 7,39 6,17 Richmond/Milpark - 0,00 1,25 1,25 Bedfordview 10,00 10,77 10,90 8,60 Bruma - 6,78 5,35 7,86 Woodmead 7,48 9,61 8,96 9,32 Sunninghill 5,00 11,58 6,18 6,18 Bryanston/Epsom Downs 7,52 7,76 7,47 5,82 Fourways 9,72 8,99 7,88 6,78 Houghton 16,25 8,04 9,32 12,47 Melrose Arch 16,00 14,00 10,00 - Hyde Park 2,36 9,42 4,95 5,38 Eastgate/Kramerville ,50 - Ormonde - - 2,50 - Midrand 9,13 14,31 21,50 10,03 Hendrik Potgieter Corridor - 3,79 9,60 2,94 Waterfall 9,59 5, Waverley/Bramley 9,20 9,01 12,08 5,83 East Rand Germiston Benoni CBD Benoni dec Pretoria CBD - 11,79 10,61 2,36 Lynnwood Glen - 30,00 15,00 6,24 Lynnwood - 42,50 29,44 - Lynnwood Manor - 49,22 20,00 - Lynnwood Ridge Faerie Glen - 7,50 10,80 0,00 Val de Grace ,00 - Menlyn 14,14 12,50 2,36 5,00 Menlo Park (Brooks St) 10,00 6,24 4,71 11,79 Brooklyn/Waterkloof 0,00 5,00 4,71 7,50 Nieuw Muckleneuk 0,00 2,50 9,43 8,50 Hatfield/Hillcrest 0,00 10,00 4,71 10,00 Centurion ,79 10,27 Highveld Technopark 2,50 4,08 4,71 2,36 For definitions, see Glossary of terms and abbreviations in Annexure 1 or visit

49 Rode s Report 2018:3 30 Office rentals Table 5.3 (continued) Standard deviation of market rental rates for office buildings Quarter 2018:3 Rands per month Grade A + Grade A Grade B Grade C Sunnyside - - 5,00 5,59 Arcadia - 2,50 9,43 7,91 Murrayfield Route 21 Corp. Park 7,50 15,72 2,50 2,50 Irene (excl. Route 21 Corp. Park) Silver Lakes Nelspruit CBD - - 0,00 0,00 Nelspruit dec. 0,00 0,00 0,00 0,00 Polokwane 22,50 9,82 6,13 2,50 Bloemfontein CBD 0,00 0,00 14,72 7,13 Westdene 12,25 6,12 6,24 7,50 Durban CBD - 2,36 10,27 4,08 Durban Berea - 6,24 7,07 12,25 Essex Terrace - 6,24 6,24 4,71 Westway - 10,23 12,25 - La Lucia Ridge 10,18 6,24 9,43 - Westville CBD 13,12 8,16 11,66 2,50 Pinetown - 7,50 18,71 - Hillcrest-Kloof (Upper Highway) 2,50-17,50 - Umhlanga 4,71 3,70 10,27 - Ballito - 7,50 10,00 - Port Elizabeth CBD 5,00 0,00 2,36 14,31 Greenacres: Parks 4,71 17,00 2,36 3,54 Greenacres: Single 20,12 15,41 9,60 7,50 Walmer Park 1, 2 & 3 7,50 7,50 0,00 - South End - 0,00 5,00 - Humerail/Humewood 14,50 5,00 7,50 - Newton Park/Cape Road - 4,71 7,91 5,59 East London CBD - 5,00 5,00 10,80 Southernwood - 13,50 18,50 20,00 Berea 2,94 11,15 10,33 6,24 Chiselhurst Beacon Bay 10,27 17,00 4,71 8,16 Vincent 2,50-8,50 2,50 Cape Town CBD 6,07 6,78 5,35 5,59 Sea Point 2,36 11,73 10,61 17,50 Waterfront: Portswood Ridge 11,79 10, Waterfront: Silo District 6,50 4, Granger Bay 4,08 9, Salt River 18,71 10,80 10,27 2,36 Woodstock 0,00 2,36 6,50 4,71 Observatory 9,60 14,34 13,86 10,00 Mowbray 10,80 9,43 8,32 8,16 Kenilworth (Racecourse) - 6,50 10,80 - Rondebosch - 12,44 12,44 15,00 Newlands 19,39 12,75 7,50 - Wynberg - 14,14 3,54 7,50 Westlake 2,50 6,01 0,00 -

50 Rode s Report 2018:3 31 Office rentals Table 5.3 (continued) Standard deviation of market rental rates for office buildings Quarter 2018:3 Rands per month Grade A + Grade A Grade B Grade C Tokai 0,00 12,08 10,20 4,08 Claremont Lower* - 8,50 10,80 - Claremont Upper 12,25 10,61 2,17 2,50 Hout Bay Noordhoek (Sun Valley) Central (Pinelands & Black River - 4,71 8,12 0,00 Office Park) Athlone Milnerton - 5,00 5,00 - Panorama - 5, Table View/Parklands Century City 9,17 9,29 7,49 6,24 Maitland - 2,50 9,43 2,50 Goodwood (N1 City) 0,00 9,60 0,00 12,50 Tygerberg Hills 10,27 5,48 4,33 14,14 Bellville CBD 8,16 8,94 10,20 11,14 Tyger Valley area 6,41 10,20 10,68 7,40 Durbanville 0,00 7,40 13,27 7,50 Mitchell s Plain Airport Khayelitsha Kuils River - - 0,90 0,00 Paarl - 17,38 12,50 12,50 Wellington - 0,00 0,00 0,00 Stellenbosch The Vineyard Technopark Other Helderberg Somerset West CBD Somerset West Mall area Strand Gordon s Bay George Central 2,50 0,00 0,00 4,71 George dec Pietermaritzburg Core CBD Peripheral CBD Pietermaritzburg dec Richards Bay Empangeni Windhoek *Claremont Lower: east of Main Road For definitions, see Glossary of terms and abbreviations in Annexure 1 or visit

51 Rode s Report 2018:3 32 Office rentals Table 5.4 Typical rent-free period in months Average periods on offer in quarter 2018:3 Mean SD Johannesburg CBD 1,4 0,5 Braamfontein 1,4 0,5 Sandton CBD 1,5 0,5 Dunkeld West 1,3 0,5 Wierda Valley 1,4 0,5 Randburg Ferndale 1,5 0,7 Rivonia 1,3 0,5 Rosebank 1,3 0,5 Illovo 1,4 0,5 Illovo Boulevard 1,4 0,5 Chislehurston 1,6 0,9 Parktown 1,9 0,8 Richmond/Milpark 1,7 0,5 Bedfordview 1,4 0,5 Bruma 1,6 0,5 Woodmead 1,9 0,9 Sunninghill 1,9 0,7 Bryanston/Epsom Downs 1,4 0,5 Fourways 1,3 0,4 Houghton 1,3 0,5 Melrose Arch 1,4 0,5 Hyde Park 1,2 0,4 Eastgate/Kramerville 2,2 0,7 Ormonde 1,7 0,5 Midrand 1,9 0,7 Hendrik Potgieter Corridor 1,2 0,2 Waterfall 2,0 0,8 Waverley/Bramley 1,8 0,6 East Rand - - Germiston - - Benoni CBD - - Benoni dec. - - Pretoria CBD 1,0 0,0 Lynnwood Glen 1,3 0,3 Lynnwood 1,5 0,5 Lynnwood Manor 1,0 0,0 Lynnwood Ridge 1,0 0,0 Faerie Glen 1,8 0,3 Val de Grace 1,0 0,0 Menlyn 1,7 0,5 Menlo Park (Brooks St) 1,0 0,0 Brooklyn/Waterkloof 1,5 0,5 Nieuw Muckleneuk 1,5 0,5 Hatfield/Hillcrest 1,3 0,5

52 Rode s Report 2018:3 33 Office rentals Table 5.4 (continued) Typical rent-free period in months Average periods on offer in quarter 2018:3 Mean Centurion 1,0 0,0 Highveld Technopark 1,2 0,2 Sunnyside 1,0 0,0 Arcadia 1,0 0,0 Murrayfield 1,0 0,0 Route 21 Corp. Park 1,0 - Irene (excl. Route 21 Corp. Park) 1,0 0,0 Silver Lakes 1,0 - Nelspruit CBD 1,0 0,0 Nelspruit dec. 1,0 0,0 Polokwane 2,5 1,1 Bloemfontein CBD 2,7 2,4 Westdene 2,8 2,2 Durban CBD 1,5 0,5 Durban Berea 1,5 0,5 Essex Terrace 1,5 0,5 Westway 1,5 0,5 La Lucia Ridge 1,7 0,5 Westville CBD 1,5 0,5 Pinetown 1,5 0,5 Hillcrest-Kloof (Upper Highway) 1,5 0,5 Umhlanga 1,7 0,5 Ballito 1,5 0,5 Port Elizabeth CBD 1,3 0,4 Greenacres: Parks 1,3 0,4 Greenacres: Single 1,0 0,0 Walmer Park 1, 2 & 3 1,0 0,0 South End 1,0 0,0 Humerail/Humewood 1,5 0,5 Newton Park/Cape Road 1,0 0,0 East London CBD - - Southernwood - - Berea 1,0 0,0 Chiselhurst 1,0 - Beacon Bay 1,5 0,5 Vincent 1,0 - Cape Town CBD 1,3 0,5 Sea Point 1,0 0,0 Waterfront: Portswood Ridge 1,3 0,5 Waterfront: Silo District 1,3 0,5 Granger Bay 1,3 0,5 Salt River 1,7 0,9 Woodstock 1,5 0,5 Observatory 1,3 0,4 Mowbray 1,8 0,8 Kenilworth (Racecourse) 1,1 0,1 Rondebosch 1,3 0,4 Newlands 1,0 0,0 Wynberg 3,0 - SD

53 Rode s Report 2018:3 34 Office rentals Table 5.4 (continued) Typical rent-free period in months Average periods on offer in quarter 2018:3 Mean Westlake 1,3 0,4 Tokai 1,3 0,5 Claremont Lower* 1,0 0,0 Claremont Upper 1,0 0,0 Hout Bay - - Noordhoek (Sun Valley) - - Central (Pinelands & Black River Office Park) 1,4 0,4 Athlone - - Milnerton 1,0 - Panorama 1,0 - Table View/Parklands - - Century City 1,2 0,4 Maitland 1,0 - Goodwood (N1 City) 2,0 - Tygerberg Hills 1,5 0,5 Bellville CBD 1,2 0,4 Tyger Valley area 1,6 0,7 Durbanville 1,0 0,0 Mitchell s Plain - - Airport - - Khayelitsha - - Kuils River 1,0 - Paarl - - Wellington - - Stellenbosch - - The Vineyard - - Technopark - - Other - - Helderberg Somerset West CBD 2,0 - Somerset West Mall area - - Strand - - Gordon s Bay - - George Central 1,0 0,0 George dec. 1,0 - Pietermaritzburg Core CBD - - Peripheral CBD - - Pietermaritzburg dec. - - Richards Bay - - Empangeni 1,0 - Windhoek 1,0 - SD

54 Rode s Report 2018:3 35 Office rentals Table 5.5 Market parking rentals Monthly parking Rands per bay per month (excl. VAT) as in quarter 2018:3 Covered reserved parking Gr A + Gr A Gr B Gr C Shade net Openair Johannesburg CBD Braamfontein Sandton CBD Dunkeld West Wierda Valley Randburg Ferndale Rivonia Rosebank Illovo Illovo Boulevard Chislehurston Parktown Richmond/Milpark Bedfordview Bruma Woodmead Sunninghill Bryanston/Epsom Downs Fourways Houghton Melrose Arch Hyde Park Eastgate/Kramerville Ormonde Midrand Hendrik Potgieter Corridor Waterfall Waverley/Bramley East Rand Germiston Benoni CBD Benoni dec Pretoria CBD Lynnwood Glen Lynnwood Lynnwood Manor Lynnwood Ridge Faerie Glen

55 Rode s Report 2018:3 36 Office rentals Table 5.5 (continued) Market parking rentals Monthly parking as in quarter 2018:3 Covered reserved parking Shade Openair Gr A + Gr A Gr B Gr C net Val de Grace Menlyn Menlo Park (Brooks St) Brooklyn/Waterkloof Nieuw Muckleneuk Hatfield/Hillcrest Centurion Highveld Technopark Sunnyside Arcadia Murrayfield Route 21 Corp. Park Irene (excl. Route Corp. Park) Silver Lakes Nelspruit CBD Nelspruit dec Polokwane Bloemfontein CBD Westdene Durban CBD Durban Berea Essex Terrace Westway La Lucia Ridge Westville CBD Pinetown Hillcrest-Kloof (Upper Highway) Umhlanga Ballito East London CBD Southernwood Berea Chiselhurst Beacon Bay Vincent Port Elizabeth CBD Greenacres: Parks Greenacres: Single Walmer Park 1, 2 & South End Humerail/Humewood Newton Park/Cape Road Cape Town CBD Sea Point Waterfront: Portswood Ridge Waterfront: Silo District Granger Bay Salt River

56 Rode s Report 2018:3 37 Office rentals Table 5.5 (continued) Market parking rentals Monthly parking Rands per bay per month (excl. VAT) as in quarter 2018:3 Covered reserved parking Shade Openair Gr A + Gr A Gr B Gr C net Woodstock Observatory Mowbray Kenilworth (Racecourse) Rondebosch Newlands Wynberg Westlake Tokai Claremont Lower* Claremont Upper Hout Bay Noordhoek (Sun Valley) Central (Pinelands & Black River Office Park) Athlone Milnerton Panorama Table View/Parklands Century City Maitland Goodwood (N1 City) Tygerberg Hills Bellville CBD Tyger Valley area Durbanville Mitchells Plain Airport Khayelitsha Kuils River Paarl Wellington Stellenbosch The Vineyard Technopark Other Helderberg Somerset West CBD Somerset West Mall area Strand Gordon s Bay George Central George dec Pietermaritzburg Core CBD Peripheral CBD Pietermaritzburg dec Richards Bay Empangeni Windhoek Claremont Lower: east of Main Road

57 Rode s Report 2018:3 38 Office rentals Table 5.6 Office rental escalation rates on new leases (%) Average escalation rate on net rentals for quarter 2018:3 Mean Johannesburg CBD 8,0 Braamfontein 8,1 Sandton CBD 8,2 Dunkeld West 8,2 Wierda Valley 8,3 Randburg Ferndale 8,6 Rivonia 8,3 Rosebank 8,1 Illovo 8,3 Illovo Boulevard 8,3 Chislehurston 8,4 Parktown 8,3 Richmond/Milpark 8,3 Bedfordview 8,2 Bruma 8,2 Woodmead 8,4 Sunninghill 8,3 Bryanston/Epsom Downs 8,3 Fourways 8,5 Houghton 8,2 Melrose Arch 8,3 Hyde Park 8,1 Eastgate/Kramerville 8,5 Ormonde 8,5 Midrand 8,2 Hendrik Potgieter Corridor 8,6 Waterfall 8,3 Waverley/Bramley 8,1 East Rand - Germiston - Benoni CBD - Benoni dec. - Pretoria CBD 9,3 Lynnwood Glen 8,8 Lynnwood 8,3 Lynnwood Manor 8,3 Lynnwood Ridge 8,3 Faerie Glen 8,5 Val de Grace 9,0 Menlyn 8,5 Menlo Park (Brooks St) 8,5 Brooklyn/Waterkloof 8,5 Nieuw Muckleneuk 8,2 Hatfield/Hillcrest 8,5 Centurion 8,5 Highveld Technopark 8,5 Sunnyside 8,9 Arcadia 8,6

58 Rode s Report 2018:3 39 Office rentals Table 5.6 (continued) Office rental escalation rates on new leases (%) Average escalation rate on net rentals for quarter 2018:3 Mean Murrayfield 8,0 Route 21 Corp. Park 8,0 Irene (excl. Route 21 Corp. Park) 8,0 Silver Lakes - Nelspruit CBD 8,5 Nelspruit dec. 8,5 Polokwane 6,8 Bloemfontein CBD 8,0 Westdene 8,0 Durban CBD 7,8 Durban Berea 7,8 Essex Terrace 7,8 Westway 8,0 La Lucia Ridge 8,4 Westville CBD 8,2 Pinetown 8,2 Hillcrest-Kloof (Upper Highway) 8,0 Umhlanga 8,4 Ballito 8,0 Port Elizabeth CBD 7,0 Greenacres: Parks 8,0 Greenacres: Single 7,8 Walmer Park 1, 2 & 3 7,8 South End 7,8 Humerail/Humewood 8,0 Newton Park/Cape Road 7,7 East London CBD 7,5 Southernwood 6,7 Berea 7,7 Chiselhurst 7,5 Beacon Bay 7,7 Vincent 7,7 Cape Town CBD 8,1 Sea Point 8,1 Waterfront: Portswood Ridge 8,2 Waterfront: Silo District 8,2 Granger Bay 8,1 Salt River 8,2 Woodstock 8,2 Observatory 8,0 Mowbray 8,3 Kenilworth (Racecourse) 8,0 Rondebosch 8,3 Newlands 8,0 Wynberg 8,4 Westlake 8,3 Tokai 8,0 Claremont Lower* 8,0 Claremont Upper 8,0 Hout Bay 8,0 Noordhoek (Sun Valley) 8,0 *Claremont Lower: east of Main Road

59 Rode s Report 2018:3 40 Office rentals Table 5.6 (continued) Office rental escalation rates on new leases (%) Average escalation rate on net rentals for quarter 2018:3 Mean Central (Pinelands & Black River Office Park) 8,3 Athlone 8,0 Milnerton 8,0 Panorama 8,0 Table View/Parklands 8,0 Century City 8,3 Maitland 8,0 Goodwood (N1 City) 7,8 Tygerberg Hills 8,1 Bellville CBD 8,1 Tyger Valley area 8,1 Durbanville 8,0 Mitchells Plain 8,0 Airport 8,0 Khayelitsha 8,0 Kuils River 8,5 Paarl 8,0 Wellington 8,0 Stellenbosch - The Vineyard - Technopark - Other - Helderberg Somerset West CBD 8,0 Somerset West Mall area - Strand - Gordon s Bay - George Central 7,7 George dec. - Pietermaritzburg Core CBD 8,0 Peripheral CBD 8,0 Pietermaritzburg dec. 8,0 Richards Bay - Empangeni 8,0 Windhoek 8,0

60 Rode s Report 2018:3 41 Office rentals Table 5.7 Escalation rates on operating costs (%) Mean Johannesburg CBD 8,6 Braamfontein 8,7 Sandton CBD 8,4 Dunkeld West 8,7 Wierda Valley 8,8 Randburg Ferndale 9,1 Rivonia 8,8 Rosebank 8,7 Illovo 8,9 Illovo Boulevard 8,9 Chislehurston 8,7 Parktown 8,9 Richmond/Milpark 9,0 Bedfordview 8,8 Bruma 8,7 Woodmead 8,8 Sunninghill 8,7 Bryanston/Epsom Downs 8,8 Fourways 9,1 Houghton 8,6 Melrose Arch 8,6 Hyde Park 8,7 Eastgate/Kramerville 9,0 Ormonde 9,0 Midrand 8,8 Hendrik Potgieter Corridor 8,9 Waterfall 8,8 Waverley/Bramley 8,5 East Rand - Germiston - Benoni CBD - Benoni dec. - Pretoria CBD 10,0 Lynnwood Glen 9,5 Lynnwood 10,0 Lynnwood Manor 9,0 Lynnwood Ridge 9,0 Faerie Glen 9,5 Val de Grace 10,0 Menlyn 9,5 Menlo Park (Brooks St) 9,5 Brooklyn/Waterkloof 9,5 Nieuw Muckleneuk 9,0 Hatfield/Hillcrest 9,5 Centurion 9,0 Highveld Technopark 9,0 Sunnyside 10,0

61 Rode s Report 2018:3 42 Office rentals Table 5.7 (continued) Escalation rates on operating costs (%) Mean Arcadia 9,5 Murrayfield 8,0 Route 21 Corp. Park 8,0 Irene (excl. Route 21 Corp. Park) 8,0 Silver Lakes - Nelspruit CBD 9,0 Nelspruit dec. 9,0 Polokwane 7,5 Bloemfontein CBD 8,0 Westdene 8,0 Durban CBD 7,8 Durban Berea 7,8 Essex Terrace 7,8 Westway 8,0 La Lucia Ridge 8,4 Westville CBD 8,3 Pinetown 8,0 Hillcrest-Kloof (Upper Highway) 7,8 Umhlanga 8,4 Ballito 8,0 Port Elizabeth CBD 9,0 Greenacres: Parks 9,0 Greenacres: Single - Walmer Park 1, 2 & 3 8,5 South End 9,0 Humerail/Humewood - Newton Park/Cape Road 8,0 East London CBD 8,5 Southernwood 7,5 Berea 7,5 Chiselhurst 10,0 Beacon Bay 10,0 Vincent 10,0 Cape Town CBD 8,0 Sea Point 8,0 Waterfront: Portswood Ridge 8,5 Waterfront: Silo District 8,5 Granger Bay 8,0 Salt River - Woodstock - Observatory 7,8 Mowbray 8,7 Kenilworth (Racecourse) 8,3 Rondebosch 9,0 Newlands 8,7 Wynberg 9,0 Westlake 8,7 Tokai 8,0 Claremont Lower* 8,3 Claremont Upper 8,7 Hout Bay - *Claremont Lower: east of Main Road

62 Rode s Report 2018:3 43 Office rentals Table 5.7 (continued) Escalation rates on operating costs (%) Mean Noordhoek (Sun Valley) - Central (Pinelands & Black River Office Park) 8,3 Athlone - Milnerton 8,0 Panorama 8,0 Table View/Parklands - Century City 8,5 Maitland - Goodwood (N1 City) 7,5 Tygerberg Hills 8,0 Bellville CBD 8,4 Tyger Valley area 8,4 Durbanville 8,3 Mitchells Plain - Airport 8,0 Khayelitsha - Kuils River - Paarl - Wellington - Stellenbosch - The Vineyard - Technopark - Other - Helderberg - Somerset West CBD 9,0 Somerset West Mall area - Strand - Gordon s Bay - George Central 8,2 George dec. 7,0 Pietermaritzburg Core CBD 7,5 Peripheral CBD 7,5 Pietermaritzburg dec. 8,0 Richards Bay - Empangeni - Windhoek 10,0

63 Rode s Report 2018:3 44 Office demand and vacancies Chapter 6: Office demand and vacancies Vacancy rates remain high Kobus Lamprecht In the second quarter of 2018, the national decentralized vacancy rate for grades A and B offices combined decreased to 10,2% from 10,5% in the first quarter of 2018, as can be seen in the chart below. This was the fifth consecutive quarter of double-digit vacancy rates, as oversupply continues to plaque the office market. Evident in the chart is how, since 2015, decentralized office vacancies have moved further away from their long-term average rate of 8%. Also note how decentralized vacancy rates are converging with vacancy rates of CBDs (12,7%). to Sandton and Midrand, the two biggest office nodes in decentralized Johannesburg. Sandton s vacancy rate rose to 16,5%, the third consecutive quarterly increase. This is represented by sky-high vacancy rates for grades A (22%) and B (34%) space due to the popularity of new grade A + supply (only 6% vacant). Office space under construction in the second quarter totalled m², 34% of national developments, and should hold back rental growth in the short term. For more details on where the biggest office developments are happening, see Table 6.3 at the end of this chapter. Vacancy rate (%) National office vacancy rates Grades A+, A and B combined Midrand s vacancy rate improved to 13% from 16%, probably continuing to benefit from Waterfall s popularity. Waterfall s vacancy rate is only 2%, and although a large volume of new office space (11% of SA; third most after Sandton and Rosebank) is being developed, all is pre-let. 4 0 Vacancy (%) National decentralized vacancy rate 20-yr avg decentralized vacancy rate National CBD vacancy rate Source of data: Sapoa; Rode calculations Decentralized Johannesburg office vacancies Grade A+, A and B combined Sandton & environs Rosebank Parktown Rivonia Source of data: Rode's Time Series; Sapoa The Johannesburg decentralized vacancy rate for grades A and B office space improved slightly in the second quarter of 2018, but remained elevated at 11,4%. The high vacancy rates can largely be ascribed Rosebank is another node proving to be highly sought after, with its vacancy rate declining to 5%, the fourth consecutive quarterly improvement. Given the high demand, new office space under construction is also substantial at m², 17% of national development. However, only 58% of this space was pre-let as at the second quarter of 2018, which could pose a risk to vacancy rates down the line. The popularity of new offices in prime spots, such as Sandton, Waterfall and Sandton is also impacting on vacancy rates of some of the smaller nodes. Sunninghill is a good example its second-quarter vacancy rate jumped to 15% from 8% in the previous quarter, likely due to PwC s move to Waterfall. Worryingly, auditors Nkonki is also set to close its doors in Sunninghill after the government cancelled its contract (together with KPMG s) in the aftermath of a scandal involving the Guptas.

64 Rode s Report 2018:3 45 Office demand and vacancies Decentralized Johannesburg office vacancies Grade A+, A and B combined Decentralized Durban office vacancies Grade A+, A and B combined Bryanston/Epson Downs Illovo Midrand Randburg Westville Berea La Lucia/ Umhlanga Vacancy (%) Vacancy (%) Source of data: Rode's Time Series; Sapoa Source of data: Rode's Time Series; Sapoa The Pretoria decentralized vacancy rate of grades A and B combined improved to 11% the only major city other than Cape Town where the decentralized vacancy rate is worse than in the CBD (6%). The explanation for this anomaly is the bulging public service (which, quite rightly, supports the CBD) combined with overenthusiastic development in the suburbs. Hatfield s vacancy rate (15%) remained the highest in the Jacaranda City, as shown in the chart below. Centurion s vacancy rate has improved over the last few quarters, but is still a high 12%. Vacancy rates look rosier in smaller nodes, such as Arcadia (6%) and Silver Lakes (8%). Of the major cities, decentralized vacancy rates remained the lowest in Cape Town (5%). However, vacancy rates worsened in most nodes during the second quarter, with the biggest change in Century City (10% versus 8% previously). Century City s high vacancy rate can be attributed to enthusiastic developers who are constantly adding to the stock, and not a lack of demand. In fact, the area is attracting good rental growth, as you will read in Chapter 5. Vacancy rates were the lowest in the V&A Waterfront (1%), Newlands/Rondebosch and Claremont (both 3%). Decentralized Cape Town office vacancies Grade A+, A and B combined Decentralized Pretoria office vacancies Grade A+, A and B combined 30 Rondebosch/Newlands Claremont 20 Brooklyn/Niew Muckleneuk/Groenkloof/Waterkloof 25 Century City V&A Waterfront Pretoria Other Eastern Suburbs/Route 21 Centurion CBD 16 Hatfield/Hillcrest 20 Vacancy (%) 12 8 Vacancy (%) Source of data: Rode's Time Series; Sapoa Source of data: Rode's Time Series; Sapoa On average, vacancy rates in Durban decentralized increased slightly to 7,3%. The vacancy rate of Umhlanga/La Lucia, half of decentralized office space, worsened for the third consecutive quarter to about 6%. In contrast, Westville s vacancy rate (8%) continues to improve. Westville is the second-largest decentralised office node in Durban. In the second quarter of 2018, vacancy rates in Port Elizabeth decentralized worsened slightly. This was mainly due to deterioration in the vacancy rate of the biggest node, Greenacres, to 9% from 6%. Newton Park remained the node with the highest vacancy rate (19%).

65 Rode s Report 2018:3 46 Office demand and vacancies Decentralized Port Elizabeth office vacancies Grades A and B combined Greenacres Newton Park Walmer/Fairview We conclude this chapter with tables showing the most recent office vacancy rates and stock levels, as well as new developments. Vacancy (%) Source of data: Rode's Time Series; Sapoa

66 Rode s Report 2018:3 47 Office demand and vacancies Bedfordview Table 6.1 Sapoa office vacancy factors (%) Grades A +, A & B June 2017 September 2017 Johannesburg December 2017 March 2018 Grade A Grade A 8,9 9,4 7,3 16,7 9,1 Grade B 10,6 10,3 9,5 14,1 7,6 Total 9,3 9,6 7,8 15,8 8,7 Braamfontein Grade A Grade A 5,8 4,5 8,1 11,2 8,3 Grade B 15,8 18,8 18,8 21,0 17,4 Total 9,8 10,2 12,4 15,1 11,9 Bryanston/Epsom Downs Grade A ,7 3,5 Grade A 11,6 7,5 8,4 6,5 8,0 Grade B 9,8 9,4 9,4 8,2 10,3 Total 10,7 8,4 8,9 7,7 8,9 Bruma Grade A Grade A 5,7 6,8 10,5 9,7 6,2 Grade B 18,4 42,0 37,3 42,0 34,0 Total 9,8 18,1 18,7 19,6 13,6 CBD Johannesburg Grade A Grade A 0,2 3,4 3,0 3,1 2,9 Grade B 26,0 23,8 22,5 20,7 21,8 Total 16,7 16,3 15,3 14,3 14,9 Constantia Kloof Basin Grade A Grade A 5,3 6,7 4,5 8,7 6,3 Grade B 1,2 1,2 2,7 2,7 8,3 Total 5,0 6,3 4,4 8,3 6,4 Fourways Grade A + 0,0 0,0 0,0 0,0 0,0 Grade A 10,2 13,6 14,7 11,3 11,3 Grade B 12,4 12,8 11,1 8,2 7,5 Total 9,7 11,7 11,8 8,9 8,8 Houghton/Killarney Grade A Grade A 9,9 12,4 13,5 13,3 13,6 Grade B 0,0 0,0 0,0 0,0 0,0 Total 9,7 12,2 13,3 13,1 13,4 Hyde Park/Dunkeld Grade A Grade A 2,7 2,7 1,6 2,7 1,7 Grade B 11,2 5,5 5,9 8,1 7,9 Total 8,2 4,5 4,4 6,2 5,7 Source of data: Sapoa June 2018

67 Rode s Report 2018:3 48 Office demand and vacancies Illovo Table 6.1 (continued) Sapoa office vacancy factors (%) Grades A +, A & B June 2017 September 2017 December 2017 March 2018 June 2018 Grade A + 0,0 1,1 2,7 3,9 5,8 Grade A 11,4 11,7 10,2 11,8 12,5 Grade B 10,5 10,7 12,2 11,7 10,4 Total 10,1 10,5 9,7 10,9 11,6 Melrose/Waverley Grade A + 3,9 4,0 3,5 16,7 13,1 Grade A 12,8 15,2 21,4 9,5 5,4 Grade B 0,6 0,0 0,0 0,0 0,0 Total 5,8 6,4 8,2 9,4 5,6 Midrand Grade A + 0,0 0,0 0,0 0,0 0,0 Grade A 11,7 15,9 16,1 16,7 13,7 Grade B 16,5 15,6 13,7 14,7 13,2 Total 13,1 15,6 15,1 15,9 13,4 Milpark Grade A Grade A 0,0 0,0 5,4 3,2 3,2 Grade B 10,3 4,6 9,1 8,5 7,1 Total 8,9 4,0 8,6 7,7 6,6 Morningside Grade A Grade A 22,2 20,3 19,8 17,6 11,9 Grade B 19,0 29,9 10,1 8,5 5,4 Total 21,6 21,6 22,4 10,0 Parktown Grade A Grade A 10,8 15,8 13,4 6,0 6,1 Grade B 14,5 19,1 18,4 18,4 20,1 Total 13,1 17,9 16,2 13,1 14,1 Randburg Grade A + 0,0 0,0 0,0 0,0 0,0 Grade A 6,7 7,0 8,0 9,2 9,4 Grade B 18,4 17,5 18,9 13,3 15,5 Total 14,7 14,1 14,3 11,1 12,6 Rivonia Grade A Grade A 4,9 8,4 8,1 8,1 8,1 Grade B 15,5 15,9 16,0 15,8 12,6 Total 15,1 15,6 15,7 15,5 12,4 Rosebank Grade A + 3,3 3,3 3,2 0,0 0,0 Grade A 22,1 18,8 10,9 11,5 6,9 Grade B 23,6 12,2 12,8 7,4 7,1 Total 18,2 12,3 9,6 6,9 5,2 Sandton & Environs Grade A + 6,5 4,8 6,5 6,3 6,4 Grade A 17,3 16,5 17,6 19,7 21,6 Grade B 11,7 11,7 25,9 34,2 33,4 Total 12,8 11,3 14,0 15,9 16,5 Source of data: Sapoa

68 Rode s Report 2018:3 49 Office demand and vacancies Sunninghill Table 6.1 (continued) Sapoa office vacancy factors (%) Grades A +, A & B June 2017 September 2017 December 2017 March 2018 Grade A Grade A 10,4 8,4 12,1 12,2 26,6 Grade B 4,1 5,3 4,6 4,6 4,6 Total 7,0 6,7 8,1 8,1 14,8 Waterfall Grade A ,0 8,6 3,1 Grade A - - 1,1 1,1 1,1 Grade B Total 4,2 4,7 2,4 Woodmead Grade A Grade A 7,3 7,3 7,2 7,1 6,3 Grade B 27,9 7,1 5,4 5,4 6,5 Total 13,7 7,2 6,7 6,6 6,4 Cresta/Blackheath to Randpark Grade A + 0,0 0,0 0,0 0,0 0,0 Grade A 12,8 12,8 11,1 21,9 11,2 Grade B 5,6 7,0 7,3 9,7 14,2 Total 5,4 5,8 5,3 10,3 7,3 Greenstone Grade A + 0,0 0,0 0,0 - - Grade A 6,4 5,2 5,5 3,3 2,8 Grade B Total 4,9 4,0 4,2 3,3 2,8 Newtown Grade A + 0,0 0,0 0,0 0,0 0,0 Grade A 5,6 5,6 3,0 3,0 3,0 Grade B 27,4 27,4 23,2 23,2 23,2 Total 13,7 13,7 12,9 10,9 10,9 June 2018 Bellville Cape Town Grade A + 19,6 19,6-12,8 12,5 Grade A 0,6 1,4 1,8 1,6 1,7 Grade B 8,8 9,7 10,0 8,4 8,4 Total 3,4 4,2 4,3 3,9 3,9 CBD Cape Town Grade A + 13,7 10,6 10,6 9,8 9,0 Grade A 8,3 6,7 6,0 8,8 7,7 Grade B 11,4 10,9 10,4 11,5 11,0 Total 10,3 9,3 8,7 10,4 9,6 Century City Grade A + 4,2 4,2 3,1 2,0 12,7 Grade A 9,3 8,7 8,5 8,9 9,6 Grade B 4,1 4,7 5,3 9,5 9,4 Total 8,0 7,6 7,4 8,0 10,1 Claremont Grade A + 6,4 0,0 0,0 0,0 0,0 Grade A 2,5 0,3 1,3 1,0 1,8 Grade B 3,8 3,9 9,6 2,3 4,2 Total 3,2 1,7 4,5 1,4 2,7 Source of data: Sapoa

69 Rode s Report 2018:3 50 Office demand and vacancies Central (Pinelands & Black River Office Park) Table 6.1 (continued) Sapoa office vacancy factors (%) Grades A +, A & B June 2017 September 2017 December 2017 March 2018 Grade A Grade A 1,2 1,1 1,5 1,1 1,7 Grade B 9,8 5,2 5,6 9,0 9,1 Total 2,2 1,5 2,0 2,0 2,5 Rondebosch/Newlands Grade A Grade A 3,2 3,1 4,9 1,1 3,5 Grade B 11,2 8,6 9,3 1,6 0,7 Total 5,6 4,8 6,2 1,2 2,6 Waterfront Grade A + 8,0 6,3 6,2 4,6 1,4 Grade A 0,3 1,7 2,8 1,9 0,3 Grade B 0,0 0,0 0,0 0,0 3,4 Total 3,4 3,5 4,0 2,9 0,9 Berea Durban Grade A Grade A 3,5 1,6 2,8 5,5 3,9 Grade B 16,7 14,9 15,0 12,6 13,3 Total 8,6 6,7 7,5 8,1 7,4 Ballito Grade A + 0,0 0,0 2,8 2,8 1,3 Grade A 23,1 22,9 13,0 15,1 13,5 Grade B 6,1 4,0 5,0 2,4 6,4 Total 17,2 16,7 8,7 8,6 8,6 Hillcrest/Gillits Grade A + 10,7 8,2 11,9 12,4 - Grade A 9,4 9,8 9,8 10,3 10,7 Grade B 5,2 5,2 5,2 4,8 10,1 Total 8,9 8,9 9,3 9,6 10,6 CBD Durban Grade A Grade A 21,4 19,5 19,7 27,1 22,1 Grade B 15,7 12,3 17,1 19,3 17,9 Total 18,5 15,6 18,3 22,9 19,9 Umhlanga/La Lucia Grade A + 1,9 1,9 1,9 2,0 11,3 Grade A 5,4 3,2 3,7 4,9 5,6 Grade B 3,0 7,9 8,8 9,5 6,4 Total 5,1 3,4 4,0 5,0 6,4 Westville Grade A Grade A 16,2 12,4 11,0 8,7 8,7 Grade B 9,3 10,3 10,2 10,4 8,0 Total 11,6 11,0 10,5 9,8 8,3 Source of data: Sapoa June 2018

70 Rode s Report 2018:3 51 Office demand and vacancies Arcadia Table 6.1 (continued) Sapoa office vacancy factors (%) Grades A +, A & B June 2017 September 2017 Pretoria December 2017 March 2018 June 2018 Grade A Grade A 7,6 7,6 7,6 7,6 7,6 Grade B 10,1 10,4 10,2 4,6 4,6 Total 8,8 8,9 8,9 6,1 6,1 Brooklyn/Waterkloof/ Nieuw Muckleneuk/Groenkloof Grade A Grade A 4,2 4,0 4,3 5,0 8,1 Grade B 9,6 13,2 20,1 11,9 11,0 Total 7, ,6 8,6 9,6 CBD Pretoria Grade A Grade A 1,3 1,3 1,3 1,3 1,1 Grade B 12,9 12,8 12,8 6,7 7,7 Total 9,9 9,8 9,8 5,3 6,0 Centurion CBD Grade A Grade A 10,0 10,0 8,0 3,8 4,1 Grade B 22,4 22,5 23,0 19,7 19,4 Total 16,5 16,5 15,2 12,0 11,9 Hatfield/Hillcrest Grade A Grade A 13,2 12,0 14,7 34,2 27,8 Grade B 7,9 7,8 8,4 7,8 8,6 Total 9,5 9,1 10,3 16,9 15,0 Highveld Technopark Grade A Grade A 11,2 9,4 9,2 14,0 13,4 Grade B 10,0 9,9 9,8 10,4 10,7 Total 10,9 9,5 9,4 12,7 12,5 Menlyn/Faerie Glen/Ashlea Gardens Grade A Grade A 13,6 14,9 11,4 11,5 9,6 Grade B 11,7 9,9 10,1 7,3 6,3 Total 12,9 13,1 10,9 10,0 8,5 Pretoria other Eastern suburbs/route 21 Grade A Grade A 9,7 9,8 7,6 7,9 5,0 Grade B 11,6 13,9 10,2 13,6 13,4 Total 11,1 12,8 9,5 12,1 10,9 Lynnwood/Menlo Park/ Persequor Park/Hazelwood Grade A + 1,7 1,9 1,1 2,3 1,2 Grade A 4,1 8,9 14,4 14,1 14,9 Grade B 15,2 15,2 13,4 13,6 13,8 Total 9,0 10,6 11,5 11,8 12,1 Silver Lakes/The Willows Grade A + Grade A 3,7 3,7 3,3 9,4 9,1 Grade B 2,5 6,0 6,0 6,0 5,6 Total 3,3 4,4 4,1 8,4 8,1 Source of data: Sapoa

71 Rode s Report 2018:3 52 Office demand and vacancies Greenacres Table 6.1 (continued) Sapoa office vacancy factors (%) Grades A +, A & B June 2017 September 2017 Port Elizabeth December 2017 March 2018 Grade A + 0,0 0,0 0,0 0,0 0,0 Grade A 7,7 4,8 5,3 5,3 3,8 Grade B 13,3 9,6 7,4 7,4 11,0 Total 11,0 7,8 6,5 6,3 8,5 Newton Park Grade A + 4,8 4,8 4,8 16,8 16,8 Grade A 0,0 0,0 0,0 0,0 0,0 Grade B 28,7 34,2 34,2 34,2 34,2 Total 8,6 9,5 9,5 19,0 19,0 Central/Park Drive Grade A Grade A Grade B 0,0 0,0 0,0 0,0 0,0 Total 0,0 0,0 0,0 0,0 0,0 Walmer/Fairview Grade A Grade A 8,6 1,2 8,3 7,8 7,6 Grade B 11,4 11,4 11,4 12,3 12,3 Total 8,9 2,4 8,7 8,3 8,1 Humerail Grade A + Grade A - - 0,0 5,5 4,6 Grade B Total 0,0 5,5 4,6 June 2018 Johannesburg central Major cities Grade A Grade A 1,8 3,7 4,4 5,4 4,4 Grade B 24,7 23,1 22,1 20,8 21,2 Total 15,4 15,1 14,8 14,4 14,3 Johannesburg decentralized Grade A + 4,5 3,6 4,8 5,4 4,9 Grade A 11,8 12,0 11,6 12,1 11,6 Grade B 14,4 13,0 14,0 14,6 14,1 Total 11,7 11,1 11,3 11,8 11,4 Pretoria decentralized Grade A + 1,7 1,9 1,1 2,3 1,2 Grade A 9,8 9,7 9,1 11,5 10,7 Grade B 12,5 13,2 13,1 11,7 11,6 Total 11,0 11,2 10,9 11,5 11,0 Durban decentralized Grade A + 3,3 2,1 3,5 3,2 10,2 Grade A 8,0 5,8 5,1 6,0 6,4 Grade B 9,5 10,3 10,3 10,0 8,6 Total 8,2 6,8 6,5 7,0 7,3 Cape Town decentralized Grade A + 7,4 6,3 4,4 4,1 7,7 Grade A 3,0 3,1 3,5 3,1 3,5 Grade B 7,7 7,4 8,6 6,9 7,2 Total 4,3 4,2 4,6 4,0 4,6 Source of data: Sapoa

72 Rode s Report 2018:3 53 Office demand and vacancies Table 6.1 (continued) Sapoa office vacancy factors (%) Grades A +, A & B June 2017 September 2017 December 2017 March 2018 June 2018 National decentralized Grade A + 4,6 3,8 4,6 5,3 5,4 Grade A 9,7 9,5 9,2 10,0 9,7 Grade B 13,1 12,5 13,1 12,9 12,6 Total 10,4 10,0 10,1 10,5 10,2 National CBDs Grade A + 2,7 2,1 2,1 1,9 1,7 Grade A 6,4 6,8 7,0 9,3 7,7 Grade B 18,7 17,4 17,3 16,1 16,2 Total 14,2 13,5 13,0 13,1 12,7 Source of data: Sapoa

73 Rode s Report 2018:3 54 Office demand and vacancies Bedfordview Grade A + June 2017 Table 6.2 Sapoa office stock (m²) Grades A +, A & B September 2017 Johannesburg December 2017 March 2018 June 2018 Grade A Grade B Total Braamfontein Grade A + Grade A Grade B Total Bryanston/Epsom Downs Grade A Grade A Grade B Total Bruma Grade A + Grade A Grade B Total CBD Johannesburg Grade A + Grade A Grade B Total Constantia Kloof Grade A + Grade A Grade B Total Fourways Grade A Grade A Grade B Total Houghton/Killarney Grade A + Grade A Grade B Total Source of data: Sapoa

74 Rode s Report 2018:3 55 Office demand and vacancies Hyde Park/Dunkeld Grade A + June 2017 Table 6.2 (continued) Sapoa office stock (m²) Grades A +, A & B September 2017 December 2017 March 2018 June 2018 Grade A Grade B Total Illovo Grade A Grade A Grade B Total Melrose/Waverley Grade A Grade A Grade B Total Midrand Grade A Grade A Grade B Total Milpark Grade A + Grade A Grade B Total Morningside Grade A + Grade A Grade B Total Parktown Grade A + Grade A Grade B Total Randburg Grade A Grade A Grade B Total Source of data: Sapoa

75 Rode s Report 2018:3 56 Office demand and vacancies Rivonia Grade A + June 2017 Table 6.2 (continued) Sapoa office stock (m²) Grades A +, A & B September 2017 December 2017 March 2018 June 2018 Grade A Grade B Total Rosebank Grade A Grade A Grade B Total Sandton & Environs Grade A Grade A Grade B Total Sunninghill Grade A + Grade A Grade B Total Waterfall Grade A Grade A Grade B Total Woodmead Grade A + Grade A Grade B Total Cresta/Blackheath to Rand Park Grade A Grade A Grade B Total Greenstone Grade A Grade A Grade B Total Newtown Grade A Grade A Grade B Total

76 Rode s Report 2018:3 57 Office demand and vacancies Table 6.2 (continued) Sapoa office stock (m²) Grades A +, A & B June 2017 September 2017 December 2017 March 2018 June 2018 Bellville Cape Town Grade A Grade A Grade B Total CBD Cape Town Grade A Grade A Grade B Total Century City Grade A Grade A Grade B Total Claremont Grade A Grade A Grade B Total Central (Pinelands & Black River Office Park) Grade A + Grade A Grade B Total Rondebosch/Newlands Grade A + Grade A Grade B Total Waterfront Grade A Grade A Grade B Total Source of data: Sapoa

77 Rode s Report 2018:3 58 Office demand and vacancies Berea Grade A + June 2017 Table 6.2 (continued) Sapoa office stock (m²) Grades A +, A & B September 2017 Durban December 2017 March 2018 June 2018 Grade A Grade B Total Ballito Grade A Grade A Grade B Total Hillcrest/Gillits Grade A Grade A Grade B Total CBD Durban Grade A + Grade A Grade B Total Umhlanga/La Lucia Grade A Grade A Grade B Total Westville Grade A + Grade A Grade B Total Arcadia Grade A + Pretoria Grade A Grade B Total Brooklyn/Waterkloof/ Groenkloof/ Nieuw Muckleneuk Grade A + Grade A Grade B Total Source of data: Sapoa

78 Rode s Report 2018:3 59 Office demand and vacancies CBD Pretoria Grade A + June 2017 Table 6.2 (continued) Sapoa office stock (m²) Grades A +, A & B September 2017 December 2017 March 2018 June 2018 Grade A Grade B Total Centurion CBD Grade A + Grade A Grade B Total Hatfield/Hillcrest Grade A + Grade A Grade B Total Highveld Technopark & Extensions Grade A + Grade A Grade B Total Menlyn/Faerie Glen/Ashlea Gardens Grade A + Grade A Grade B Total Pretoria other Eastern suburbs/route 21 Grade A + Grade A Grade B Total Lynnwood/Menlo Park/ Persequor Park/Hazelwood Grade A Grade A Grade B Total Silver Lakes/The Willows Grade A + Grade A Grade B Total Source of data: Sapoa

79 Rode s Report 2018:3 60 Office demand and vacancies Greenacres June 2017 Table 6.2 (continued) Sapoa office stock (m²) Grades A +, A & B September 2017 Port Elizabeth December 2017 March 2018 June 2018 Grade A Grade A Grade B Total Newton Park Grade A Grade A Grade B Total Central/Park Drive Grade A + Grade A Grade B Total Walmer/Fairview Grade A + Grade A Grade B Total Humerail Grade A + Grade A Grade B Total Source of data: Sapoa

80 Rode s Report 2018:3 61 Office demand and vacancies June 2017 Table 6.2 (continued) Sapoa office stock (m²) Grades A +, A & B September 2017 Major cities December 2017 March 2018 June 2018 Johannesburg central Grade A + Grade A Grade B Total Johannesburg decentralized Grade A Grade A Grade B Total Pretoria decentralized Grade A Grade A Grade B Total Durban decentralized Grade A Grade A Grade B Total Cape Town decentralized Grade A Grade A Grade B Total Source of data: Sapoa

81 Rode s Report 2018:3 62 Office demand and vacancies Table 6.3 Sapoa new office developments Size (m²) % of new SA developments Johannesburg Sandton ,8% Rosebank ,7% Waterfall ,0% Midrand ,9% Bryanston/Epsom Downs ,1% Fourways ,4% Illovo ,2% Houghton/Killarney ,7% Bedfordview ,7% Total ,5% Pretoria Menlyn/Faerie Glen/Ashlea ,9% Gardens Centurion CBD ,5% Lynnwood/Hazelwood/Menlo ,2% Park/Persequor Park Total ,6% Durban Umhlanga/La Lucia ,6% Westville ,8% Total ,4% Cape Town Cape Town CBD ,5% Claremont ,9% Bellville ,1% Total ,4% Total South Africa Source of data: Sapoa

82 Rode s Report 2018:3 63 Industrial rentals and vacancies Chapter 7: Industrial rentals and vacancies Industrial rentals shine Kobus Lamprecht Industrial property continues to be the shining light in the property market due to its superior rental growth and lower vacancy rates. However, Rode s latest data indicate the market is starting to cool somewhat. Nominal industrial market rentals in South Africa grew by about 6% year on year in the third quarter of 2018, slowing from the 7,5% growth recorded in the second quarter. This implies that rentals continued to increase in real terms, after adjusting for building-cost inflation (BER BCI) of about 4%. Below we first discuss the major factors impacting the industrial market, before delving deeper into the recent rental performance of industrial property. Drivers of the industrial market Changes in rental and vacancy rates are strongly linked to the performance of the manufacturing and retail sectors. The manufacturing sector underpins the demand for industrial space for manufacturing production purposes, whereas the retail sector underpins the demand for warehouse space and manufacturing. Manufacturing production increased by 1% in the first seven months of 2018 compared to the first seven months of 2017 an improvement from the 1% decrease recorded in However, the latest Absa Purchasing Managers Index (PMI) reached only 43,2 index points in September due to depressed manufacturing activity and weak sales orders. This implies business conditions will probably get tougher before getting better. The PMI has remained stuck in contraction territory for most of 2018, with the third quarter especially poor, as shown in the chart. Index Source of data: BER; ABSA ABSA Purchasing Managers' Index (Seasonally adjusted) The retail sector performed better than the manufacturing sector over the first seven months of the year, growing by 2,9% in real terms. However, monthly sales have been weak the last few months, with July sales only managing to grow 1,3% on a year earlier. This slow growth was not surprising as consumers are buckling under financial pressure, and the situation is not likely to change soon. This should be of concern to landlords of retail property, especially considering the current oversupply of space. Rental performance Expansion Contraction Industrial property continued to perform well in the third quarter of 2018, with national nominal market rentals growing by 6%, outpacing building-cost inflation of about 4%. However, growth slowed in each of the major industrial regions, while vacancy rates also increased. National rental growth in the third quarter was largely driven by the Cape Peninsula (see first chart), where nominal market rentals for prime industrial space of

83 Rode s Report 2018:3 64 Industrial rentals and vacancies 500 m² grew by an incredible 15% year on year. This sharp growth is in line with Rode s vacancy factor data, which indicates the region has the least amount of vacant space in the country (less than 10%). Rentals in the Central Witwatersrand, Durban and East Rand grew by 5%, 4% and 3% respectively. Rentals in the West Rand declined by 3%. This implies that rentals managed to grow in real terms (see second chart) only in the Cape Peninsula and the Central Witwatersrand. R/m² (log scale) Smoothed Nominal prime industrial rentals 500m² units Cape Peninsula Durban East Rand Central Witwatersrand Source of data: Rode's Time Series Real prime industrial rentals (2005 rands) 500m² units Smoothed As a yardstick of potential future growth in market rentals, we compare pioneer rentals with prevailing market rentals for prime industrial premises of m² as in the third quarter of 2018 (see Table 7.1). Pioneer rental levels often represent leases signed on newly erected ondemand buildings, and these rentals then reflect today s building costs, as developers naturally expect an immediate fair return on their development costs. Thus these rentals are an early indicator of the eventual level that market rentals will attain once demand catches up with supply in the wake of renewed economic growth. Operating expenses are also an important factor to consider when assessing the profitability or viability of a property (see Table 7.5). The remainder of this chapter includes: mean prime industrial rentals by township, the standard deviations from these mean rentals, indicative operating costs, and the predominant escalation rates. This concludes our section on industrial rentals and vacancies. Note that our industrial tables follow. R/m² (log scale) Cape Peninsula Durban East Rand Central Witwatersrand Source of data: Rode's Time Series; BER BCI

84 Rode s Report 2018:3 65 Industrial rentals and vacancies 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 viability of new developments over time, holding constant capitalization rates and operating expenses. The industrial rental tables contain regression parameters to allow readers to interpolate rental rates for area sizes other than those given in the tables. These parameters are necessary because the relationship between rental rates and floor area is not linear. For more details on how to use these equations, refer to Annexure 3 on annexure page XII. Readers are reminded that the vacancy figures in the graph above are not actual vacancy percentages, but rather graduations on a 1-9 vacancy scale. For more information, see the notes to the industrial tables on p.90. Furthermore, the vacancies are for all the unit sizes (250 m², 500 m², m², m² and m²) combined, as surveyed by Rode. In reality, vacancies could differ across the different-sized units. Table 7.1 Pioneer industrial rentals Highest gross nominal market rental rate achieved (1 000 m² units) Quarter 2018:3 Rands per rentable m², gross leases (excl. VAT) Pioneer Normal prime mean Inferred growth potential (%) Central Witwatersrand % West Rand % East Rand % Durban % Cape Peninsula % Bloemfontein %

85 Rode s Report 2018:3 66 Industrial rentals and vacancies Table 7.2 Mean prime industrial market rentals as in quarter 2018:3 (R/m² p.m.; gross lease; excl. VAT) Area size leased in m² Vacancy a b r² Central Witwatersrand Cambridge Park 72,67 71,67 69,00 68,00 67,33 3,0 4,432-0,027 0,94 Wynberg Proper 47,20 44,71 42,43 41,07 39,57 2,6 4,159-0,057 0,98 Strijdom Park 57,43 56,67 55,42 51,50 49,60 2,4 4,351-0,052 0,95 Kya Sand 50,40 49,25 47,40 46,40 46,00 3,5 4,090-0,032 0,95 Clayville/Olifantsfontein 57,00 55,00 51,00 50,19 49,25 3,5 4,309-0,050 0,91 Chloorkop 49,83 48,88 47,10 45,33 42,50 2,2 4,205-0,052 0,96 Amalgam 39,00 39,33 37,50 36,00 35,00 2,0 3,902-0,040 0,93 Crown Mines 42,50 42,50 40,67 39,50 36,50 1,7 4,043-0,050 0,90 Industria 38,67 36,50 35,50 33,20 29,00 3,0 4,155-0,088 0,93 Booysens/Booysens Reserve/ 39,00 35,75 33,00 31,88 29,00 2,8 4,158-0,092 0,97 Ophirton Village Main/Village Deep/New 37,50 32,50 29,25 28,50 27,11 2,6 4,134-0,101 0,89 Centre Benrose 35,33 32,50 31,50 29,08 29,00 2,8 3,913-0,067 0,94 Steeledale/Electron/Tulisa Park 41,67 40,67 38,00 37,75 36,00 2,5 3,992-0,048 0,94 Aeroton 42,67 40,33 39,00 38,13 35,50 2,0 4,052-0,055 0,96 Devland/Nancefield 35,00 34,00 31,00 30,00 27,50 3,5 4,003-0,080 0,97 Cleveland/Heriotdale 40,67 39,67 37,67 35,38 33,33 2,7 4,090-0,068 0,99 Newlands/Martindale 40,00 35,00 35,00 30,00 25,00 2,5 4,494-0,144 0,93 Kew/Wynberg East 34,33 33,33 31,75 30,00 28,00 3,0 3,920-0,068 0,98 Bramley View/Lombardy West 31,00 30,00 27,50 27,00 27,00-3,696-0,050 0,85 Marlboro 21,67 20,00 18,33 21,67 25,00 5,0 2,699 0,051 0,29 Halfway House: hi-tech strip 61,40 60,60 58,80 56,56 56,40 2,7 4,294-0,032 0,96 Halfway House: Richards Drive 57,56 55,89 54,89 53,89 51,86 3,4 4,228-0,032 0,97 Commercia 49,50 47,25 46,75 45,40 44,50 1,8 4,074-0,033 0,96 Kramerville/Eastgate Ext12 & Ext13 97,50 85,00 78,75 75,00 72,50 2,3 5,051-0,093 0,91

86 Rode s Report 2018:3 67 Industrial rentals and vacancies Table 7.2 (continued) Mean prime industrial market rentals as in quarter 2018:3 (R/m² p.m.; gross lease; excl. VAT) Area size leased in m² Vacancy a b r² Linbro Park 66,38 65,00 63,36 62,44 61,50 3,0 4,331-0,025 0,98 Wesco Park/Eastgate Ext3, Ext11, 62,25 61,25 56,50 53,50 52,50 1,7 4,483-0,063 0,96 Ext6, Ext8/Malboro North (New) City Deep 46,00 45,50 42,50 41,75 40,75 2,7 4,068-0,043 0,93 North Riding 61,50 61,50 61,50 59,40 57,67 2,3 4,252-0,022 0,82 Samrand Centurion 65,00 64,75 64,75 64,58 68,60 2,7 4,086 0,014 0,42 Barbeque Downs 66,33 64,00 61,40 60,60 60,60 1,8 4,350-0,031 0,86 Selby Ext 12/13/15/19/20/24/City 40,67 37,33 33,67 33,00 32,67 3,0 4,075-0,073 0,86 West Selby Ext 5/10/14/18 40,00 35,00 32,50 32,50 32,50-3,978-0,063 0,70 Selby Ext 11 40,00 30,00 25,00 25,00 25,00-4,359-0,144 0,71 Selby Ext 3/4/6 40,00 30,00 25,00 25,00 25,00-4,359-0,144 0,71 Denver (Old) 27,50 27,50 27,22 27,50 27,50 2,5 3,311 0,000 0,00 Denver (New) 43,33 43,33 41,67 41,67 41,00 2,0 3,879-0,020 0,86 Kyalami Business Park 64,75 64,00 60,86 60,00 58,57 1,8 4,363-0,035 0,95 Reuven 40,00 40,00 35,00 35,00 30,00 2,5 4,225-0,093 0,87 Selby (Old)/Selby Ext2/Park Central 42,50 37,50 33,89 32,50 25,00 2,7 4,619-0,157 0,92 Robertsham 41,50 41,50 39,00 35,00 33,50 1,5 4,193-0,080 0,94 Fordsburg/Mayfair 45,00 45,00 40,00 35,00 35,00-4,382-0,100 0,92 Waterfall 73,50 73,50 71,00 68,50 68,50-4,458-0,028 0,92 Central Witwatersrand 47,61 45,37 42,95 41,61 40,24 2,6 West Rand Lea Glen 41,25 41,25 40,25 40,10 39,50 2,5 3,806-0,015 0,91 Honeydew X19/20/21/22 57,50 56,25 56,25 53,50 52,60 2,8 4,223-0,030 0,94 Stormill 44,64 43,86 42,80 44,83 44,43 2,2 3,770 0,002 0,02 Chamdor 40,00 35,00 32,50 29,33 27,50-4,333-0,121 0,98

87 Rode s Report 2018:3 68 Industrial rentals and vacancies Table 7.2 (continued) Mean prime industrial market rentals as in quarter 2018:3 (R/m² p.m.; gross lease; excl. VAT) Area size leased in m² Vacancy a b r² Factoria 50,00 47,50 46,25 41,67 35,00-4,559-0,112 0,90 Krugersdorp: Delporton 75,00 70,00 60,00 60,00 55,00-4,856-0,101 0,91 Randfontein: Aureus 34,30 30,00 27,50 26,50 23,00 2,0 4,174-0,120 0,95 Boltonia 35,00 35,00 30,00 25,00 25,00-4,327-0,134 0,92 Roodepoort: Technikon/Manufacta 43,50 41,00 37,50 33,75 30,00-4,470-0,123 0,99 Industria North 40,00 37,50 30,00 30,00 25,00 3,0 4,525-0,151 0,92 Robertville 43,00 41,83 40,60 39,67 39,67 2,7 3,909-0,028 0,93 Laserpark 60,00 58,00 57,00 51,50 50,83 2,7 4,433-0,060 0,95 West Rand 44,47 42,47 40,06 37,80 35,68 2,5 East Rand Elandsfontein 44,11 43,73 43,33 42,50 39,70 3,1 3,973-0,032 0,80 Tunney/Greenhills 57,11 56,10 55,60 53,05 52,50 2,2 4,213-0,030 0,96 Henville 49,60 49,00 48,40 48,00 48,00 2,2 3,962-0,011 0,91 Meadowbrook/Wilbart 54,88 54,40 53,29 52,79 50,86 2,1 4,141-0,024 0,93 Sunnyrock 56,30 55,18 54,00 51,00 50,57 2,3 4,249-0,039 0,97 Rustivia/Activia Park 45,44 45,00 44,44 43,95 42,86 2,1 3,921-0,018 0,96 Eastleigh 49,13 48,71 46,29 43,61 40,14 2,1 4,292-0,068 0,94 Sebenza Ext 14 44,33 43,44 43,67 43,05 42,00 2,4 3,876-0,015 0,86 Spartan Ext 16 (Sebenza Link) + 47,70 46,64 46,18 45,85 45,11 2,4 3,952-0,017 0,95 Ext 1/3/7 Isando 48,57 46,88 46,25 45,06 44,43 2,8 4,033-0,029 0,97 Isando 3 50,38 49,75 48,50 46,61 46,00 3,1 4,104-0,033 0,98 Jet Park 53,42 52,65 52,30 52,04 50,25 3,0 4,076-0,018 0,86 Alrode & Xs 38,50 37,50 35,50 36,00 35,33 2,2 3,790-0,027 0,77 Alrode South 41,40 40,20 37,20 35,75 33,60 2,6 4,116-0,070 0,98

88 Rode s Report 2018:3 69 Industrial rentals and vacancies Table 7.2 (continued) Mean prime industrial market rentals as in quarter 2018:3 (R/m² p.m.; gross lease; excl. VAT) Area size leased in m² Vacancy a b r² Alberton 41,67 41,33 38,67 34,80 34,33 2,3 4,158-0,074 0,94 Aeroport/Spartan Ext 2 55,71 55,86 53,00 52,14 52,43 2,3 4,160-0,025 0,80 Delville 31,50 31,50 30,00 30,00 27,67 2,3 3,686-0,040 0,83 Roodekop 35,50 35,00 33,83 32,33 31,17 2,7 3,826-0,045 0,98 Wadeville: Industrial zoning 38,00 37,67 37,00 36,10 35,25 2,5 3,783-0,025 0,98 Route 24/Meadowdale 51,70 51,44 51,30 49,65 49,38 3,3 4,045-0,017 0,90 Germiston S/Industries E 36,50 35,00 31,00 30,67 29,25 2,0 4,000-0,075 0,91 Driehoek/Industries W 41,67 40,00 38,67 37,38 37,33 2,0 3,927-0,038 0,93 Knights 36,25 35,00 33,50 31,40 28,50 2,3 4,034-0,078 0,96 Spartan Proper 47,25 46,88 46,38 45,35 43,63 2,1 4,004-0,025 0,91 Founders View 60,71 60,00 58,88 55,88 54,17 1,6 4,336-0,040 0,96 Longmeadow 66,22 66,35 66,11 65,46 64,91 1,9 4,237-0,007 0,86 Pomona/Kempton park 57,29 57,00 56,13 56,13 55,89 3,1 4,093-0,008 0,86 Gosforth Park 63,67 63,67 61,17 60,83 58,00 1,6 4,330-0,030 0,89 East Rand 48,25 47,63 46,37 45,18 43,92 2,4 Far East Rand Boksburg North & East 44,29 43,29 41,88 39,83 39,00 2,8 4,040-0,045 0,99 Benoni South 37,50 37,50 36,40 35,60 33,67 2,7 3,833-0,035 0,90 New Era/Vulcania 29,50 29,33 29,33 28,33 25,00 2,7 3,679-0,048 0,69 Nuffield 31,67 31,67 30,00 29,60 26,00 2,3 3,815-0,061 0,82 Fulcrum 29,00 29,00 26,50 25,00 25,00 2,0 3,701-0,059 0,90 Apex 40,25 39,75 38,50 37,00 35,00 2,5 3,963-0,046 0,96 Labore 32,50 32,50 25,00 25,00 22,50 2,0 4,212-0,130 0,86 Morehill Ext 8 Benoni 42,75 41,50 37,50 37,33 36,00 2,8 4,071-0,058 0,89 Far East Rand 35,93 35,57 33,14 32,21 30,27 2,5

89 Rode s Report 2018:3 70 Industrial rentals and vacancies Table 7.2 (continued) Mean prime industrial market rentals as in quarter 2018:3 (R/m² p.m.; gross lease; excl. VAT) Area size leased in m² Vacancy a b r² Pretoria Charlotte Maxeke 50,00 42,50 35,00 30,50 27,50 5,5 4,989-0,200 0,98 Pretoria Industrial Township 42,50 40,00 32,50 27,50 25,00 3,5 4,814-0,189 0,98 Koedoespoort 50,00 40,00 35,00 30,00 25,00 2,0 5,089-0,219 0,99 Waltloo/Despatch 51,67 47,50 47,50 42,50 40,00 3,5 4,398-0,082 0,96 Silverton/Silvertondale 53,33 50,00 46,67 43,33 40,00 4,0 4,498-0,094 1,00 Samcor Park 52,50 50,00 50,00 47,50 42,00 3,0 4,335-0,066 0,85 Sunderland Ridge 52,50 49,00 47,50 45,00 42,50 3,5 4,320-0,067 0,99 Hermanstad 37,50 37,50 30,00 27,50 27,50 3,0 4,311-0,122 0,87 Kirkney 30,00 30,00 27,00 25,00 22,00 3,0 4,022-0,106 0,94 Hennopspark X15 & X7 69,00 66,50 57,50 55,00 50,00 2,0 4,844-0,109 0,96 Gateway 57,67 56,00 54,33 52,67 50,00 1,0 4,309-0,046 0,98 Lyttleton Manor X4/X6 52,50 50,00 45,00 35,00 35,00 1,0 4,845-0,155 0,94 Pretoria North 45,00 35,00 30,00 25,00 25,00 3,5 4,826-0,198 0,92 Silvertondale X1 50,00 48,33 45,00 42,50 40,00 2,5 4,336-0,076 0,99 Klerksoord 35,00 33,00 30,00 25,00 20,00 3,0 4,625-0,185 0,95 Rosslyn 35,00 35,00 35,00 30,00 30,00 2,0 3,931-0,062 0,79 Route 21 Corporate Park Centurion 65,00 65,00 60,00 55,00 50,00 2,0 4,713-0,091 0,95 Irene (excl. Route 21 Corp. Park) 80,00 80,00 80,00 80,00 80,00-4,382 0,000 - Pretoria 47,76 44,40 40,50 36,50 33,84 2,9 Polokwane Lebowakgomo Superbia 50,00 37,50 32,50 30,00 30,00 2,5 4,694-0,162 0,82 Industria 50,00 41,50 35,00 32,50-1,

90 Rode s Report 2018:3 71 Industrial rentals and vacancies Table 7.2 (continued) Mean prime industrial market rentals as in quarter 2018:3 (R/m² p.m.; gross lease; excl. VAT) Area size leased in m² Vacancy a b r² Ladine 50,00 42,50 33,50 30,00 30,00 2,5 4,847-0,179 0,90 Futura Laboria - 35,00 32, , Magna Via 55,00 54,67 47,50 45,00-2, Seshego Polokwane 51,25 42,23 36,10 34,38 30,00 2,1 Nelspruit Nelspruit East 45,00 40,00 35,00 35,00-3, Nelspruit West 47,50 45,00 42,50 42,50-3, Rocky's Drift 40,00 35,00 36,50 32,50-4, Riverside Park 67,50 57,50 57,50 55,00-3, Nelspruit 50,00 44,38 42,88 41,25-3,3 Durban Springfield Park 63,17 62,33 61,67 60,00 58,33 2,3 4,295-0,026 0,97 Mayville 52,50 50,00 50,00 47,50 43,50 2,0 4,278-0,056 0,90 Phoenix 57,50 57,50 54,00 52,67 49,33 1,7 4,353-0,052 0,93 North Coast Rd/Briardene 65,00 63,33 63,33 61,67 60,00 2,7 4,310-0,025 0,95 Briardene Industrial Park 72,50 66,67 65,00 61,67 61,00 2,3 4,566-0,055 0,92 Umgeni Rd/Stamford Hill 62,50 58,33 58,25 56,00 55,00 4,3 4,331-0,039 0,90 Umbilo/Sydney Rd/Gale St 55,00 55,00 57,00 56,67 60,00 4,5 3,852 0,027 0,80 Jacobs 56,67 56,67 55,00 55,00 56,25 3,0 4,064-0,006 0,20 Mobeni 57,50 57,50 56,25 56,25 55,00 2,3 4,135-0,014 0,88 Prospecton 65,00 61,67 58,25 58,25 57,25 4,0 4,376-0,040 0,84 Ithala Industrial Estate 56,50 56,50 55,00 52,50 52,50 3,0 4,205-0,029 0,91 Pinetown Central 58,25 57,00 56,67 53,33 50,00 3,8 4,352-0,049 0,91 New Germany 59,33 59,33 56,67 56,67 53,33 3,3 4,280-0,034 0,86

91 Rode s Report 2018:3 72 Industrial rentals and vacancies Table 7.2 (continued) Mean prime industrial market rentals as in quarter 2018:3 (R/m² p.m.; gross lease; excl. VAT) Area size leased in m² Vacancy a b r² Kwa Debeka Industrial Park Isipingo 55,00 55,00 55,00 55,00 55,00 2,0 4,007 0,000 - Rossburgh/South Coast Rd 55,00 55,00 55,00 55,00 52,50 1,5 4,083-0,012 0,50 Edwin Swales Drive 65,00 62,50 62,50 57,50 55,00 1,5 4,489-0,055 0,94 Glen Anil 67,40 67,40 66,40 65,00 63,40 1,8 4,335-0,021 0,93 Brickfield Rd 62,50 62,50 62,50 57,50 55,00 2,0 4,411-0,045 0,83 Verulam 45,00 45,00 45,00 38,00 38,00 2,0 4,218-0,069 0,79 Canelands 45,00 45,00 45,00 45,00 45,00 1,0 3,807 0,000 0,00 Tongaat 30,00 30,00 30,00 30,00 30,00 2,0 3,401 0,000 - New Westmead/Mahogany 67,67 66,00 65,00 63,33 61,25 2,3 4,390-0,032 0,98 Westmead 66,00 64,33 64,33 63,33 62,50 3,5 4,275-0,016 0,93 Mariann Park/Southmead 57,50 53,00 50,00 49,00 48,00 2,3 4,339-0,057 0,89 Maxmead 63,33 60,67 60,67 61,67 59,33 2,3 4,214-0,014 0,52 Ringroad Industrial Park 65,00 65,00 65,00 62,00-2, Avoca/Red Hill/Northgate 65,00 63,33 63,33 61,67 58,33 2,7 4,356-0,032 0,88 Falcon Park 55,00 55,00 55,00 50,00 50,00 2,0 4,239-0,039 0,79 Riverhorse Valley Business Estate 75,00 73,33 73,33 71,67 70,00 1,7 4,434-0,021 0,95 Mount Edgecombe 73,75 72,50 72,00 67,50 64,33 3,3 4,568-0,046 0,92 Umbogintwini/Southgate 60,00 60,00 60,00 55,00 55,00 2,0 4,306-0,035 0,79 Southgate Industrial Park 61,00 61,00 60,00 59,00 57,50 2,0 4,229-0,020 0,93 Hibiscus Industrial Park Umgeni Park 67,50 67,50 67,50 66,00 63,50 2,3 4,330-0,019 0,76 Hammersdale 32,00 32,00 33,00 33,00 33,50 3,5 3,376 0,016 0,87 Cato Ridge 34,00 34,00 34,00 34,00 33,67 1,7 3,542-0,003 0,50 Ballito 65,00 60,00 50,00 50,00 50,00 4,0 4,641-0,091 0,77 Dube Tradeport 75,00 70,00 70,00 70,00 65,00 3,0 4,507-0,037 0,77 Durban 58,54 57,48 56,90 55,10 53,60 2,5

92 Rode s Report 2018:3 73 Industrial rentals and vacancies Table 7.2 (continued) Mean prime industrial market rentals as in quarter 2018:3 (R/m² p.m.; gross lease; excl. VAT) Area size leased in m² Vacancy a b r² Ladysmith Ezakheni/Pieters Danskraal 20,00 17,00 12,00 10,00 8,00 3,0 4,706-0,310 0,98 Nambiti 20,00 17,00 12,00 10,00 8,00 3,0 4,706-0,310 0,98 Colenso Ladysmith 20,00 17,00 12,00 10,00 8,00 3,0 Cape Peninsula Viking Place 64,25 62,50 58,00 55,00 56,50 1,6 4,434-0,051 0,84 Glosderry 60,00 60,00 60, , Paarden Eiland/Metro 65,80 63,17 60,60 60,60 57,67 1,4 4,396-0,040 0,92 Montague Gardens 60,00 57,88 55,63 53,86 54,71 2,4 4,267-0,034 0,84 Marconi Beam 60,86 58,57 57,00 50,67 50,50 1,5 4,496-0,069 0,94 Killarney Gardens 52,00 50,14 46,17 44,00 42,50 2,7 4,337-0,070 0,98 Racing Park 45,00 43,17 41,29 37,67 35,00 3,6 4,286-0,084 0,98 Atlantis , Woodstock/Salt River/Observatory - 80,00 70, , Athlone 1 & 2 45,00 45,00 40,00 35,00 35,00-4,382-0,100 0,92 Lansdowne Nerissa 50,00 47,50 47,50 45,00 42,50 2,0 4,188-0,050 0,94 Sand Industria 40,00 40,00 35,00 30,00 30,00 1,0 4,348-0,115 0,92 Ottery Hillstar 61,00 57,67 57,67 55,00-2, Ottery Sunset 60,00 55,00 55,00 55,00-2, Diep River 67,50 62,50 60, , Elfindale Monwood/Philippi 45,00 45,00 37,50 37,50 35,00 2,0 4,307-0,089 0,86 Retreat/Steenberg - 55, , Capricorn Park 65,00 65,00 65,00 45,00-3, Maitland 56,67 54,80 53,50 50,00 49,00 2,0 4,319-0,051 0,98 Ndabeni 62,83 60,50 57,67 55,14 50,25 1,4 4,541-0,071 0,96

93 Rode s Report 2018:3 74 Industrial rentals and vacancies Table 7.2 (continued) Mean prime industrial market rentals as in quarter 2018:3 (R/m² p.m.; gross lease; excl. VAT) Area size leased in m² Vacancy a b r² Epping 1 & 2 54,79 53,44 50,43 48,71 48,60 2,5 4,239-0,044 0,93 WP Park 60,17 60,00 58,40 54,00 53,00 1,3 4,379-0,048 0,93 Elsies River (excl. Central Park) 41,75 39,00 37,75 35,25 33,67 2,3 4,110-0,070 0,99 Parow Beaconvale 52,33 51,83 50,00 43,00 39,67 2,5 4,543-0,099 0,92 Tygerberg Business Park 58,40 53,50 51,00 49,00 48,29 1,7 4,377-0,061 0,91 Parow Industria 51,11 50,33 48,00 42,43 40,00 2,4 4,447-0,088 0,95 Parow East 55,83 52,00 48,00 42,33 40,00 1,5 4,661-0,115 1,00 Bellville Oakdale 45,00 40,00 35,00 32,50 30,00 2,0 4,518-0,133 0,97 Bellville Stikland/Kaymor 54,00 50,50 49,00 41,67 40,33 1,4 4,567-0,103 0,96 Bellville Triangle 47,50 45,00 42,75 40,00 39,00 1,6 4,226-0,067 0,99 Bellville South/Sacks Circle 45,33 44,80 42,50 40,56 37,88 2,7 4,164-0,060 0,96 Kraaifontein 43,00 40,40 39,83 38,67 37,00 2,0 3,997-0,045 0,95 Brackenfell Industria 54,29 51,29 49,00 45,00 43,00 2,3 4,429-0,079 1,00 Everite Brackenfell 59,00 54,00 46,67 44,67 44,00 2,0 4,606-0,101 0,89 Kuils River 49,13 45,56 41,88 39,71 39,40 3,0 4,290-0,076 0,93 Blackheath 48,29 45,00 42,13 38,83 37,60 2,5 4,338-0,085 0,99 Saxenburg Industrial Park 52,00 49,00 48,83 47,00 43,75 2,5 4,227-0,051 0,92 Okavango 55,00 50,13 47,14 43,67 41,60 2,0 4,495-0,091 0,99 Brackengate 73,75 70,00 69,00 68,00 70,75 1,3 4,353-0,014 0,32 Paarl 45,00 43,50 40,00 37,50 35,00 1,0 4,289-0,086 0,99 Wellington 45,00 40,00 38,50 32,50 30,00 1,0 4,547-0,135 0,98 Contermanskloof 65,00 65,00 62,50 62,50 62,50 2,0 4,258-0,015 0,73 Rivergate 66,67 65,00 62,50 62,50 60,00 2,0 4,375-0,032 0,93 Airport Ind (north of sewerage farm) 60,00 58,00 54,75 53,25 50,67 1,6 4,399-0,055 0,98 Airport Ind (west of Borcherds Quarry) 64,50 61,25 59,50 57,50 57,00 1,8 4,377-0,041 0,94 Airport Ind (east of Borcherds Quarry) 69,50 68,50 69,25 65,25 64,00 1,4 4,409-0,029 0,84

94 Rode s Report 2018:3 75 Industrial rentals and vacancies Table 7.2 (continued) Mean prime industrial market rentals as in quarter 2018:3 (R/m² p.m.; gross lease; excl. VAT) Area size leased in m² Vacancy a b r² Durbanville Industrial Park 55,00 47,00 47, , Northgate Industrial Park Cape Peninsula 55,46 53,14 50,59 46,98 45,33 2,1 Helderberg The Interchange 65,00 55,00 50, Helderberg Industrial Park 45,00 40,00 38, Gants 50,00 48,00 45, Half Way 50,00 48,00 45, Somerset Business Park 55,00 48,00 48, Georges Park/Onverwacht 48,00 45,00 40, Mansfield 40,00 38,00 35, Firgrove Strand Halt Broadlands Helderberg Port Elizabeth Deal Party 40,83 35,00 33,13 33,13 31,88 3,3 4,041-0,071 0,76 North End 39,38 38,13 34,38 34,38 33,75 4,0 3,955-0,053 0,84 Korsten/Neave/Sidwell/Sydenham 32,50 33,75 35,00 35,00 34,50 3,3 3,390 0,020 0,59 South End Walmer 53,33 50,00 42,50 35,00-2, Uitenhage: Volkswagen area/nmblp 29,17 28,75 28,75 25,00 22,50 5,8 3,900-0,088 0,86 Uitenhage: Hella/Kruisrivier 24,17 23,17 23,63 21,88 21,88 6,6 3,372-0,034 0,83 Struandale ,17 33,13 33,13 2, Markman Township ,00 25,00 25,00 5, Perseverance 33,33 32,50 31,25 31,25 31,25 3,9 3,615-0,022 0,77 Walmer 53,75 47,50 42, ,

95 Rode s Report 2018:3 76 Industrial rentals and vacancies Table 7.2 (continued) Mean prime industrial market rentals as in quarter 2018:3 (R/m² p.m.; gross lease; excl. VAT) Area size leased in m² Vacancy a b r² Greenbushes 46,25 45,83 41,38 40,88 40,88 2,8 4,090-0,047 0,80 Fairview 63,13 63,13 57,50 55,83-3, Port Elizabeth 41,58 39,78 35,76 33,68-3,7 East London Arcadia 40,67 36,67 29,33 26,00 25,00 2,5 4,640-0,173 0,95 Gately/Woodbrook 40,00 35,00 33,33 31,00 30,00 3,0 4,154-0,091 0,93 Wilsonia 32,50 30,00 27,25 26,67 21,00 2,5 4,208-0,129 0,89 Braelyn 40,00 35,00 33,50 24,50 20,00 3,0 5,007-0,231 0,96 Northend 40,00 35,00 33,50 30,00 20,00 3,0 4,845-0,202 0,85 Chiselhurst 41,67 35,00 30,00 30,00 25,00 1,7 4,527-0,152 0,92 Meisies Halt 47,50 40,00 35,00 35,00 30,00-4,566-0,136 0,91 Beacons Bay Industrial 42,50 40,00 32, , IDZ ,00 30, Wesbank Industrial Area 27,50 27,50 25,00 20,00-5, East London 39,15 34,91 31,05 28,35 25,13 2,7 Bloemfontein Hilton 46,00 44,67 37,67 31,50 25,00 3,0 5,034-0,207 0,96 East End 46,00 44,67 37,67 31,50 24,50 3,5 5,067-0,212 0,95 Harvey Road 40,33 34,33 28,33 29,00 24,50 4,0 4,483-0,151 0,89 Old Industrial 39,67 37,33 35,33 26,50 21,00 4,5 4,938-0,215 0,92 Hamilton: Mill St 35,00 33,00 30,00 27,00 25,00 4,5 4,198-0,115 1,00 Hamilton: G Lubbe St 32,50 29,33 27,00 25,50 22,00 5,5 4,139-0,120 0,97 Estoire 47,00 46,00 45,00 42,50 41,50 3,5 4,096-0,043 0,98 Bloemfontein 40,93 38,48 34,43 30,50 26,21 4,1

96 Rode s Report 2018:3 77 Industrial rentals and vacancies Table 7.2 (continued) Mean prime industrial market rentals as in quarter 2018:3 (R/m² p.m.; gross lease; excl. VAT) Area size leased in m² Vacancy a b r² George George Central 35,67 31,67 28,50 24,00 21,00 1,5 4,552-0,176 1,00 Tamsui Industria 38,33 34,83 31,00 25,67 22,67 1,0 4,652-0,179 1,00 Pacaltsdorp Industria 33,33 31,67 29,33 24,00 20,67 1,0 4,453-0,163 0,96 George 35,78 32,72 29,61 24,56 21,44 1,2 Pietermaritzburg Willowton - 35,00 35,00 35,00 30,00 3, Mkomdeni - 35,00 30,00 30,00 28,00 5, Camps Drift - 55,00 45, , Pietermaritzburg Central 70,00 70,00 65,00 60,00-5, Pietermaritzburg - 48,75 43,75 41,67 29,00 4,5 Windhoek North 70,00 70,00 70,00 60,00 60,00 2,0 4,624-0,062 0,79 Lafrenz 70,00 70,00 60,00 60,00 55,00 2,0 4,719-0,083 0,88 South 90,00 90,00 90,00 75,00 70,00 1,0 5,057-0,092 0,83 Prosperita 70,00 70,00 65,00 65,00 60,00 1,0 4,537-0,050 0,88 Windhoek 75,00 75,00 71,25 65,00 61,25 1,5

97 Rode s Report 2018:3 78 Industrial rentals and vacancies Table 7.3 Standard deviation from mean prime industrial market rentals as in 2018:3 250 Area size leased in m² Contributor codes Central Witwatersrand Cambridge Park 5,56 4,71 3,94 3,69 2,05 AP,AW,BM,FWR,MR Wynberg Proper 4,21 4,68 4,24 4,23 5,21 AP,AV,AW,BM,BS,FWR,GB,MR,QU Strijdom Park 4,10 3,73 5,48 6,95 8,40 AP,AV,AW,BM,FWR,GB,QU,WHF Kya Sand 5,28 3,77 3,56 2,24 7,09 AP,AV,BM,FWR,GB,QU,REN,WHF Clayville/Olifantsfontein 6,28 6,12 6,40 6,46 6,83 AP,AV,BM,FWR,GB,GI,MR,QU Chloorkop 3,66 3,71 4,86 3,89 3,64 AP,BM,BS,FWR,MR,PPR Amalgam 0,00 4,19 4,33 2,92 4,08 AP,AV,BM,BS,CR,GB,REN Crown Mines 2,04 2,50 4,19 3,49 1,50 AP,BM,CR,GB,REN Industria 0,94 2,06 2,87 3,87 2,94 AP,BM,CR,GB,QU Booysens/Booysens Reserve/Ophirton 1,00 3,77 5,43 4,83 2,94 AP,BM,CR,GB,QU Village Main/Village Deep/New Centre 2,50 2,50 4,25 3,50 2,11 AP,BM,GB,RA Benrose 4,11 2,50 2,50 2,13 1,00 AP,BM,GB,QU,RA Steeledale/Electron/Tulisa Park 2,36 0,94 0,00 3,27 1,41 AP,BM,GB,PPR Aeroton 3,30 3,68 3,00 6,47 3,84 AP,AV,BM,CR,GB,QU Devland/Nancefield - 1,00 1,00 0,00 2,50 AP,BM,QU Cleveland/Heriotdale 6,13 5,56 6,13 3,38 2,36 AP,BM,GB,PPR Newlands/Martindale AP,BM,RA Kew/Wynberg East 3,30 2,36 2,86 4,12 4,95 AP,AW,BM,GB,QU Bramley View/Lombardy West 6,00 5,00 2, AP,BM,GB Marlboro 4,71 4,08 2,36 6,24 5,00 AP,BM,GB,GI,QU Halfway House: hi-tech strip 5,99 4,41 3,97 4,66 3,14 AP,AW,BM,BR,CR,FWR,GB,GI,MR Halfway House: Richards Drive 5,79 4,63 6,37 6,62 9,31 AP,AW,BM,BR,CR,FWR,GB,GI,MR,QU,RO Commercia 4,27 2,77 2,38 3,44 0,50 AP,AW,BM,BR,CR,FWR Kramerville/Eastgate Ext12 & Ext13 2,50 12,20 9,60 5,00 7,50 AP,BM,FWR,GB,GI,QU Linbro Park 4,12 4,33 4,81 4,22 5,50 AP,AV,AW,BM,BR,FWR,GB,GI,MR,PPR,QU,RO,WHF

98 Rode s Report 2018:3 79 Industrial rentals and vacancies Table 7.3 (continued) Standard deviation from mean prime industrial market rentals as in 2018:3 Area size leased in m² Contributor codes Wesco Park/Eastgate Ext3, Ext11, Ext6, 5,26 5,93 4,09 4,60 4,92 AP,BM,FWR,GB,QU Ext8/Malboro North (New) City Deep 2,35 2,87 2,50 2,05 2,59 AP,BM,GB,PPR,QU North Riding 3,77 3,77 3,77 3,93 3,30 BM,BR,FWR,GB,WHF Samrand Centurion 8,37 6,14 6,14 6,52 1,96 AP,BM,BR,CR,FWR,MR,WHF Barbeque Downs 4,89 5,32 4,36 5,24 5,24 AP,AW,BM,BR,CR,FWR,GB Selby Ext 12/13/15/19/20/24/City West 0,94 5,25 6,13 5,72 5,56 AP,BM,GB,QU Selby Ext 5/10/14/18 0,00 5,00 7,50 7,50 7,50 AP,GB Selby Ext AP Selby Ext 3/4/ AP Denver (Old) 2,50 2,50 2,08 2,50 2,50 AP,BM,GB,RA Denver (New) 2,36 2,36 2,36 2,36 2,94 AP,BM,GB,QU Kyalami Business Park 4,66 5,88 6,77 5,35 5,80 AP,AV,AW,BM,BR,FWR,GB,MR,QU Reuven ,00 - AP,BM Selby (Old)/Selby Ext2/Park Central 2,50 7,50 8,31 7,50 - AP,BM,BS,GB,RA Robertsham 3,50 3,50 1,00 0,00 1,50 AP,CR Fordsburg/Mayfair AP Waterfall 1,50 1,50 1,00 3,50 3,50 AP,BR,GB West Rand Lea Glen 4,15 4,15 4,02 4,00 5,02 BM,CR,FWR,GB,QU Honeydew X19, 20, 21 & 22 2,50 2,17 2,17 2,06 2,24 AP,BM,FWR,GB,REN,WHF Stormill 3,24 4,05 3,43 6,09 5,92 AP,AV,BM,CR,FWR,GB,QU,RA,REN,WHF Chamdor 5,00 5,00 2,50 0,94 2,50 AP,BM,GB,WHF Factoria 0,00 2,50 6,25 10,20 - AP,BM,REN,WHF Krugersdorp: Delporton GB Randfontein: Aureus 3,26 0,00 2,50 1,50 3,00 AP,BM,QU,REN

99 Rode s Report 2018:3 80 Industrial rentals and vacancies Table 7.3 (continued) Standard deviation from mean prime industrial market rentals as in 2018:3 Area size leased in m² Contributor codes Boltonia AP,BM Roodepoort: Technikon/Manufacta 3,50 6,00 7,50 3,75 - AP,BM,GB Industria North 0,00 2, AP,BM,GB Robertville 1,90 4,67 2,65 3,40 4,68 AP,AV,BM,CR,FWR,GB,QU,RA,WHF Laserpark 4,47 2,45 2,45 4,31 5,34 AP,AW,BM,FWR,GB,REN,WHF East Rand Elandsfontein 4,09 3,91 4,40 7,20 7,68 AP,BM,BS,FWR,GB,ME,MR,OS,OSO,PPR, QU,RO Tunney/Greenhills 4,53 4,89 4,72 5,17 2,80 AP,BM,BR,BS,FWR,GB,ME,MR,OS,PPR, QU,WHF,ZZ Henville 4,08 3,74 5,31 5,10 2,16 BM,FWR,ME,MR,OS,PPR,WHF Meadowbrook/Wilbart 5,60 5,22 4,37 6,23 3,44 BM,BR,BS,FWR,GB,ME,MR,OS,OSO,PPR, RO Sunnyrock 3,77 3,16 3,74 4,44 4,50 AP,BM,BR,FWR,GB,ME,MR,OS,OSO,PPR, QU,RO Rustivia/Activia Park 2,87 3,37 3,59 3,59 3,64 AP,BM,FWR,GB,ME,MR,OS,OSO,PPR, QU Eastleigh 5,28 5,87 5,06 5,50 4,22 AP,BM,BR,BS,FWR,GB,ME,MR,OS,PPR Sebenza Ext 14 2,11 2,50 4,67 4,92 2,76 AP,BM,BR,FWR,GB,ME,MR,OS,PPR,QU Spartan Ext 16 (Sebenza Link) + 2,76 3,11 4,04 3,66 4,25 AP,BM,BR,BS,FWR,GB,ME,MR,OS,PPR, Ext1,3,7 QU,RO Isando 3,81 3,95 4,26 4,28 4,27 AP,BM,BR,FWR,GB,ME,MR,OS,PPR,QU, RA,RO Isando 3 3,28 2,77 2,74 3,36 2,71 AP,BM,BR,FWR,ME,MR,OS,PPR,QU,RO Jet Park 4,42 4,38 3,87 3,64 3,80 AP,BM,BR,BS,FWR,GB,ME,MR,OS,OSO, PPR,QU,RA,RO,WHF

100 Rode s Report 2018:3 81 Industrial rentals and vacancies Table 7.3 (continued) Standard deviation from mean prime industrial market rentals as in 2018:3 Area size leased in m² Contributor codes Alrode & Xs 0,50 0,50 0,50 2,83 1,89 AP,BM,FWR,GB Alrode South 5,28 6,46 5,04 5,16 6,22 AP,BM,BR,FWR,GB,QU Alberton 4,03 3,77 1,89 1,94 3,30 AP,BM,FWR,GB,QU Aeroport/Spartan Ext 2 1,91 2,36 3,54 5,12 5,31 AP,AV,BM,BR,FWR,GI,ME,MR,OS,PPR, QU,RA Delville 1,50 1,50 0,00 0,00 2,05 AP,BM,PPR,QU Roodekop 4,31 4,08 2,97 2,75 3,18 AP,BM,FWR,GB,MR,PPR,QU Wadeville: Industrial zoning 3,74 3,68 4,36 3,17 4,32 AP,BM,FWR,GB,PPR Route 24/Meadowdale 2,83 2,75 2,65 3,83 4,27 AV,BM,BR,FWR,GB,ME,MR,OS,OSO,PPR, QU,RO Germiston S/Industries E 1,50 0,00 1,41 0,94 2,59 AP,BM,BS,GB,PPR Driehoek/Industries W 6,24 4,08 3,40 3,27 3,77 AP,BM,GB,PPR Knights 8,93 7,91 3,50 5,08 3,50 AP,BM,BS,PPR,QU Spartan Proper 4,24 4,28 3,71 4,64 4,82 AP,BM,BR,BS,FWR,GB,ME,MR,OS,PPR Founders View 4,16 3,54 4,04 4,69 5,81 AP,BM,BR,BS,FWR,GB,ME,OS,PPR,RA Longmeadow 4,57 4,20 3,14 4,14 5,42 AV,BM,BR,BS,FWR,GB,ME,MR,OS,OSO,PPR,QU,RA,ZZ Pomona/Kempton Park 4,46 5,52 6,27 7,94 8,01 AP,BM,BR,FWR,GB,ME,OS,PPR,QU,RO Gosforth Park 3,94 3,94 5,34 5,34 4,65 AP,FWR,GB,ME,MR,PPR Far East Rand Boksburg North & East 4,95 4,83 4,31 5,42 3,74 AP,BM,BR,FWR,GB,MR,RA,RO,WHF Benoni 5,59 5,59 3,72 3,38 4,19 AP,BM,FWR,GB,RA,WHF New Era/Vulcania 4,50 4,19 4,19 4,71 0,00 AP,BM,GB Nuffield 6,94 6,94 4,42 3,83 2,94 AP,BM,BS,GB,QU Fulcrum 6,00 6,00 3, AP,GB Apex 8,26 8,44 7,09 6,28 6,12 AP,GB,MR,QU Labore 7,50 7, ,50 AP,GB Morehill Ext 8 Benoni 7,26 6,26 4,33 3,30 6,00 AP,BS,GB,QU

101 Rode s Report 2018:3 82 Industrial rentals and vacancies Table 7.3 (continued) Standard deviation from mean prime industrial market rentals as in 2018:3 Area size leased in m² Pretoria Charlotte Maxeke 5,00 2,50 5,00 4,50 2,50 AP,CI Pretoria Industrial Township 2,50 0,00 2,50 2,50 0,00 AP,HN Koedoespoort AP Waltloo/Despatch 2,36 2,50 2,50 7,50 5,00 AP,BR,CI Silverton/Silvertondale 6,24 4,08 2,36 2,36 - AP,BR,CI Samcor Park 2,50 0,00 0,00 2,50 - AP,BR Sunderland Ridge 2,50 1,00 2,50 5,00 7,50 AP,HN Hermanstad 2,50 2,50 0,00 2,50 2,50 AP,CI Kirkney AP Hennopspark X15 & X7 1,00 1,50 2,50 0,00 0,00 AP,HN Gateway 2,05 1,41 3,30 3,77 - AP,BR,MAS Lyttleton Manor X4/X6 2,50 5, AP,CI Pretoria North 0, AP,CI Silvertondale X1 4,08 2,36 0,00 2,50 - AP,BR,CI Klerksoord AP Rosslyn AP Route 21 Corporate Park Centurion HN Irene (excl. Route 21 Corp. Park) AP Polokwane Lebowakgomo Superbia 10,00 2,50 2,50 0,00 - MO,TG Industria 0,00 1,50 5,00 2,50 - MO,TG Ladine 0,00 2,50 1, MO,TG Futura Contributor codes

102 Rode s Report 2018:3 83 Industrial rentals and vacancies Table 7.3 (continued) Standard deviation from mean prime industrial market rentals as in 2018:3 Area size leased in m² Laboria TG Magna Via 0,00 6,60 2, ES,MO,NET,TG Seshego Nelspruit Nelspruit East 0,00 0,00 0,00 0,00 - HH,KEL,PM,RZ Nelspruit West 0,00 0,00 0,00 0,00 - HH,KEL,PM,RZ Rocky s Drift 0,00 0,00 0,00 0,00 - HH,KEL,PM,RZ Riverside Park 0,00 0,00 0,00 0,00 - HH,KEL,PM,RZ Durban Springfield Park 3,17 2,05 2,36 0,00 2,36 PC,ML,SRE Mayville 7,50 5,00 5,00 2,50 1,50 ML,SRE Phoenix 7,50 7,50 6,00 5,25 0,94 ML,PC,SRE North Coast Rd/Briardene 4,08 2,36 2,36 2,36 0,00 ML,PC,SRE Briardene Industrial Park 8,29 2,36 0,00 2,36 2,94 FWR,GI,ML,PC,SRE Umgeni Rd/Stamford Hill 2,50 6,24 6,26 5,66 - FWR,ML,PC,SRE Umbilo/Sydney Rd/Gale St 5,00 5,00 4,97 2,36 0,00 FWR,ML,PC Jacobs 6,24 6,24 4,08 4,08 5,45 FWR,ML,PC,SRE Mobeni 7,50 7,50 4,15 4,15 3,54 FWR,ML,PC,SRE Prospecton 0,00 4,71 3,03 3,03 5,12 FWR,ML,PC,SRE Ithala Industrial Estate 1,50 1,50 0,00 2,50 2,50 ML,PC Pinetown Central 2,05 2,12 2,36 2,36 5,00 FWR,GI,ML,PC,SRE New Germany 4,19 4,19 2,36 2,36 2,36 FWR,ML,PC,SRE Kwa Debeka Industrial Park Isipingo ML Rossburgh/South Coast Rd ML,PC Edwin Swales Drive 5,00 2,50 2,50 2,50 0,00 ML,SRE Contributor codes

103 Rode s Report 2018:3 84 Industrial rentals and vacancies Table 7.3 (continued) Standard deviation from mean prime industrial market rentals as in 2018:3 Area size leased in m² Glen Anil 5,39 5,39 6,15 7,04 8,50 FWR,GI,ML,PC,SRE Brickfield Rd 2,50 2,50 2,50 2,50 0,00 ML,SRE Verulam ML Canelands ML Tongaat ,00 ML,PC New Westmead/Mahogany 2,05 1,41 2,45 2,36 2,17 FWR,GI,ML,PC,SRE Westmead 4,32 3,30 3,30 2,36 2,50 FWR,ML,PC,SRE Mariann Park/Southmead 7,50 3,00 0,00 1,00 - ML,PC,SRE Maxmead 6,24 4,19 4,19 2,36 0,94 ML,PC,SRE Ringroad Industrial Park PC Avoca/Red Hill/Northgate 4,08 2,36 2,36 2,36 2,36 ML,PC,SRE Falcon Park 5,00 5,00 5, ML,PC Riverhorse Valley Business Estate 7,07 4,71 4,71 6,24 3,54 FWR,ML,PC,SRE Mount Edgecombe 7,40 7,50 8,03 4,33 3,30 FWR,ML,PC,SRE Umbogintwini/Southgate ,00 5,00 ML,PC Southgate Industrial Park 1,00 1,00 0,00 1,00 2,50 ML,PC Hibiscus Industrial Park Umgeni Park 2,50 2,50 2,50 4,00 1,50 ML,PC,SRE Hammersdale 0,00 0,00 1,41 1,41 1,50 ML,PC,QP,SRE Cato Ridge 6,00 6,00 6,00 6,00 4,19 ML,PC,QP,SRE Ballito SRE Dube Tradeport SRE Ladysmith Ezakheni/Pieters - - Danskraal DE Contributor codes

104 Rode s Report 2018:3 85 Industrial rentals and vacancies Table 7.3 (continued) Standard deviation from mean prime industrial market rentals as in 2018:3 250 Area size leased in m² Nambiti DE Colenso Cape Peninsula Viking Place 4,38 2,50 3,08 4,08 1,50 AN,AP,DN,DW,GY Contributor codes Glosderry DW,PL Paarden Eiland/Metro 6,05 3,89 2,33 2,33 5,25 AN,AP,AX,CR,CRE,DW Montague Gardens 6,12 4,23 6,82 7,66 8,81 AN,AP,AX,CR,CRE,DN,DW,LF,PL Marconi Beam 3,98 3,50 2,62 0,47 0,50 AN,AP,AX,CR,CRE,DN,DW,LF Killarney Gardens 4,00 3,83 2,91 3,95 7,50 AP,AX,CR,CRE,DW,LF,PL Racing Park 5,48 6,49 7,78 2,05 0,00 AP,AX,CR,CRE,DN,DW,LF,PL Atlantis CR Woodstock/Salt River/Observatory CR,PL Athlone 1 & AP Lansdowne Nerissa 4,08 2,50 2,50 7,07 7,50 AP,DW Sand Industria AP Ottery Hillstar 2,94 2,05 2, AP,CR,DW Ottery Sunset AP Diep River 7,50 2,50 0, CR,DW,PL Elfindale Monwood/Philippi ,50 - AP,CR Retreat/Steenberg - 10, CR,PL Capricorn Park 0,00 0, CR,DW,IKP Maitland 3,45 3,31 3,86 4,47 4,32 AN,AP,AX,CR,DN,DW,GY Ndabeni 2,27 2,14 3,73 7,10 5,93 AN,AP,AX,CR,DD,DW,GY Epping 1 & 2 6,37 6,83 7,35 5,87 5,28 AN,AP,AX,CR,DN,DW,GAM,GY,RR

105 Rode s Report 2018:3 86 Industrial rentals and vacancies Table 7.3 (continued) Standard deviation from mean prime industrial market rentals as in 2018:3 Area size leased in m² Contributor codes WP Park 5,64 3,16 3,77 1,00 1,41 AN,AP,AX,DN,DW,GY Elsies River (excl. Central Park) 3,27 1,00 1,79 0,43 0,94 AN,AP,CR,DD,GY Parow Beaconvale 3,94 3,48 4,63 2,12 0,47 AN,AP,CR,DD,DN,DW,FS,GY Tygerberg Business Park 6,80 6,02 7,77 7,96 11,30 AN,AP,DD,DN,DW,FS,GY Parow Industria 5,67 5,56 6,04 4,44 3,11 AN,AP,CR,DD,DN,DW,FS,GY,RR Parow East 6,72 7,48 7,48 6,13 8,16 AN,AP,DD,DN,DW,FS Bellville Oakdale 0,00 0,00 0,00 2,50 0,00 DN,FS,PF Bellville Stikland/Kaymor 5,83 6,64 8,64 7,99 7,67 AN,AP,CR,DD,DN,DW,LF,NE,PF,WD Bellville Triangle 2,50 2,50 4,24 4,63 4,96 AN,AP,DD,DN,DW,LF,PF,WD Bellville South/Sacks Circle 5,25 6,51 6,02 5,50 4,23 AN,AP,CR,DD,DN,DW,FS,LF,PF,RR,WD Kraaifontein 5,10 5,54 4,71 5,22 4,00 AN,AP,CR,DD,DN,LF,WD Brackenfell Industria 5,62 5,99 4,78 2,52 4,43 AN,AP,CR,DD,FS,LF,PF,WD Everite Brackenfell 4,96 6,57 6,87 6,75 7,35 AN,AP,CR,DD,DN,FS,LF,PF,WD Kuils River 4,65 2,83 3,48 2,96 2,33 AN,AP,CR,DD,DN,LF,PF,RS,WD Blackheath 3,45 2,67 7,01 1,86 2,24 AN,AP,CR,DD,DN,LF,PF,RS Saxenburg Industrial Park 2,45 2,00 5,15 4,86 2,17 AN,AP,CR,DD,LF,RS Okavango 6,55 5,01 5,89 6,10 4,27 AN,AP,CR,DD,DN,LF,PF,WD Brackengate 2,17 3,54 3,74 2,45 4,66 AN,AP,CR,DD,DN,LF Paarl - 1, CR,PRU,SF Wellington - - 3, CR,SF Contermanskloof 0,00 0,00 2,50 2,50 2,50 AP,CR,LF,NEX Rivergate 2,36 0,00 2,50 2,50 - AP,CR,LF Airport Ind (north of sewerage farm) 0,00 2,12 2,95 2,05 0,94 AN,AP,AX,CR,GY Airport Ind (west of Borcherds Quarry) 0,87 2,17 0,87 2,06 2,12 AN,AP,AX,CR,GY,NEX Airport Ind (east of Borcherds Quarry) 0,87 2,60 4,66 3,19 3,74 AN,AP,AX,CR,GY

106 Rode s Report 2018:3 87 Industrial rentals and vacancies Table 7.3 (continued) Standard deviation from mean prime industrial market rentals as in 2018:3 Area size leased in m² Durbanville Industrial Park AP Northgate Industrial Park Helderberg The Interchange RS Helderberg Industrial Park RS Gants RS Half Way RS Somerset Business Park RS Georges Park/Onverwacht RS Mansfield RS Firgrove Strand Halt Broadlands Port Elizabeth Deal Party 1,18 6,12 4,80 3,25 3,25 BD,BR,HS,NRG North End 5,12 5,41 5,12 5,12 4,15 BR,BD,HS,NRG,TR Korsten/Neave/Sidwell/Sydenham 6,37 5,45 3,54 3,54 4,27 BR,BD,HS,NRG,TR South End Walmer 4,71 10,8 2, BR,HS,NRG Uitenhage: Volkswagen area/nmblp 1,18 1,25 4,15 3,54 2,50 BD,BR,HS,NRG Uitenhage: Hella/Kruisrivier 1,18 1,31 1,39 2,07 2,07 BD,BR,HS,NRG Struandale - - 3,12 3,25 3,25 BD,BR,HS,NRG Markman Township - - 1,77 1,77 1,77 BD,BR,HS,NRG Perseverance 2,36 2,04 2,17 2,17 2,17 BD,BR,HS,NRG Walmer 4,15 7,50 2, BD,BR,HS,NRG Greenbushes 1,25 1,18 3,63 3,91 3,91 BD,BR,HS,NRG Fairview 2,07 2,07 2,50 3,12 - BD,BR,HS,NRG Contributor codes

107 Rode s Report 2018:3 88 Industrial rentals and vacancies Table 7.3 (continued) Standard deviation from mean prime industrial market rentals as in 2018:3 Area size leased in m² East London Arcadia 4,19 2,36 0,94 1,41 - CAP,CHR,ER Gately/Woodbrook 0,00 0,00 2,36 2,94 4,08 CAP,CHR,ER Wilsonia 2,50 0,00 0,25 2,36 1,00 CAP,CHR,ER Braelyn 0,00 0,00 1,50 0,50 0,00 CHR,ER Northend 0,00 0,00 1,50 5,00 - CAP,CHR,ER Chiselhurst 2,36 0,00 0, CAP,CHR,ER Meisies Halt 2,50 0,00 0, CHR,ER Beacon Bay Industrial 2,50 0,00 2, CHR,ER IDZ ER Wesbank Industrial Area 2,50 2,50 0, CAP,CHR Bloemfontein Hilton 1,41 0,47 2,05 1,50 0,00 EK,EQV,NR East End 1,41 0,47 2,05 1,50 0,50 EK,EQV,NR Harvey Road 4,50 3,30 6,24 3,00 1,50 EK,EQV,NR Old Industrial 0,47 1,89 3,40 0,50 1,00 EK,EQV,MI,NR Hamilton: Mill St 3,00 3,00 2,00 2,00 3,00 EK,EQV Hamilton: G Lubbe St 2,50 1,89 2,16 1,50 2,00 EK,EQV,NR Estoire 1,63 0,82 1,63 2,50 3,50 EK,EQV,NR George George Central 3,30 2,36 1,08 1,41 2,94 BVF,GRV,MUL Tamsui Industria 4,71 5,17 2,94 1,70 3,77 BVF,GRV,MUL Pacaltsdorp Industria 6,24 3,86 1,89 1,41 0,94 BVF,GRV,MUL Contributor codes

108 Rode s Report 2018:3 89 Industrial rentals and vacancies Table 7.3 (continued) Standard deviation from mean prime industrial market rentals as in 2018:3 Area size leased in m² Pietermaritzburg Willowton HN Mkomdeni HN Camps Drift HN Pietermaritzburg Central HN Windhoek North TE Lafrenz TE South TE Prosperita TE Contributor codes

109 Rode s Report 2018:3 90 Industrial rentals and vacancies Notes to the industrial rental tables 1. The rentals are the achievable or market rates for the quarter shown in the table heading, and these apply to industrial and warehouse space for the area sizes indicated. The rentals are the means (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 for only his utilities, like refuse removal, water, sewerage and electricity, as well as internal maintenance and maybe 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. This means we quote through rates. (See Glossary Annexure 1.) 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 quality criteria: 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. However, a building may have additional enhancements that could improve lettability by 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 and sufficient yard space. 6. Secondary space is space that 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 that have been haphazardly renovated. They 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. 7. Vacancy scale for industrial townships. The vacancy levels are based on a scale of 1 to 9 as shown below: Low Medium High

110 Rode s Report 2018:3 91 Industrial rentals and vacancies The scale should be interpreted as follows: 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 to interpolate a rental rate, see Annexure 3.

111 Rode s Report 2018:3 92 Industrial rentals and vacancies Table 7.4 Predominant market escalation rates (%) for industrial leases Average as in quarter 2018:3 5-year leases Mean SD N Central Witwatersrand 8,05 0,27 10 West Rand 8,29 0,51 10 East Rand 8,18 0,37 16 Far East Rand 8,14 0,44 7 Pretoria 7,50 0,87 4 Polokwane 7,75 0,43 4 Nelspruit 7,50 0,00 4 Durban 8,25 0,38 6 Ladysmith 8,00-1 Cape Peninsula 8,07 0,42 14 Helderberg Stellenbosch 8,00-1 Port Elizabeth 8,00 0,00 3 East London 7,67 0,47 3 Bloemfontein 8,00 0,00 2 George 7,50 0,41 3 Pietermaritzburg 8,00-1 Windhoek 8,00-1 Notes: 1. These are the averages of the predominant i.e. most often achieved market escalation rates as reported by our panel of experts.

112 Rode s Report 2018:3 93 Industrial rentals and vacancies Table 7.5 Indicative operating expenses for industrial buildings As in quarter 2018:3 in rands per m² per month Stand-alone Park R/m² SD N R/m² SD N Central Witwatersrand 9,39 2, ,11 2,27 7 West Rand 8,67 2, ,38 1,17 5 East Rand 8,16 1, ,62 1,47 11 Far East Rand 7,33 1,92 9 9,36 0,72 6 Pretoria 12,00 2, ,50 0,50 2 Polokwane 11,00 1, ,50 2,50 2 Nelspruit 9,75 0, ,00 0,00 4 Durban 17,50 2, ,75 4,75 2 Ladysmith Cape Peninsula 12,00 1, ,17 1,54 3 Helderberg 6,00-1 8,00-1 Stellenbosch Port Elizabeth 9, ,00-1 East London 8, ,75 0,75 2 Bloemfontein 11,00 6, ,50 5,50 2 George 6,67 3,40 3 8,67 3,70 3 Pietermaritzburg 12, ,00-1 Windhoek 35, ,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.

113 Rode s Report 2018:3 94 Industrial stand values Chapter 8: Industrial stand values Stand values still going strong Kobus Lamprecht Stand values tend to track industrial rentals. Therefore, a sustained growth in stand values can only be expected on the back of a sustained increase in market rentals. The performance of industrial or warehouse rentals is, in turn, driven by the performance of the sectors key to it, namely retail and manufacturing. The retail sector (real sales up 3%) performed notably better than the manufacturing sector in the first seven months of Recent data in both sectors paint a gloomy picture (see Chapter 7 for more detail). slowed for the third consecutive quarter, perhaps starting to reflect the limits of affordability. Rentals were still doing well in the Central Witwatersrand (+11%), Durban (+9%) and the East Rand (+6%). The West Rand is the exception among the major industrial regions, with stand values down in nominal and real terms. It must be noted that rentals have generally started to slow, which could start to impact on stand-value growth in coming quarters. This of course, if rentals continue to slow. As stand values are a residual item in a viability study, poor market-rental growth translates into very poor stand-value growth and vice versa. The pro forma viability study that shows how a land value is calculated using the residual approach, is shown in Table 8.1 on the next page. Note the sensitivity of stand values to changes in market rentals. The effect is akin to financial gearing. Stand-value performance In the third quarter of 2018, national stand values grew by 7% for the second consecutive quarter, again beating building-cost inflation (about 4%). All major industrial regions managed to outpace inflation. Regionally, the Cape Peninsula remains the standout, with nominal market rental growth of 12%. However, growth has R/m² (log scale) R/m² (log scale) 2,000 1,500 1, Nominal industrial stand values (1.000m² stands) Smoothed Cape Peninsula Durban East Rand Central Witwatersrand Source of data: Rode's Time Series 1, Real industrial stand values (1.000m² stands) 2005 rands Cape Peninsula Deflated by BER BCI (2005=100) Durban East Rand Smoothed Central Witwatersrand Source of data: Rode's Time Series

114 Rode s Report 2018:3 95 Industrial stand values Table 8.1 Sensitivity of land value to changes in rent A simplistic viability study Scenario A B % change Market rent year 1 (net) R10 R12 +20% Capitalization rate 10% 10% MV on completion (net rent capitalized) R100 R % Construction costs -R60 -R60 +0% Profit margin* -R17 -R20 +18% Max value of land R23 R40 +74% * Assuming a constant profit margin of 20% of cost (i.e. construction costs and land costs) Thus land value is a residual item in this viability study: it is the maximum the developer can afford to pay for the land. The remainder of this chapter includes market values for level, serviced stands in named industrial townships. The industrial land value tables contain regression parameters to allow readers to interpolate land values for area sizes other than those given in the tables. This is necessary because the relationship between price and square metreage is not linear. Normally, the larger an industrial stand, the cheaper the stand value per square metre. However, we find this is not always the case, most likely due to a shortage or an oversupply in certain size categories. For more details on how to use these equations, refer to Annexure 3 (annexure page XII). This concludes our chapter on industrial stand values. PS: If you do not understand a term used in this article, please consult the Glossary (Annexure 1).

115 Rode s Report 2018:3 96 Industrial stand values Table 8.2 Mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Area size in m² Vacancy grade a b r² Central Witwatersrand Cambridge Park ,0 7,494-0,040 0,84 Wynberg Proper ,0 6,828 0,017 0,58 Strijdom Park ,5 7,381-0,039 0,71 Kya Sand ,8 7,457-0,085 0,93 Clayville/Olifantsfontein ,0 7,199-0,084 1,00 Chloorkop ,5 6,996-0,044 0,81 Amalgam Crown Mines ,3 7,392-0,030 0,58 Industria ,897-0,098 0,58 Booysens/Booysens Reserve/Ophirton ,0 7,271-0,080 0,93 Village Main/Village Deep/New Centre ,685 0,000 - Benrose ,0 6,807-0,018 0,95 Steeledale/Electron/Tulisa Park ,0 6,653 0,000 - Aeroton ,0 7,372-0,064 0,98 Devland/Nancefield ,0 8,014-0,183 0,87 Cleveland/Heriotdale ,0 6,874-0,029 0,99 Newlands/Martindale ,056-0,123 0,92 Kew/Wynberg East Bramley View/Lombardy West ,215 0,000 - Marlboro ,991 0,000 - Halfway House: hi-tech strip ,0 6,855 0,029 0,84 Halfway House: Richards Drive ,0 7,112-0,011 0,49 Commercia ,0 6,931-0,040 0,88 Kramerville/Eastgate Ext 12 & Ext ,3 8,143-0,091 0,90 Linbro Park ,5 7,766-0,052 0,81

116 Rode s Report 2018:3 97 Industrial stand values Table 8.2 (continued) Mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Wesco Park/Eastgate Ext 3, Ext 11, Ext 6, Ext8/Malboro North (New) Area size in m² Vacancy grade a b r² City Deep ,0 6,814-0,005 0,58 North Riding ,3 6,908 0,000 - Samrand Centurion ,5 7,452-0,063 0,84 Barbeque Downs ,6 7,138-0,007 0,01 Selby Ext 12/13/15/19/20/24/City West ,0 6,651-0,004 0,58 Selby Ext 5/10/14/ ,0 6,728-0,006-0,76 Selby Ext ,0 6,724-0,012-0,92 Selby Ext 3/4/ ,0 6,786-0,020-0,95 Denver (Old) ,684-0,043-0,76 Denver (New) ,0 6,810-0,010-0,96 Kyalami Business Park ,0 7,334-0,013-0,92 Reuven Selby (Old)/Selby Ext 2/Park Central ,0 6,971-0,032-0,92 Robertsham Fordsburg/Mayfair Waterfall ,672-0,151-0,92 Central Witwatersrand ,6 West Rand Lea Glen ,0 6,915-0,036 0,78 Honeydew Ext 19, 20, 21 & ,0 7,704-0,106 0,87 Stormill ,3 7,207-0,049 0,88 Chamdor ,264-0,089 0,90 Factoria ,358-0,061 0,58 Krugersdorp: Delporton ,059-0,176 0,58 Randfontein: Aureus ,0 6,763-0,125 0,86

117 Rode s Report 2018:3 98 Industrial stand values Table 8.2 (continued) Mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Area size in m² Vacancy grade a b r² Boltonia ,828-0,152 0,58 Roodepoort: Technikon/Manufacta ,925-0,034 0,84 Industria North ,0 7,883-0,123 0,92 Robertville ,0 6,901-0,024 0,84 Laserpark ,5 6,957-0,003 0,00 West Rand ,5 East Rand Elandsfontein ,8 7,169-0,049 0,95 Tunney/Greenhills ,6 7,288-0,028 0,90 Henville ,4 7,260-0,057 0,88 Meadowbrook/Wilbart ,0 7,373-0,054 0,95 Sunnyrock ,1 7,336-0,048 0,99 Rustivia/Activia Park ,3 7,241-0,064 0,92 Eastleigh ,0 7,291-0,055 0,97 Sebenza Ext ,3 7,395-0,072 0,92 Spartan Ext 16 (Sebenza Link) + Ext 1,3, ,5 7,812-0,133 0,75 Isando ,0 7,299-0,056 0,89 Isando ,7 7,386-0,064 0,90 Jet Park ,5 7,562-0,061 0,92 Alrode & Xs ,3 7,141-0,069 0,90 Alrode South ,0 7,369-0,110 0,96 Alberton ,3 7,640-0,130 0,94 Aeroport/Spartan Ext ,0 7,825-0,101 0,96 Delville Roodekop ,0 7,078-0,096 0,83 Wadeville: Industrial zoning ,1 7,290-0,102 0,93

118 Rode s Report 2018:3 99 Industrial stand values Table 8.2 (continued) Mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Area size in m² Vacancy grade a b r² Route 24/Meadowdale ,3 7,636-0,081 0,84 Germiston S/Industries E ,0 6,988-0,108 0,92 Driehoek/Industries W ,0 7,012-0,065 0,70 Knights ,7 6,965-0,109 0,92 Spartan Proper ,8 7,562-0,085 0,87 Founders View ,2 7,872-0,102 0,98 Longmeadow ,3 7,720-0,053 0,92 Pomona/Kempton Park ,8 7,286-0,043 0,97 Gosforth Park ,5 7,311-0,024 0,98 East Rand ,7 Far East Rand Boksburg North & East ,0 6,852-0,028 0,85 Benoni South ,8 6,555 0,005 0,14 New Era/Vulcania ,0 6,109 0,000 - Nuffield ,5 6,052 0,000 - Fulcrum ,5 6,052 0,000 - Apex ,5 6,795-0,044 0,86 Labore Brakpan ,5 6,466-0,040 0,92 Morehill Ext 8 Benoni ,0 6,699-0,030 0,58 Far East Rand ,2 Pretoria Charlotte Maxeke , Pretoria Industrial Township ,5 8,550-0,300 1,00 Koedoespoort Waltloo/Despatch ,0 6,802 0,000 - Silverton/Silvertondale ,0 7,501-0,104 0,97

119 Rode s Report 2018:3 100 Industrial stand values Table 8.2 (continued) Mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Area size in m² Vacancy grade a b r² Samcor Park ,0 6,802 0,000 - Sunderland Ridge ,5 7,153-0,075 0,84 Hermanstad , Kirkney Hennopspark Ext 15 & Ext ,5 7,919-0,084 0,92 Gateway ,0 6,908 0,000 - Lyttleton Manor Ext 4/Ext ,991 0,000 - Pretoria North Silvertondale X ,0 7,501-0,104 0,97 Klerksoord ,0 7,696-0,303 0,87 Rosslyn ,0 6,436-0,044 0,58 Route 21 Corporate Park Centurion ,0 7,973-0,110 0,81 Irene (excl. Route 21 Corp. Park) ,0 6,908 0,000 - Pretoria ,1 Polokwane Lebowakgomo Superbia , Industria , Ladine , Futura , Laboria , Magna Via ,3 7,302-0,061 0,81 Seshego Polokwane

120 Rode s Report 2018:3 101 Industrial stand values Table 8.2 (continued) Mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Area size in m² Vacancy grade a b r² Nelspruit Nelspruit East Nelspruit West Rocky's Drift ,0 6,109 0,000 - Riverside Park ,0 7,048 0,000 - Nelspruit ,0 Durban Springfield Park ,0 7,911-0,057 0,96 Mayville ,0 7,170 0,000 - Phoenix ,0 7,244 0,000 - North Coast Rd/Briardene ,0 8,124-0,082 0,98 Briardene Industrial Park ,0 8,129-0,081 0,98 Umgeni Rd/Stamford Hill ,0 7,591-0,023 0,86 Umbilo/Sydney Rd/Gale St ,0 7,681-0,042 0,82 Jacobs ,0 7,733-0,038 0,82 Mobeni ,0 7,764-0,037 0,82 Prospecton ,5 7,938-0,053 0,74 Ithala Industrial Estate Pinetown Central ,0 7,836-0,046 0,97 New Germany ,0 7,836-0,046 0,97 Kwa Debeka Industrial Park Isipingo ,0 7,433-0,022 0,59 Rossburgh/South Coast Rd ,0 7,407-0,013 0,58 Edwin Swales Drive ,0 7,437-0,012 0,58 Glen Anil ,0 7,743-0,019 0,58 Brickfield Rd ,0 7,504-0,026 0,58

121 Rode s Report 2018:3 102 Industrial stand values Table 8.2 (continued) Mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Area size in m² Vacancy grade a b r² Verulam ,0 5,991 0,000 - Canelands ,0 5,991 0,000 - Tongaat ,0 7,612-0,038 0,81 New Westmead/Mahogany ,0 7,767-0,024 0,84 Westmead ,0 7,767-0,024 0,84 Mariann Park/Southmead ,0 7,090 0,000 - Maxmead ,0 7,601 0,000 - Ringroad Industrial Park Avoca/Red Hill/Northgate ,409 0,000 - Falcon Park Riverhorse Valley Business Estate ,0 8,142-0,029 0,84 Mount Edgecombe ,244 0,000 - Umbogintwini/Southgate Southgate Industrial Park ,090 0,000 - Hibiscus Industrial Park Umgeni Park ,601 0,000 - Hammersdale ,7 7,896-0,134 0,58 Cato Ridge ,7 7,304-0,054 0,58 Ballito , Dube Tradeport Durban ,7 Ladysmith Ezakheni/Pieters Danskraal , Nambiti , Colenso Ladysmith ,0

122 Rode s Report 2018:3 103 Industrial stand values Table 8.2 (continued) Mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Area size in m² Vacancy grade a b r² Cape Peninsula Viking Place , Glosderry Paarden Eiland/Metro , Montague Gardens ,0 8,333-0,075 0,93 Marconi Beam ,0 8,483-0,096 0,95 Killarney Gardens ,3 8,427-0,128 0,94 Racing Park ,0 7,793-0,121 1,00 Atlantis Woodstock/Salt River/Observatory Athlone 1 & ,0 8,147-0,138 0,84 Lansdowne Nerissa ,0 7,090 0,000 - Sand Industria Ottery Hillstar ,0 7,739-0,117 0,84 Ottery Sunset Diep River Elfindale Monwood/Philippi ,0 7,090 0,000 - Retreat/Steenberg Capricorn Park ,0 7,467 0,000 - Maitland , Ndabeni ,0 7,824 0,000 - Epping 1 & ,0 7,816-0,030 0,85 WP Park ,

123 Rode s Report 2018:3 104 Industrial stand values Table 8.2 (continued) Mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Area size in m² Vacancy grade a b r² Elsies River (excl. Central Park) ,3 7,496-0,051 0,84 Parow Beaconvale ,8 7,714-0,060 0,91 Tygerberg Business Park ,3 8,216-0,125 0,96 Parow Industria ,8 7,419-0,009 0,92 Parow East ,5 8,466-0,142 0,99 Bellville Oakdale Bellville Stikland/Kaymor ,8 7,709-0,020 0,86 Bellville Triangle ,5 7,691-0,060 0,97 Bellville South/Sacks Circle ,3 7,743-0,061 0,94 Kraaifontein ,7 7,746-0,084 0,89 Brackenfell Industria ,7 7,932-0,066 0,95 Everite Brackenfell ,0 8,125-0,081 0,95 Kuils River ,5 7,633-0,072 0,98 Blackheath ,0 7,440-0,077 0,82 Saxenburg Industrial Park ,3 8,035-0,092 0,95 Okavango ,5 8,316-0,095 0,92 Brackengate ,5 8,220-0,065 0,95 Paarl ,848-0,261 0,96 Wellington ,588-0,249 0,90 Contermanskloof ,0 9,200-0,211 0,92 Rivergate ,0 8,525-0,128 0,89 Airport Ind (north of sewerage farm) ,0 8,300-0,100 0,99 Airport Ind (west of Borcherds Quarry) ,0 8,427-0,109 0,97 Airport Ind (east of Borcherds Quarry) ,5 8,687-0,133 0,98 Durbanville Industrial Park ,872-0,082 0,85 Northgate Industrial Park Cape Peninsula ,7

124 Rode s Report 2018:3 105 Industrial stand values Table 8.2 (continued) Mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Area size in m² Vacancy grade a b r² Helderberg The Interchange Helderberg Industrial Park Gants Half Way Somerset Business Park Georges Park/Onverwacht Mansfield Firgrove Strand Halt Broadlands Helderberg Port Elizabeth Deal Party North End ,5 7,055-0,050 0,58 Korsten/Neave/Sidwell/Sydenham ,902-0,068 0,58 South End Walmer Uitenhage: Volkswagen area/nmblp ,0 5,565 0,017 0,06 Uitenhage: Hella/Kruisrivier ,0 5,988-0,129 0,30 Struandale ,0 7,454-0,138 0,84 Markman Township ,5 5,521 0,000 - Perseverance ,0 6,184-0,036 0,84 Walmer ,0 7,108-0,047 0,84 Greenbushes ,5 5,708-0,014 0,09 Fairview ,8 7,494-0,072 0,68 Port Elizabeth ,6

125 Rode s Report 2018:3 106 Industrial stand values Table 8.2 (continued) Mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Area size in m² Vacancy grade a b r² East London Arcadia Gately/Woodbrook ,0 8,541-0,282 1,00 Wilsonia ,493-0,303 0,87 Braelyn Northend Chiselhurst ,911-0,325 0,96 Meisies Halt ,161-0,100 0,62 Beacon Bay Industrial ,027-0,312 0,95 IDZ Wesbank Industrial Area ,745-0,322 1,00 East London ,0 Bloemfontein Hilton East End Harvey Road Old Industrial Hamilton: Mill St Hamilton: G Lubbe St Estoire Bloemfontein George George Central ,0 7,147-0,156 0,93 Tamsui Industria ,5 7,280-0,165 0,90 Pacaltsdorp Industria ,5 7,243-0,165 0,89 George ,7

126 Rode s Report 2018:3 107 Industrial stand values Table 8.2 (continued) Mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Area size in m² Vacancy grade a b r² Pietermaritzburg Willowton , Mkomdeni , Camps Drift , Pietermaritzburg Central Pietermaritzburg ,3 Windhoek North ,0 8,755-0,093 0,58 Lafrenz ,0 8,758-0,144 0,58 South ,0 8,779-0,084 0,58 Prosperita ,0 8,512-0,068 0,58 Windhoek ,8

127 Rode s Report 2018:3 108 Industrial stand values Table 8.3 Standard deviation from mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Area size in m² Contributors Central Witwatersrand Cambridge Park 150,00 150,00 250,00 250,00 AP,FWR Wynberg Proper 50,00 50,00 50,00 - BM,FWR,QU Strijdom Park 273,86 238,48 311,25 314,25 AP,BM,FWR,GB,QU,WHF Kya Sand 311,56 235,59 257,65 288,04 AP,BM,FWR,GB,RA,WHF Clayville/Olifantsfontein 50,00 0,00 93,54 84,98 AP,BM,FWR,GB,MR Chloorkop 70,71 84,98 75,00 35,00 AP,BM,FWR,PPR Amalgam AP,BM,GB Crown Mines 141,42 141,42 141,42 163,30 AP,BM,CR,QU Industria AP,BM Booysens/Booysens Reserve/Ophirton 25,00 0,00 112,42 108,01 AP,BM,QU Village Main/Village Deep/New Centre AP Benrose 163,30 163,72 164,99 169,97 AP,BM,GB,QU Steeledale/Electron/Tulisa Park 175,00 175,00 175,00 175,00 AP,BM,GB Aeroton 54,49 21,65 73,95 58,74 AP,BM,CR,GB,QU Devland/Nancefield 200,00 200,00 125,00 25,00 AP,QU Cleveland/Heriotdale 124,37 134,63 150,00 155,62 AP,BM,GB,PPR,QU Newlands/Martindale AP Kew/Wynberg East Bramley View/Lombardy West AP Marlboro 250,00 250,00 250,00 250,00 AP,QU Halfway House: hi-tech strip 124,72 124,72 205,48 205,48 AP,AW,BM,FWR,GB Halfway House: Richards Drive 111,80 113,88 216,51 224,65 AP,FWR,GB,QU Commercia 47,14 47,14 73,95 89,44 AP,AW,CR,FWR,QU Kramerville/Eastgate Ext 12 & Ext ,78 588,78 610,33 500,00 AP,BM,FWR,QU Linbro Park 227,76 217,94 224,50 82,92 AP,BM,FWR,GB,PPR Wesco Park/Eastgate Ext 3, Ext 11, Ext 6, Ext8/Malboro North (New) BM

128 Rode s Report 2018:3 109 Industrial stand values Table 8.3 (continued) Standard deviation from mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Area size in m² Contributors City Deep 134,63 188,75 188,75 198,04 AP,BM,GB,PPR,QU North Riding 0,00 0,00 0,00 0,00 AP,FWR,GB Samrand Centurion ,00 25,00 BM,CR,FWR Barbeque Downs 235,70 235,70 188,56 258,60 AP,AW,FWR,GB Selby Ext 12/13/15/19/20/24/City West 70,71 70,71 70,71 65,62 AP,BM,GB,QU Selby Ext 5/10/14/18 0,00 0,00 0,00 12,50 AP,QU,WHF Selby Ext 11 84,98 84,98 70,71 70,71 AP,GB,QU Selby Ext 3/4/6 84,98 84,98 70,71 62,36 AP,GB,QU Denver (Old) 23,57 108,01 108,01 108,01 AP,BM,GB,QU Denver (New) 145,22 145,22 143,37 142,89 AP,GB,QU Kyalami Business Park 141,42 141,42 188,56 188,56 AP,BM,GB,QU,WHF Reuven Selby (Old)/Selby Ext2/Park Central BM,QU Robertsham Fordsburg/Mayfair Waterfall GB West Rand Lea Glen ,36 62,36 BM,FWR,GB Honeydew Ext 19, 20, 21 & 22 75,00 60,00 192,93 245,90 AP,BM,FWR,GB,WHF Stormill 61,01 70,42 137,20 71,46 AP,BM,CR,FWR,GB,QU,RA,WHF Chamdor 75,00 75,00 50,00 25,00 AP,BM,GB Factoria AP Krugersdorp: Delporton GB Randfontein: Aureus 50,00 50,00 12,50 62,50 AP,QU Boltonia AP Roodepoort: Technikon/Manufacta AP,GB Industria North ,00 150,00 AP,BM,QU Robertville 108,25 108,25 122,47 79,06 AP,BM,FWR,QU,WHF Laserpark 50,00 50,00 192,93 0,00 AP,BM,FWR,GB

129 Rode s Report 2018:3 110 Industrial stand values Table 8.3 (continued) Standard deviation from mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Area size in m² Contributors East Rand Elandsfontein 74,83 91,65 95,74 107,70 BM,BR,FWR,GB,ME,PPR Tunney/Greenhills 154,99 146,71 167,82 192,46 BM,BR,FWR,GB,ME,MR,OS,PPR,QU, WHF Henville 111,80 111,80 149,67 206,16 BM,BR,FWR,ME,PPR Meadowbrook/Wilbart 122,47 86,60 43,30 64,95 BM,BR,FWR,GB,ME,PPR Sunnyrock 122,47 82,92 43,30 89,27 BR,FWR,GB,ME Rustivia/Activia Park 97,98 97,98 129,10 74,83 BM,BR,FWR,ME,PPR,QU Eastleigh 126,49 132,66 91,65 80,00 AP,BM,BR,ME,PPR,QU Sebenza Ext ,50 149,07 147,37 63,25 BM,BR,GB,ME,MR,OS,PPR,QU Spartan Ext 16 (Sebenza Link) + Ext 146,29 156,84 166,60 307,52 AP,BM,BR,ME,OS,PPR,QU 1,3,7 Isando 120,00 120,00 76,38 70,00 BM,BR,FWR,ME,PPR,QU Isando 3 104,40 104,40 67,82 74,83 AP,BR,FWR,ME,QU Jet Park 167,82 167,82 184,98 170,69 BM,BR,FWR,GB,ME,MR,PPR,QU, WHF,ZZ Alrode & Xs 169,97 169,97 115,76 94,44 AP,BM,BR,FWR,GB Alrode South 188,56 181,57 139,28 129,30 AP,BM,BR,FWR,GB Alberton 188,56 169,97 143,07 108,01 AP,BM,BR,FWR,GB Aeroport/Spartan Ext 2 43,30 70,71 50,00 73,95 AP,BM,BR,FWR,ME Delville Roodekop 163,30 162,66 129,36 68,34 AP,BM,BR,FWR,GB,PPR,QU Wadeville: Industrial zoning 135,65 128,06 79,93 80,00 AP,BM,BR,FWR,GB,PPR Route 24/Meadowdale 124,72 124,72 141,42 81,65 BM,BR,FWR,GB Germiston S/Industries E ,00 - BM,PPR Driehoek/Industries W 100,00 100,00 70,71 75,00 BM,GB,PPR Knights 102,74 102,74 84,98 84,98 AP,BM,MR,PPR,QU Spartan Proper 141,42 141,42 100,00 66,33 AP,BM,BR,FWR,ME,PPR Founders View 270,42 205,48 171,51 121,34 AP,BM,BR,FWR,GB,ME,PPR,RA

130 Rode s Report 2018:3 111 Industrial stand values Table 8.3 (continued) Standard deviation from mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Area size in m² Contributors Longmeadow 132,62 136,68 176,99 205,07 BM,BR,FWR,GB,ME,PPR,QU Pomona/Kempton Park 122,47 110,22 88,19 105,70 AP,BM,BR,FWR,GB,ME,MR, PPR,QU,WHF Gosforth Park 74,83 100,00 132,66 104,88 AP,FWR,GB,ME,PPR Far East Rand Boksburg North & East 67,56 75,00 63,25 75,00 AP,BM,FWR,GB,MR,RA,WHF Benoni South 74,83 73,61 80,00 87,18 AP,BM,FWR,GB,QU,WHF New Era/Vulcania 50,00 50,00 40,82 50,00 AP,BM,GB Nuffield 25,00 25,00 25,00 25,00 AP,GB Fulcrum 25,00 25,00 25,00 25,00 AP,GB Apex 70,71 70,71 90,14 54,49 AP,GB,MR,QU Labore Brakpan 10,00 25,00 50,00 50,00 GB,QU Morehill Ext 8 Benoni 100,00 100,00 100,00 50,00 AP,GB Pretoria Charlotte Maxeke AP Pretoria Industrial Township 350,00 325,00 250,00 175,00 AP,HN Koedoespoort Waltloo/Dispatch AP Silverton/Silvertondale AP Samcor Park AP Sunderland Ridge 100,00 100,00 0,00 0,00 AP,HN Hermanstad Kirkney AP Hennopspark Ext 15 & Ext 7 0,00 0,00 150,00 250,00 AP,HN Gateway AP Lyttleton Manor Ext 4/Ext AP Pretoria North Silvertondale X AP Klerksoord AP Rosslyn AP

131 Rode s Report 2018:3 112 Industrial stand values Table 8.3 (continued) Standard deviation from mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Area size in m² Route 21 Corporate Park MAS Centurion HN Irene (excl. Route 21 Corp. Park) AP Polokwane Lebowakgomo Superbia MO Industria - 55, MO,NET,TG Ladine - 95, MO,TG Futura MO Laboria TG Magna Via - 31, ES,MO,NET,TG Seshego Nelspruit Nelspruit East Nelspruit West Rocky's Drift 0,00 0,00 0,00 0,00 HH,KEL,PM,RZ Riverside Park 0,00 0,00 0,00 0,00 HH,KEL,PM,RZ Durban Springfield Park 350,00 250,00 150,00 125,00 ML,PC,SRE Mayville ML,SRE Phoenix ML,PC,SRE North Coast Rd/Briardene 325,00 200,00 50,00 0,00 ML,PC,SRE Briardene Industrial Park 300,00 175,00 25,00 25,00 ML,PC,SRE Umgeni Rd/Stamford Hill 100,00 50,00 50,00 0,00 ML,SRE Umbilo/Sydney Rd/Gale St 200,00 200,00 150,00 50,00 ML,SRE Jacobs 75,00 75,00 25,00 75,00 ML,PC,SRE Mobeni 0,00 0,00 50,00 150,00 ML,SRE Prospecton 100,00 100,00 150,00 235,70 ML,PC,SRE Contributors

132 Rode s Report 2018:3 113 Industrial stand values Table 8.3 (continued) Standard deviation from mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Area size in m² Ithala Industrial Estate Pinetown Central 25,00 0,00 141,42 122,47 ML,PC,SRE New Germany 25,00 0,00 141,42 122,47 ML,PC,SRE Kwa Debeka Industrial Park Isipingo 150,00 150,00 169,97 100,00 ML,PC,SRE Rossburgh/South Coast Rd 100,00 100,00 100,00 50,00 ML,SRE Edwin Swales Drive 50,00 50,00 50,00 0,00 ML,SRE Glen Anil 200,00 200,00 200,00 100,00 ML,PC,SRE Brickfield Rd 300,00 300,00 300,00 200,00 ML,SRE Verulam ML,SRE Canelands ML,PC,SRE Tongaat SRE New Westmead/Mahogany 0,00 50,00 50,00 125,00 ML,PC,SRE Westmead 0,00 50,00 50,00 125,00 ML,PC,SRE Mariann Park/Southmead ML,PC Maxmead ML,PC Ringroad Industrial Park Avoca/Red Hill/Northgate ML Falcon Park Riverhorse Valley Business Estate ,00 150,00 ML,PC Mount Edgecombe ML,PC Umbogintwini/Southgate Southgate Industrial Park ML Hibiscus Industrial Park Umgeni Park ML Hammersdale - - 0,00 216,02 ML,PC,QP Cato Ridge - - 0,00 188,56 ML,PC,QP Ballito PC Dube Tradeport Contributors

133 Rode s Report 2018:3 114 Industrial stand values Table 8.3 (continued) Standard deviation from mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Area size in m² Contributors Ladysmith Ezakheni/Pieters Danskraal DE Nambiti DE Colenso Cape Peninsula Viking Place AP Glosderry Paarden Eiland/Metro AP,DN Montague Gardens 50,00 141,42 94,28 81,65 AP,AX,CRE,DN,LF Marconi Beam 50,00 100,00 100,00 0,00 AX,LF Killarney Gardens 302,85 296,60 275,00 200,00 AP,AX,DN,LF Racing Park 108,01 25,00 146,29 0,00 AP,AX,CRE,DN,LF Atlantis Woodstock/Salt River/Observatory Athlone 1 & AP Landsdowne Nerissa AP Sand Industria Ottery Hillstar AP Ottery Sunset Diep River Elfindale Monwood/Philippi AP Retreat/Steenberg Capricorn Park IKP

134 Rode s Report 2018:3 115 Industrial stand values Table 8.3 (continued) Standard deviation from mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Area size in m² Contributors Maitland AN,AP Ndabeni AP Epping 1 & ,00 94,28 AN,AP,LF WP Park AN,AP Elsies River (excl. Central Park) ,47 262,47 AN,AP,DD Parow Beaconvale 249,44 227,30 240,77 200,00 AN,AP,DD,DN Tygerberg Business Park 200,00 200,00 250,00 200,00 AP,DD,DN Parow Industria 329,98 329,98 384,06 389,51 AN,AP,DD,DN Parow East AP,DD Bellville Oakdale Bellville Stikland/Kaymor 165,83 236,64 100,00 77,46 AN,AP,DD,DN,LF,NE,WD Bellville Triangle 272,43 254,95 124,72 204,12 AN,DD,DN,LF Bellville South/Sacks Circle 0,00 209,50 203,10 212,13 AN,AP,DD,LF Kraaifontein 67,82 67,82 89,44 82,92 AN,DD,DN,LF,WD Brackenfell Industria 25,00 75,00 229,13 94,28 AN,AP,DD,DN,LF Everite Brackenfell 294,39 339,93 339,93 - AN,AP,DN,LF Kuils River 0,00 0,00 141,42 94,28 AN,DD,LF,WD Blackheath 47,14 81,65 90,14 40,82 AN,DD,DN,LF,RS Saxenburg Industrial Park 164,99 350,00 200,00 300,00 AN,DD,DN,LF,RS Okavango 94,28 94,28 23,57 117,85 AN,DD,LF Brackengate 150,00 131,23 277,89 187,08 AN,AP,DD,LF Paarl SF Wellington SF Contermanskloof 150,00 0,00 0,00 - AP,LF Rivergate 0,00 0, AP,LF Airport Ind (north of sewerage farm) GY Airport Ind (west of Borcherds Quarry) - 50, AN,GY Airport Ind (east of Borcherds Quarry) - 100,00 100,00 50,00 AN,GY Durbanville Industrial Park AP Northgate Industrial Park

135 Rode s Report 2018:3 116 Industrial stand values Table 8.3 (continued) Standard deviation from mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Area size in m² Contributors Helderberg The Interchange RS Helderberg Industrial Park RS Gants RS Half Way Somerset Business Park RS Georges Park/Onverwacht RS Mansfield RS Firgrove Strand Halt Broadlands Port Elizabeth Deal Party HS North End ,00 - BR,HS Korsten/Neave/Sidwell/Sydenham HS South End Walmer Uitenhage: Volkswagen area/nmblp ,00 25,00 BR,HS Uitenhage: Hella/Kruisrivier ,00 - BR,HS Struandale HS Markman Township ,00 100,00 BR,HS Perseverance BR,HS Walmer HS Greenbushes ,00 BR,HS Fairview - 25,00 25,00 0,00 BR,HS East London Arcadia CHR Gately/Woodbrook 75,00 150,00 125,00 125,00 CHR,ER Wilsonia CHR

136 Rode s Report 2018:3 117 Industrial stand values Table 8.3 (continued) Standard deviation from mean market values for serviced and level industrial stands in quarter 2018:3 (R/m² excl. VAT) Area size in m² Contributors Braelyn CHR Northend CHR Chiselhurst CHR Meisies Halt 75,00 100, CHR,ER Beacon Bay Industrial 100, CHR,ER IDZ ER Wesbank Industrial Area CHR Bloemfontein Hilton East End EQV Harvey Road Old Industrial Hamilton: Mill St Hamilton: G Lubbe St Estoire EQV George George Central 20,55 11,79 9,43 10,00 BVF,GRV,MUL Tamsui Industria 0,00 13,12 23,57 0,00 BVF,GRV,MUL Pacaltsdorp Industria 12,47 9,43 14,14 10,00 BVF,GRV,MUL Pietermaritzburg Willowton HN Mkomdeni HN Camps Drift HN Pietermaritzburg Central Windhoek North TE Lafrenz TE South TE Prosperita TE

137 Rode s Report 2018:3 118 Flats market Chapter 9: Flats market Flats market Kobus Lamprecht We are busy expanding our national flatrental coverage by adding more suburbs and getting more panellists on board. Therefore we have decided to discontinue the normal discussion in this chapter about flat-rental trends across the major cities until we have built up sufficient data to properly conduct such an analysis. In the tables that follow, we still provide the specific rental levels in the suburbs for the various grades of flats, as well as vacancy rates per city. Please note that the flat-rental data tends to be erratic. Therefore readers are advised to use an average of at least the last two quarters to obtain the latest rental rate. Table 9.1 Flat vacancies (%) as in quarter 2018:3 Average for all grades (standard & upmarket combined) Johannesburg 5,6% Pretoria 3,9% Cape Town 2,2% Durban 7,7% Bloemfontein - East Rand: Germiston - East Rand: Benoni - East London 18,6% Polokwane 6,3% George 0,0% Pietermaritzburg 3,0% Port Elizabeth - Stellenbosch 3,1% National 4,1%

138 Rode s Report 2018:3 119 Flats market Johannesburg Table 9.2 Flat rentals: Standard units Average rands per month as at quarter 2018:3 Bachelor 1-Bedroom 2-Bedroom 3-Bedroom Broker Mean SD Mean SD Mean SD Mean SD Contributors City R R 449 R R 418 R R 647 R EXH,PPG,SYN,VAR Yeoville/Bellevue/Highlands R R R 645 R R NAN,PPG Jeppestown/Fordsburg/Malvern/ Kengsington North-Eastern Suburbs R R R R EXH Maraisburg/Crosby/Brixton Meldene (Melville, Westdene, Auckland Park) Killarney/Illovo R R R R TR Greenside/Victory/Emmarentia/ R R TR Linden Parkhurst/Parkview R TR Rosebank Randburg: Ferndale/ R R R R ETC,PRS Fontainebleau Randburg & Suburbs R R R 200 R R ETC,PRS,REN Windsor: East/West R ETC Craighall/Craighall Park R R R TR Sandton: North & Far North R R R R 950 R TR,VAR Sandton: South to Central Old South New South Waterfall Bedfordview R TR Houghton Estate R R R TR

139 Rode s Report 2018:3 120 Flats market Table 9.2 (continued) Flat rentals: Standard units Average rands per month as at quarter 2018:3 Bachelor 1-Bedroom 2-Bedroom 3-Bedroom Broker Mean SD Mean SD Mean SD Mean SD Contributors Melrose (excl. Melrose Arch) Melrose Arch Germiston Primrose R R R R R BS,PH Germiston Central & South Germiston Southern Suburbs Elsburg Witfield Benoni Benoni Central - - R R R SC Lakefield - - R R R SC Westdene Farramere R R SC Morehill - - R R R SC Rynfield - - R R R SC Northmead Crystal Park - - R R R 775 R R REN,SC Mackensie Park Western Extension - - R R R SC Boksburg Boksburg R BS Kempton Park Croyden - - R R BS

140 Rode s Report 2018:3 121 Flats market Pretoria Table 9.2 (continued) Flat rentals: Standard units Average rands per month as at quarter 2018:3 Bachelor 1-Bedroom 2-Bedroom 3-Bedroom Broker Mean SD Mean SD Mean SD Mean SD Contributors Akasia - - R R R 175 R R 250 PPG,TR Pretoria North/Dorandia/Florauna - - R R TR Annlin/Wonderboom/Sinoville/ - - R R R RAP Montana Die Moot/Queenswood R R R 0 R R 300 R R RAP,TR Eastlynne/Eersterust - - R R RAP Silverton/Meyerspark/La Montagne Eastern Suburbs R R R R 250 R RAP,RIZ Pretorius Park Groenkloof/Brooklyn/Most Waterkloofs/Erasmusrand Monument Park South Eastern Suburbs Sunnyside R R 418 R R 400 R R 300 R R 525 PPG,TR Arcadia R R 13 R R 163 R R 218 R R 765 PPG,TR Pretoria Central R R R 150 R R 175 R R 175 PPG,TR Pretoria West - - R R R RAP Kwaggasrand/West Park Elandspoort/Danville Atteridgeville/Laudium Hatfield - - R R 100 R R RAP,TR Polokwane Eduanpark/Welgelegen Bendor/Bendor extension R R R RY,SF

141 Rode s Report 2018:3 122 Flats market Table 9.2 (continued) Flat rentals: Standard units Average rands per month as at quarter 2018:3 Bachelor 1-Bedroom 2-Bedroom 3-Bedroom Broker Mean SD Mean SD Mean SD Mean SD Contributors Ster Park R R SF Flora Park/Fauna R R R R RY Park/Capricorn Môregloed/Pietersburg/Central/ R R 350 R R R RY,SF Hospitaal Park Annadale Penina Park/Ivy Park - - R R 450 R RY,SF Durban Upper highway: Kloof/Hillcrest R R R TR Pinetown area/queensburgh R R 500 R R R R TR,WK Westville area R R R TR Central City R R R TR Berea/Morningside/Glenwood R R R TR South and North Beach R R R TR Durban North/La R R R R TR Lucia/Umhlanga North (Dolphin) Coast/Ballito Montclaire/Yellowwood Park - - R R TR Bluff area/durban South R R R TR Durban South/Amanzimtoti/ R R R R TR Warner Beach area Cape Town Camps Bay/Clifton/Bantry Bay R R 850 R R R R R R JUS,SF,SQ,TR Sea Point/Green Point/Three R R 791 R R R R 777 R R 818 JR,JUS,PF,SF,SQ,TR Anchor Bay City Bowl (excl. Higgovale) R R R R R R R PF,SQ,TR

142 Rode s Report 2018:3 123 Flats market Table 9.2 (continued) Flat rentals: Standard units Average rands per month as at quarter 2018:3 Bachelor 1-Bedroom 2-Bedroom 3-Bedroom Broker Mean SD Mean SD Mean SD Mean SD Contributors City Centre R R R R PF,SQ,TR Waterfront Woodstock/Observatory Rondebosch/Rosebank/Claremont R R R R R R R PF,SQ,TR Kenilworth/Wynberg/Plumstead R R R 750 R R 259 R JR,PF,PX,SQ,TR Grassy Park Muizenberg/Kalk Bay/Fish Hoek - - R R JR,PF,SQ Houtbay Milnerton Sanddrift - - R R PF Milnerton Royal Ascot Milnerton Burgundy Estate R R R TR Tableview R R R R R LA,TR Parklands/Sandown/Sunningdale R PPG Bloubergstrand Melkbosstrand Athlone Garlandale Rondebosch East/Crawford Mitchells Plain Bishop Lavis Montana/Belhar/Belhar South R R R R TR Pinelands - - R R R PF Brooklyn/Rugby/Maitland - - R R R SQ,TR

143 Rode s Report 2018:3 124 Flats market Table 9.2 (continued) Flat rentals: Standard units Average rands per month as at quarter 2018:3 Bachelor 1-Bedroom 2-Bedroom 3-Bedroom Broker Mean SD Mean SD Mean SD Mean SD Contributors Monte Vista/Goodwood/ R R R 475 R R 419 R LA,PF,SQ,TR Parow/Bellville Central Tyger Valley area R R R R 579 R LA,RS,TR Durbanville Brackenfell/Kuils River R R R 25 R R 472 R R 850 CIR,LA,PF,TR Somerset West R R R R JUS Strand R R R 100 R R 356 R R 356 JUS,LA,SQ,TR Gordon's Bay R R R R 757 R CIR,JUS,LA,TR Kraaifontein (excl. Buh-Rein) R LA Buh-Rein Estate Paarl R R R R PRU Wellington Century City Stellenbosch Cloetesville R R R R MHP Onder Papegaaiberg R R R 250 R R R MHP,RR Simonswyk R R R R MHP Idas Valley Uniepark Krigeville Dalsig Kleingeluk Paradyskloof

144 Rode s Report 2018:3 125 Flats market Table 9.2 (continued) Flat rentals: Standard units Average rands per month as at quarter 2018:3 Bachelor 1-Bedroom 2-Bedroom 3-Bedroom Broker Mean SD Mean SD Mean SD Mean SD Contributors Klein Welgevonden R R 250 R MER,MHP Nuutgevonden R R 0 R MER,MHP Nooitgedacht Village R R 250 R MER,MHP Campus Central R R R R R MER,MHP Campus West R R MER Campus North R R MER La Colline R R R R 250 R MER,MHP George Heather Park Heatherlands King George Park Dormehl's Drift R BVF George South R R 150 R R 0 R R 225 R R 250 BVF,GRV George Central R R 100 R R 125 R R 100 R R 125 BVF,GRV Bo-Dorp R R R R BVF Denver Park Loerie Park Protea Park Parkdene Borcherds Lawaaikamp Ballot's View Herolds Bay (excl. Oubaai) Oubaai

145 Rode s Report 2018:3 126 Flats market Port Elizabeth Table 9.2 (continued) Flat rentals: Standard units Average rands per month as at quarter 2018:3 Bachelor 1-Bedroom 2-Bedroom 3-Bedroom Broker Mean SD Mean SD Mean SD Mean SD Contributors Summerstrand/Humewood/South R R 150 R R IPC,TR End Walmer R R TR Central/North End R R R TR Newton Park R TR Westering R R TR Kabega R R 250 IPC,TR Algoa Park R TR Lorraine Sherwood R TR Fairview East London Southernwood/Quigney R R R 349 R R 572 R R 713 EB,PPG,TR Beach/CBD Berea/Vincent R R R 550 R R R 750 EB,TR Cambridge/Amalinda/Haven Hills R R R 50 R R 250 R R 250 EB,TR Gonubie Park R R R R TR Beacon Bay R R R 0 R R 471 R R EB,RM,TR Nahoon R R R R TR Gonubie R R R 625 R R 480 R R 250 EB,DAL,RM,TR Cove Rock R R R R TR Kimberley New Park R R R R PW Eltoro Park R R R R PW Hillcrest R R R R PW

146 Rode s Report 2018:3 127 Flats market Bloemfontein Table 9.2 (continued) Flat rentals: Standard units Average rands per month as at quarter 2018:3 Bachelor 1-Bedroom 2-Bedroom 3-Bedroom Broker Mean SD Mean SD Mean SD Mean SD Contributors Bloemfontein CBD Westdene Willows Navalsig Arboretem Langenhovenpark Bainsvlei Universitas Pentagon Park Pietermaritzburg Woodlands/Northdale/Bombay Heights/Orient Heights/Allandale Chase Valley/Oak Park/ - - R R R HN Chasedene/Northern Park Wembley/Clarendon - - R R R HN Pietermaritzburg City R R R R HN Prestbury - - R R R HN Pelham/Scottsville/Richmond Crest/Bisley Hayfields/Lincoln Meade/ - - R R R HN Bellevue/The Meadows Vanderbijlpark Vanderbijlpark Central - - R DT Vanderbijlpark CE - - R DT Vanderbijlpark SE Vanderbijlpark SW Vanderbijlpark CW

147 Rode s Report 2018:3 128 Flats market Johannesburg Table 9.3 Flat rentals: Upmarket units Average rands per month as at quarter 2018:3 Bachelor 1-Bedroom 2-Bedroom 3-Bedroom Broker Mean SD Mean SD Mean SD Mean SD Contributors City R SYN Yeoville/Bellevue/Highlands R SYN Jeppestown/Fordsburg/Malvern/ R R R SYN Kengsington North-Eastern Suburbs R R R R EXH Maraisburg/Crosby/Brixton Meldene (Melville, Westdene, Auckland Park) Killarney/Illovo R R R R TR Greenside/Victory/Emmarentia/ R R TR Linden Parkhurst/Parkview R TR Rosebank Randburg: Ferndale/ R R 200 R R 400 R R 368 R R ETC,PPG,PRS Fontainebleau Randburg & Suburbs R R R R R ETC,PPG,PRS Windsor: East/West ETC Craighall/Craighall Park TR Sandton: North & Far North R R TR Sandton: South to Central Old South New South Waterfall Bedfordview R TR Houghton Estate R R R TR

148 Rode s Report 2018:3 129 Flats market Table 9.3 (continued) Flat rentals: Upmarket units Average rands per month as at quarter 2018:3 Bachelor 1-Bedroom 2-Bedroom 3-Bedroom Broker Mean SD Mean SD Mean SD Mean SD Contributors Melrose (excl. Melrose Arch) Melrose Arch Germiston Primrose PH Germiston Central & South Germiston Southern Suburbs R R R PH Elsburg - - R R PH Witfield - - R R R PH Benoni Benoni Central - - R R R SC Lakefield - - R R R SC Westdene Farramere R R SC Morehill - - R R R SC Rynfield - - R R R SC Northmead Crystal Park - - R R R SC Mackensie Park Western Extension Boksburg Boksburg R BS Kempton Park Croyden R BS

149 Rode s Report 2018:3 130 Flats market Pretoria Table 9.3 (continued) Flat rentals: Upmarket units Average rands per month as at quarter 2018:3 Bachelor 1-Bedroom 2-Bedroom 3-Bedroom Broker Mean SD Mean SD Mean SD Mean SD Contributors Akasia Pretoria North/Dorandia/Florauna Annlin/Wonderboom/Sinoville/ - - R R TR Montana Die Moot/Queenswood R R R R RAP Eastlynne/Eersterust Silverton/Meyerspark/La Montagne Eastern Suburbs R R RIZ Pretorius Park Groenkloof/Brooklyn/Most Waterkloofs/Erasmusrand Monument Park South Eastern Suburbs Sunnyside Arcadia Pretoria Central Pretoria West Kwaggasrand/West Park Elandspoort/Danville Atteridgeville/Laudium Hatfield R R R RIZ Polokwane Eduanpark/Welgelegen Bendor/Bendor extension R R SF

150 Rode s Report 2018:3 131 Flats market Table 9.3 (continued) Flat rentals: Upmarket units Average rands per month as at quarter 2018:3 Bachelor 1-Bedroom 2-Bedroom 3-Bedroom Broker Mean SD Mean SD Mean SD Mean SD Contributors Ster Park Flora Park/Fauna Park/Capricorn R R R R RY Môregloed/Pietersburg/Central/ R R 250 R R 375 R RY,TG Hospitaal Park Annadale R R R RY Penina Park/Ivy Park Durban Upper highway: Kloof/Hillcrest Pinetown area/queensburgh WK Westville area Central City Berea/Morningside/Glenwood R R R TR South and North Beach R R R TR Durban North/La Lucia/Umhlanga North (Dolphin) Coast/Ballito Montclaire/Yellowwood Park Bluff area/durban South Durban South/Amanzimtoti/ Warner Beach area Cape Town Camps Bay/Clifton/Bantry Bay R R R R R R R R JUS,SF,TR Sea Point/Green Point/Three R R R R R R 500 R R JUS,SF,SQ,TR Anchor Bay City Bowl (excl. Higgovale) R R R R 200 R LA,TR

151 Rode s Report 2018:3 132 Flats market Table 9.3 (continued) Flat rentals: Upmarket units Average rands per month as at quarter 2018:3 Bachelor 1-Bedroom 2-Bedroom 3-Bedroom Broker Mean SD Mean SD Mean SD Mean SD Contributors City Centre R R R TR Waterfront Woodstock/Observatory Rondebosch/Rosebank/Claremont R R R R LA,TR Kenilworth/Wynberg/Plumstead R R R R R LA,PX,TR Grassy Park Muizenberg/Kalk Bay/Fish Hoek R R TR Houtbay Milnerton Sanddrift Milnerton Royal Ascot Milnerton Burgundy Estate R R R R TR Tableview R R R R R LA,TR Parklands/Sandown/Sunningdale Bloubergstrand Melkbosstrand Athlone Garlandale Rondebosch East/Crawford Mitchells Plain Bishop Lavis Montana/Belhar/Belhar South R R R R TR Pinelands Brooklyn/Rugby/Maitland R R R LA,TR

152 Rode s Report 2018:3 133 Flats market Table 9.3 (continued) Flat rentals: Upmarket units Average rands per month as at quarter 2018:3 Bachelor 1-Bedroom 2-Bedroom 3-Bedroom Broker Mean SD Mean SD Mean SD Mean SD Contributors Monte Vista/Goodwood/ R R R LA,TR Parow/Bellville Central Tyger Valley area - - R R R 942 R LA,RS,TR Durbanville Brackenfell/Kuils River R R LA,TR Somerset West Strand R R TR Gordon's Bay - - R R R LA,TR Kraaifontein (excl. Buh-Rein) R LA Buh-Rein Estate Paarl R R R R LA,PRU Wellington Century City Stellenbosch Cloetesville R R R R MHP Onder Papegaaiberg R R R R 250 R MHP,RR Simonswyk R R R R MHP Idas Valley Uniepark Krigeville Dalsig Kleingeluk Paradyskloof

153 Rode s Report 2018:3 134 Flats market Table 9.3 (continued) Flat rentals: Upmarket units Average rands per month as at quarter 2018:3 Bachelor 1-Bedroom 2-Bedroom 3-Bedroom Broker Mean SD Mean SD Mean SD Mean SD Contributors Klein Welgevonden R R 100 R MER,MHP Nuutgevonden R R 0 R MER,MHP Nooitgedacht Village R R 0 R MER,MHP Campus Central R R R R R R 0 MER,MHP Campus West R R MER Campus North R R MER La Colline R R R R 100 R MER,MHP George Heather Park Heatherlands King George Park Dormehl's Drift R R BVF George South R R R R GRV George Central R R R R GRV Bo-Dorp Denver Park Loerie Park Protea Park Parkdene Borcherds Lawaaikamp Ballot's View Herolds Bay (excl. Oubaai) Oubaai

154 Rode s Report 2018:3 135 Flats market Port Elizabeth Table 9.3 (continued) Flat rentals: Upmarket units Average rands per month as at quarter 2018:3 Bachelor 1-Bedroom 2-Bedroom 3-Bedroom Broker Mean SD Mean SD Mean SD Mean SD Contributors Summerstrand/Humewood/South End Walmer R IPC Central/North End Newton Park Westering Kabega Algoa Park Lorraine Sherwood Fairview East London Southernwood/Quigney R R R R 0 R R 500 EB,TR Beach/CBD Berea/Vincent R R R 600 R R R EB,TR Cambridge/Amalinda/Haven Hills R R R 250 R R 100 R R 250 EB,TR Gonubie Park R R R R TR Beacon Bay R R R R 505 R R EB,RM,TR Nahoon R R R R 565 R R RM,TR Gonubie R R R R 150 R R 212 EB,DAL,RM,TR Cove Rock R R R R TR Bloemfontein Bloemfontein CBD Westdene Willows Navalsig

155 Rode s Report 2018:3 136 Flats market Table 9.3 (continued) Flat rentals: Upmarket units Average rands per month as at quarter 2018:3 Bachelor 1-Bedroom 2-Bedroom 3-Bedroom Broker Mean SD Mean SD Mean SD Mean SD Contributors Arboretem Langenhovenpark Bainsvlei Universitas Pentagon Park Kimberley New Park Eltoro Park Hillcrest Pietermaritzburg Woodlands/Northdale/Bombay Heights/Orient Heights/Allandale Chase Valley/Oak Park/ - - R R R HN Chasedene/Northern Park Wembley/Clarendon - - R R R HN Pietermaritzburg City Prestbury Pelham/Scottsville/Richmond R R R R HN Crest/ Bisley Hayfields/Lincoln Meade/ Bellevue/The Meadows Vanderbijlpark Vanderbijlpark Central Vanderbijlpark CE Vanderbijlpark SE Vanderbijlpark SW Vanderbijlpark CW

156 Rode s Report 2018:3 137 Flats market Johannesburg Table 9.4 Flat: Parking rentals Average rands per month as at quarter 2018:3 Open Covered Lockup Basement Broker Mean SD Mean SD Mean SD Mean SD Contributors City R R R R 465 R 65 EXH,PPG,VAR Yeoville/Bellevue/Highlands R 240 R 40 R R R EXH,PPG Jeppestown/Fordsburg/Malvern/ - Kengsington North-Eastern Suburbs R R R R EXH Maraisburg/Crosby/Brixton Meldene (Melville, Westdene, Auckland Park) Killarney/Illovo Greenside/Victory/Emmarentia/ Linden Parkhurst/Parkview Rosebank Randburg: Ferndale/ R 200 R 100 R R ETC,PPG Fontainebleau Randburg & Suburbs R 225 R 75 R R ETC,PPG Windsor: East/West Craighall/Craighall Park Sandton: North & Far North Sandton: South to Central Old South New South Waterfall Bedfordview Houghton Estate

157 Rode s Report 2018:3 138 Flats market Table 9.4 (continued) Flat: Parking rentals Average rands per month as at quarter 2018:3 Open Covered Lockup Basement Broker Mean SD Mean SD Mean SD Mean SD Contributors Melrose (excl. Melrose Arch) Melrose Arch Germiston Primrose Germiston Central & South Germiston Southern Suburbs Elsburg Witfield Benoni Benoni Central Lakefield Westdene Farramere Morehill Rynfield Northmead - - R SC Crystal Park Mackensie Park Western Extension Boksburg Boksburg Kempton Park Croyden

158 Rode s Report 2018:3 138 Flats market Table 9.4 (continued) Flat: Parking rentals Average rands per month as at quarter 2018:3 Pretoria Open Covered Lockup Basement Broker Contributors Mean SD Mean SD Mean SD Mean SD Akasia Pretoria North/Dorandia/Florauna Annlin/Wonderboom/Sinoville/ Montana Die Moot/Queenswood Eastlynne/Eersterust Silverton/Meyerspark/La Montagne Eastern Suburbs Pretorius Park Groenkloof/Brooklyn/Most Waterkloofs/Erasmusrand Monument Park South Eastern Suburbs Sunnyside R 165 R 55 R PPG,TR Arcadia R 160 R 10 R PPG,TR Pretoria Central R PPG Pretoria West Kwaggasrand/West Park Elandspoort/Danville Atteridgeville/Laudium Hatfield Polokwane Eduanpark/Welgelegen Bendor/Bendor extension

159 Rode s Report 2018:3 140 Flats market Table 9.4 (continued) Flat: Parking rentals Average rands per month as at quarter 2018:3 Open Covered Lockup Basement Broker Mean SD Mean SD Mean SD Mean SD Contributors Ster Park Flora Park/Fauna Park/Capricorn Môregloed/Pietersburg/Central/ - - R RY Hospitaal Park Annadale Penina Park/Ivy Park Durban Upper highway: Kloof/Hillcrest Pinetown area/queensburgh Westville area Central City R R TR Berea/Morningside/Glenwood R R R TR South and North Beach R R TR Durban North/La Lucia/Umhlanga R R R TR North (Dolphin) Coast/Ballito Montclaire/Yellowwood Park R R R TR Bluff area/durban South R TR Durban South/Amanzimtoti/ R TR Warner Beach area Cape Town Camps Bay/Clifton/Bantry Bay R R R SQ Sea Point/Green Point/Three R 700 R 50 R 825 R 25 R R PF,SQ Anchor Bay City Bowl (excl. Higgovale) R R R SQ

160 Rode s Report 2018:3 141 Flats market Table 9.4 (continued) Flat: Parking rentals Average rands per month as at quarter 2018:3 Open Covered Lockup Basement Broker Mean SD Mean SD Mean SD Mean SD Contributors City Centre Waterfront Woodstock/Observatory Rondebosch/Rosebank/Claremont R R R SQ Kenilworth/Wynberg/Plumstead R 475 R 125 R 625 R 75 R 750 R PF,SQ Grassy Park Muizenberg/Kalk Bay/Fish Hoek R450 - PF Houtbay Milnerton Sanddrift R R R PF Milnerton Royal Ascot Milnerton Burgundy Estate Tableview Parklands/Sandown/Sunningdale Bloubergstrand Melkbosstrand Athlone Garlandale Rondebosch East/Crawford Mitchells Plain Bishop Lavis Montana/Belhar/Belhar South Pinelands Brooklyn/Rugby/Maitland R R R SQ

161 Rode s Report 2018:3 142 Flats market Table 9.4 (continued) Flat: Parking rentals Average rands per month as at quarter 2018:3 Open Covered Lockup Basement Broker Mean SD Mean SD Mean SD Mean SD Contributors Monte Vista/Goodwood/ R 350 R 0 R R 525 R PF,SQ Parow/Bellville Central Tyger Valley area R LA Durbanville Brackenfell/Kuils River R R 600 R CIR,PF Somerset West R R R R JUS Strand R R R R JUS Gordon's Bay R R R R JUS Kraaifontein (excl. Buh-Rein) Buh-Rein Estate Paarl R R R R PRU Wellington Century City Stellenbosch Cloetesville Onder Papegaaiberg R RR Simonswyk R RR Idas Valley Uniepark Krigeville Dalsig Kleingeluk Paradyskloof

162 Rode s Report 2018:3 143 Flats market Table 9.4 (continued) Flat: Parking rentals Average rands per month as at quarter 2018:3 Open Covered Lockup Basement Broker Mean SD Mean SD Mean SD Mean SD Contributors Klein Welgevonden R R MHP Nuutgevonden R MHP Nooitgedacht Village R R R MHP Campus Central R R R R MHP Campus West Campus North La Colline R MER George Heather Park Heatherlands King George Park Dormehl's Drift George South George Central R BVF Bo-Dorp Denver Park Loerie Park Protea Park Parkdene Borcherds Lawaaikamp Ballot's View Herolds Bay (excl. Oubaai) Oubaai

163 Rode s Report 2018:3 144 Flats market Port Elizabeth Table 9.4 (continued) Flat: Parking rentals Average rands per month as at quarter 2018:3 Open Covered Lockup Basement Broker Mean SD Mean SD Mean SD Mean SD Contributors Summerstrand/Humewood/South End Walmer Central/North End Newton Park Westering Kabega Algoa Park Lorraine Sherwood Fairview East London Southernwood/Quigney Beach/CBD Berea/Vincent Cambridge/Amalinda/Haven Hills Gonubie Park Beacon Bay Nahoon Gonubie Cove Rock Bloemfontein Bloemfontein CBD Westdene Willows Navalsig

164 Rode s Report 2018:3 145 Flats market Table 9.4 (continued) Flat: Parking rentals Average rands per month as at quarter 2018:3 Open Covered Lockup Basement Broker Mean SD Mean SD Mean SD Mean SD Contributors Arboretem Langenhovenpark Bainsvlei Universitas Pentagon Park Kimberley New Park Eltoro Park Hillcrest Pietermaritzburg Woodlands/Northdale/Bombay Heights/Orient Heights/Allandale Chase Valley/Oak Park/ - - R R R HN Chasedene/Northern Park Wembley/Clarendon Pietermaritzburg City - - R R R HN Prestbury Pelham/Scottsville/Richmond - - R R R HN Crest/ Bisley Hayfields/Lincoln Meade/Bellevue/ The Meadows Vanderbijlpark Vanderbijlpark Central Vanderbijlpark CE Vanderbijlpark SE Vanderbijlpark SW Vanderbijlpark CW

165 Rode s Report 2018:3 146 House market Chapter 10: House market House prices disappoint Kobus Lamprecht In August 2018 national nominal house prices grew by 3,5% year on year the second consecutive month of slower growth as the market remains under pressure from weak demand. In the first eight months of 2018 house prices also grew by 3,5% compared to the same period in 2017, significantly slower than building-cost inflation (about 7%) and consumer inflation (4,5%). This implies that house prices have continued to decline in real terms. This helps to explain the slow single-digit (3,5%) nominal house price growth experienced thus far in A significant driver of residential mortgages granted is the leading business cycle indicator of the SARB as shown in the chart. Growth in this indicator averaged 3,5% in the first half of 2018, in line with the growth in residential mortgages granted. However, growth slowed to only 2% in July. Change in national house prices (FNB) vs Change in value of new mortgage loans Change in value of new residential mortgages granted vs Change in composite business cycle leading indicator 50 r²=0,5 80 r²=0,5 30 Change in house prices (%; y-o-y) House prices Mortgage loans (smoothed) Change in new mortgage loans (%; y-o-y) Change in value of mortgages granted (%; y-o-y) Mortgage loans (smoothed) Business cycle leading indicator Change in business cycle indicator (%; y-o-y) Source of data: FNB; SARB Source of data: SARB An important driver of house prices is the nominal value of residential mortgages granted (see chart above). These two variables have a 50% positive correlation, in other words, 50% of the change in house price can be explained by the change in mortgages granted. However, this correlation does not consider any other variables like economic growth and interest rates, which are also determinants of house prices. The nominal value of residential mortgages granted last year increased by 6%, after declining by 12% in 2016, outpacing house price growth of 4%. However, growth slowed to about 4% year on year in the first half of We expect the growth in the value of mortgages granted to remain slow as effective demand from borrowers is held back by several factors: 1) A weak economy the economy fell into a technical recession in the second quarter. However, most economists still expect growth for the full year of between 0,5% and 1%. 2) It is unlikely that banks will relax their credit criteria further in respect of mortgage approvals. The reasons are still-high household debt-to-disposable income ratios and the subdued prospects

166 Rode s Report 2018:3 147 House market for employment. The ratio between household debt and disposable income has improved from its 88% peak in the first quarter of 2008, but in the second quarter of 2018 it was still very high at 71%. 3) High unemployment in the second quarter of 2018 the official unemployment rate stood at 27,1%, up from 26,7% in the first quarter. This shows the economy is still shedding jobs, with the manufacturing sector particularly hard hit. About six million South Africans are jobless (and seeking work). 4) State of consumer finances nominal take-home pay (as measured by BankservAfrica) grew by 10% year on year in August. The strong increase is not reflective of the typical salary and is largely due to the delay in government backdated salary adjustments from the preceding months. Therefore it is highly likely that salary growth will slow in the near term, particularly as consumers come under increasing financial pressure due to several factors, most notably rising inflation. Inflation should pick up due to record-high fuel prices and the weak rand, which is lifting the prices of imported goods. 5) The prospects of rising domestic interest rates to contain inflation (mentioned above) and to attract or retain much-needed portfolio investment South Africa might lose to countries such as the USA, where interest rates are rising. 6) Sustained upward pressure on property running costs, such as property taxes (in certain municipalities) and utility prices. As for recent nominal growth in house prices, Table 10.1 shows the yearly growth in prices in the major metros for the past five quarters as per Deeds Offices data. Cape Town still stands out above the other metros with growth of close to 9%, although growth has slowed over the past two years. The Atlantic Seaboard and Atlantis/Mamre (top and bottom ends of the market!) were the only major Cape Town regions not to beat inflation. The changes in house prices in the major Cape Town regions are provided in Table Johannesburg house prices grew by 3% in the second quarter. The Diepkloof, Soweto, Meadowland, Pimville region showed the strongest growth (17%). However, we have our doubts about the veracity of this growth rate. One possible explanation is the selling of new developments that push up the average prices. Most other areas recorded growth below inflation. The changes in house prices in the major Johannesburg regions are provided in Table Note the constant meagre growth in Sandton. Table 10.1 Change in nominal house prices by metros % change on a year earlier Municipality Q2 Q3 Q4 Q1 Q2 City of Cape Town 13,2 12,0 10,8 9,7 8,7 City of Joburg 2,9 2,3 2,2 2,4 3,0 City of Ekurhuleni 3,6 3,5 3,4 3,2 2,9 City of Tshwane 4,6 4,3 3,7 3,0 2,5 City of ethekwini 5,6 4,7 3,6 2,5 N/A Source of data: FNB (Deeds Office data)

167 Rode s Report 2018:3 148 House market Table 10.2 Change in nominal house prices in Cape Town by area % change on a year earlier Area 2017 Q Q Q Q Q2 City Bowl 16,4 13,5 11,4 10,2 9,7 Southern Suburbs 12,8 11,6 10,2 8,6 7,4 Atlantic Seaboard 22,0 15,5 9,1 4,4 1,9 Bellville, Parow & Surrounds 10,5 11,5 11,9 11,7 11,2 Durbanville, Kraaifontein, Brackenfell 9,0 9,5 9,9 10,1 9,9 Somerset West, Gordon s Bay, Strand 10,0 9,7 10,2 11,1 12,0 Blouberg, Milnerton, Melkbosstrand 14,3 14,3 13,5 12,1 10,2 Source of data: FNB (Deeds Office data) Table 10.3 Change in nominal house prices in Johannesburg by area % change on a year earlier Area 2017 Q Q Q Q Q2 Diepkloof, Soweto, Meadowland, 6,0 9,4 13,5 16,5 17,6 Pimville Midrand & surrounds 3,5 3,2 3,1 3,3 4,0 Randburg 3,1 2,7 2,4 2,4 2,5 Johannesburg South 2,9 2,3 2,2 2,4 3,0 Sandton & surrounds 1,1 0,5 0,4 0,8 1,6 Source of data: FNB (Deeds Office data)

168 Rode s Report 2018:3 149 Building activity and building costs Chapter 11: Building activity and building costs Poor prospects for building activity Kobus Lamprecht The building construction industry is undergoing a depressing time, with construction companies under increasing financial pressure due to weak demand. This chapter reports on the latest trends in building activity and building costs. Building activity Growth (%; y-o-y) Growth in real gross fixed capital formation Residential vs non-residential Building activity, although improving slightly, remains lacklustre due to the weak economy and underperformance of property fundamentals, such as vacancy rates and market rentals. To analyse building activity, we delve deeper into the SARB s measure of gross fixed capital formation (GFCF) and building data from Stats SA. SARB s measure of GFCF represents the real value of bricks and mortar being put in place. GFCF in the non-residential sector rose by 5% in the second quarter of 2018, the second consecutive quarterly increase, as can be seen in the chart on the right. We won t get too excited about an upturn yet as most indicators in the sector are still not pointing to a recovery, while the first-half 2018 increase could be skewed by base effects after the dismal performance of previous years. As for residential building activity, in the second quarter of 2018 the real value of bricks and mortar being put in place decreased by 1% on a year earlier. This was the second consecutive quarterly decline Non-residential Residential Source of data: SARB Note that GFCF reflects the bricks and mortar being put in place in a specified period, for instance in a specific quarter or year. Compare this statistic with buildings completed, which reflect, at the date of completion, the total building cost expected at the time when the building plans were passed by the municipality, which could be many years earlier. For instance, a building worth R100 million completed in 2017 could reflect GFCF amounting to R25 million being put in place in 2017, R50 million in 2016 and R25 million in 2015 (see the figure on the next page). Thus the buildings completed statistic is a lagging indicator it reflects conditions in the property market that existed up to two or three years ago. This is especially true of non-residential building construction. In contrast, GFCF reflects a more recent occurrence and is therefore less of a lagging indicator, as it only reflects R25 million in 2017 in the example above.

169 Rode s Report 2018:3 150 Building activity and building costs Source: Rode & Associates With this as background, we now turn to Tables 11.1 and 11.2, which reflect building plans passed and buildings completed per square metre as reported by local government institutions (ex Stats SA). Non-residential buildings completed increased by 7% in the 12 months to July 2018, with growth slowing considerably from the 18% recorded for the 12 months to March Office space completed skyrocketed by 42%, but bear in mind that this is a lagging indicator. Shopping space completed grew by only 10%, significantly slower than the 40% increase recorded for the 12 months to March Industrial space completed declined by 10%, after growth of 12% in the 12 months to March This highlights why industrial property recently performed better in terms of rentals and vacancy rates relative to office and retail property the supply of industrial space is less speculative. Non-residential plans passed declined by 6% in the 12 months to July 2018, following a decrease of 4% in the 12 months to March This decrease was mostly due to a 41% fall in office plans passed surely a relief for office property owners. Industrial property plans passed also declined. Shopping space plans passed bucked the overall trend with growth of 36%. The sharp increase is not good news for landlords of shopping centres, especially considering the already declining real trading densities and the weak outlook for retail sales. On the other hand, given the long gestation period of new shopping centres, the explanation for this phenomenon is that developers are betting on a strong cyclical recovery of the economy in the years to come. Hmm As Table 11.2 shows, residential buildings completed rose by 4% in the 12 months ended July 2018 a turnaround after a decrease of 5% in the 12 months to March This increase was driven by a mammoth 36% jump in completed flats and townhouses. Residential plans passed indicate that activity will likely be subdued in the medium term, except for houses smaller than 80 m². There is no doubt a trend towards smaller houses. Noteworthy is that the first-half 2018 cost to construct houses smaller than 80 m² is the cheapest (R5 655/m²) of all the categories (as is to be expected), but has risen by 22% year on year. This cost pressure might slow the expected rise in smaller developments. Table 11.1 New non-residential buildings (private sector) (m²) % change on a year ago Offices Shopping space Industrial buildings Total 12 months ended July 2018 (% change on a year ago) Completed 42,3% 10,4% -9,9% 7,0% Plans passed -40,6% 36,3% -4,7% -5,7% Source of data: Stats SA

170 Rode s Report 2018:3 151 Building activity and building costs Table 11.2 New residential buildings (private sector) (m²) Smaller than 80 m² % change on a year ago Larger than 80 m² Flats & townhouses 12 months ended July 2018 (% change on a year ago) Total Completed -27,0% -3,3% 36,2% 4,3% Plans passed 10,2% -2,9% -8,0% -3,2% Source of data: Stats SA The outlook for residential property building activity over the near term is poor as house prices are still declining in real terms. Prospects for the non-residential property fundamentals are also lacklustre, especially for office and retail space, as these are constrained by current and expected vacancy rates, as well as the low level of market rentals relative to building costs. As a result, the outlook for non-residential building activity remains weak. Building costs Input costs of residential, commercial and industrial property (Haylett indices) increased by about 4-6% in the third quarter of These costs include labour, materials, plant and fuel but do not include the profit margins of contractors. In comparison, tender prices (BER BCI), which include the profit margins of contractors, increased by only 2,9% year on year, slowing considerably from increases in the first (9,1%) and second quarter (7,3%) of This indicates that builders have had to trim their profit margins amid keen tendering competition in a weak demand environment. Throughout this report we used a smoothed version of the BCI to cater for volatility in the Index. The increase came to 4,2% for the third quarter of Rode s six-year forecast of building activity and costs, as well as other property-related variables, is provided in the Trends publication.

171 Annexures

172 Rode s Report 2018:3 I Annexure 1 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 or average refer to the arithmetic mean, unless otherwise specified. See also geometric mean and median. BER BCI: Bureau for Economic Research Building Cost Index. Measures precontract non-residential buildingconstruction 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 (measured by the 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: 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, sun-screening, escape stairs, machine rooms, parking (basements or above ground), lift motor rooms, service rooms, caretakers flats, etc. GBA is mainly used by planning consultants in order to plan and execute a building in accordance with the permissible Floor Area Ratio (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 regulate the FAR definition, in a slightly different manner. The market value of office and shoppingcentre land is generally expressed as the value per bulk square metre. Bulk head lease: A lease that is signed with one party, which then sublets the space to other tenants. Capitalization rate: see Standard Capitalization rate CBD: Central business district or downtown. This is an area of concentrated high economic activity. The user may want to differentiate between the metropolitan CBD (e.g. the Johannesburg CBD) and a decentralized CBD (like the Sandton CBD). Civils: colloquial for civil construction. Civil construction: the construction of physical infrastructure like roads, bridges, dams, the laying of storm water pipes, electricity and water reticulation. See also building construction. Cluster housing [trosbehuising]: Attached or detached residences grouped together in a community, normally secured by a fence and a (guarded) gate. In the stricter sense of the word, to be called cluster housing, a complex has to have common recreation areas like a swimming pool or private nature area. This layout normally results in a higher

173 Rode s Report 2018:3 II Annexure 1 density than would be attained through a conventional subdivision layout. Tenure could be either full title (managed by a homeowners association) or sectional title (managed by a body corporate). See also Estate housing. 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. 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 plus 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 Estate housing [landgoedbehuising]: It is similar to Cluster housing, except that common-area leisure facilities are not a requirement of the definition; not necessarily upmarket, although it does have an upmarket flavour. 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. Freehold title: The owner of the land enjoys free ownership in perpetuity (no land rental payable to a landlord) and can use the land for any purpose, albeit in accordance with the local regulations. Cf. Leasehold. Full title (FT): The house or other type of building is part of an Estate or Cluster scheme and is built on a separate erf registered at the Deeds Office. The scheme is governed by a homeowners association rather than a sectional title body corporate. Thus, the term is used to distinguish it from Sectional title (ST). In theory, full-title homes could be built on Leasehold or Freehold land, although the former is unlikely in SA. It is, therefore, wrong to call full title freehold, when it could in fact be full title on leasehold land; also, most, if not all, sectional title schemes are built on freehold land. 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.

174 Rode s Report 2018:3 III Annexure 1 An FmV higher than the more 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 n th 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 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, most significantly material and labour costs. Other costs include plant and fuel. Designed to recompense the building contractor for in-contract rises in input costs. Does not include profit margins for contractors. Official designation: CPAP Haylett Formula (Work Group 180 & 181). Work Group 180 covers lump-sum domestic buildings and Work Group 181 entails industrial and commercial buildings. The Haylett index published in RR is obtained from the Medium-Term Forecasting Associates (MFA). 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. For instance, 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. Inclusionary housing: A housing programme that, through conditions attached to land-use rights approvals, requires private developers to dedicate a certain percentage of new housing developments to low-income and low-middle-income households, or to households that may not otherwise afford to live in those developments. Source: City of Johannesburg, Inclusionary Housing: Proposed Amendments, 2 August 2018 Industrial-building grades: Prime: An industrial property in which space is easily lettable because

175 Rode s Report 2018:3 IV Annexure 1 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. Wide clear span of trusses (few internal pillars); 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 and sufficient yard space. 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. Comparative grading nomenclature 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) [interne rentabiliteit]: A performance measurement that takes cognisance of the timevalue 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 moneyflows influence the return. Cf. geometric mean re-turn. JSE: JSE Securities Exchange South Africa. Labour tenant: A person who works on a commercial farm in exchange for the right to live on that farm without compensation, as well as the right to work a portion of that farm for himself. 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. Leasehold land: The leaseholder (landlord) grants the Lessee a long lease on the land (in South Africa, typically years), in exchange for which the tenant pays a rent stream to the landlord. At expiry of the lease, the land (together with the improvements) reverts to the leaseholder. This type of tenure is not common in South Africa, but since 1994 the government seems to prefer it when disposing of state land. Cf. Freehold.

176 Rode s Report 2018:3 V Annexure 1 Lessee: A tenant to whom space or land is rented under a lease. Cf. Lessor. Lessor: A landlord that lets space to another under a lease. Cf. 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. As per IVS 2011 the estimated amount for which a property would be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion Market value: Market value is the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction, after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion. [Source: International Valuation Standards Committee, 2003] The MV is an objective value in that the crucial value determinants are largely derived from the marketplace. See also price and fundamental value. As per IVS 2011 the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion. 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 ob servations 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. Cf. geometric and arithmetic mean. Metro: Metropolitan. MFA: Medium-Term Forecasting Associates, building-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. Office-building grades defined by quality of finishes and facilities (not location): Grade A + : Generally, new, top-quality, modern buildings; ample parking; a pace-setter in establishing rentals, a prestigious lobby finish. A minimum 4- star rating by GBCSA is a prerequisite. Grade A: Generally, not older than 10 years, unless renovated; high-quality finishes; adequate on-site parking; airconditioning. Grade B: Generally, 10 to 20 years old, unless renovated; accommodation to modern standards; air-conditioning; onsite parking. Grade C: Generally, 20 to 30 years old, unless renovated; in fairly good condition, although finishes are not up to modern standards; may have some onsite parking; unlikely to be centrally airconditioned. Grade D: A building reaching the end of its functional life but can be used for storage; old and in poor condition; near the bottom of the rental rate range; typically, no air-conditioning and no onsite parking; may have good location.

177 Rode s Report 2018:3 VI Annexure 1 These grades might be further sub-divided into sub-grades, viz. A -, B +, B -, C + or C - for purposes of fine-tuning market rental rates. irrespective of whether there is still a valid lease over the space. Often expressed as a percentage of the stock in rentable m². In every issue of Rode s Report (RR), we reflect rentals for the following sub-grades: A + Reported in RR tables A Reported in RR tables A - B + B Reported in RR tables B - C + C Reported in RR tables C - Sub-grades not reported on, can be established by straight-line interpolation. This schema has been appearing in Rode s Report since At a later stage, Sapoa (following the Australian example) changed the name of grade A + to P grade (for premium ). As the reader will see, the P-name does not fit in with the above schema, and for this reason, we did not follow the Sapoa nomenclature. The vigilant reader will notice that, in contrast to Sapoa, we do not include location as a determinant of grading. Our point of departure is that the grading should only reflect quality of finishes and facilities. However, location does of course play a role in determining market rental rates, which is why we in RR we report on market rental rates by node (and grade). 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, Operating costs: See outgoings. Opportunity cash flow (OCF): A valuation term introduced by Rode. The OCF quantifies the amount gained or foregone by the landlord in that the property is either over rented or under rented. More precisely, for each lease and the space that such a tenant occupies, it is, until expiry of such a lease, the present value (PV) of the contractual rental less the open-market rental (as at the valuation date) escalating at the openmarket escalation rate (as at the valuation date). Outgoings (operating costs): In the case of office buildings, the following items are included under total gross outgoings, irrespective of who pays for these: Repairs & maintenance. Cleaning. Security. Management (excluding head office overheads). All leasing expenses: broker s commission and in-house payroll, advertising, tenant installations & relocations (unless recovered), buyouts, etc. Municipal tax. Insurance (fire & SASRIA). In the case of self-insurance, the market average 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. Price: The amount actually paid for an

178 Rode s Report 2018:3 VII Annexure 1 asset. Not the same as market value, because special circumstances may have applied when the transaction was concluded (cf. the definition of market value). PLS: Property loan stock, also known as variable loan stock (VLS) (type of listed property fund). (historic) PUT: Property unit trust (type of listed property fund). (historic) REIT: A REIT is an entity that invests primarily in real estate and qualifies for special tax status in that there is single taxation at the end-investor (not the fund) level. The Dutch term fiscale beleggingsinstelling (FBI) stresses the tax characteristic. The FBI is the world s oldest fiscally transparent investment structure for property (since 1969). Source: published 16/11/2017. 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 o 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. Parking types: Detached open parking: parking bay is detached from the main building and with no cover Detached shade-net parking: parking bay is detached from the main building with shade-net cover Detached covered parking: parking bay is detached from the main building and has a solid roof Structured parking: parking forms inherently part of a structure (for instance, the main building). It could be in the basement, in an abutting parkade or on the rooftop (where it could be open or covered). 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 asking 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. Measure the rent-free period at the start of beneficial occupation. 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

179 Rode s Report 2018:3 VIII Annexure 1 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) Sectional title: A type of property ownership method whereby sections of a building, or a complex of buildings, are created to allow for each section of the building to be individually owned. In Australia it is known as strata title, and in North America and Europe as condominium (condo) (also, Eigentumswohnung in Germany). 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. 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 (USA: power) centres. Shopping centre types: Super regional: More than 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: rentable m² of shop space; principal tenant(s) are one or more major department stores; approximately 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: rentable m² of shop space; the principal tenant typically is 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 (Bellville CBD), Constantia Village (Cape metro); Constantia Centre (Port Elizabeth); Brandwag Centre (Bloemfontein); Beacon Bay Retail Park (East London). Neighbourhood: rentable m² of shop space; the principal tenant is a supermarket; shops. Convenience: rentable m² of shop space; the principal tenant is a café or grocer like Kwik Spar; 5-15 shops. Retail warehouse: Stand-alone; single tenant; > m²; air-conditioned, no ceiling, warehouse-like finishes, e.g. Makro, Hypermarket, Game, Dion. Value centre: Multi-tenanted strip centre; > m²; warehouse type finishes in order to deliver lower prices to consumers.

180 Rode s Report 2018:3 IX Annexure 1 Smoothing: Removal of shorter-term fluctuations in a time series, by e.g. moving averages, exponential smoothing, or curve fitting. Standard capitalization rate: It is the expected net operating income for year 1, assuming the entire building is let at openmarket rentals, divided by the purchase/ transaction price, normally expressed as a percentage. This calculation ignores VAT, transfer duty and income tax, and assumes a cash transaction (in contrast to a paper-based sale). Standard deviation (SD): A measure of dispersion in a set of data. For instance, assume a normal distribution of observations and 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. Through rate: Where a property consists of various components (for example office and industrial space) the through [rental] rate is the weighted average rental rate of these components. Time series [tydreeks]: A set of observations for the same variable at regular intervals (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. Town house [meenthuis]: A modern town house has a small footprint on multiple floors, for instance a duplex. In the UK it is known as a terraced house. Town houses are often found in cluster complexes. Historically, it was the (small) house of the landed gentry in town. Cf. in Afrikaans tuishuis/ dorpshuis, a small house in town where farmers used to stay for Nagmaal (Communion). 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-on-year (y-on-y) growth: Rate by which a figure has changed compared to a year earlier. 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. R/m² per month A graphic portrayal of a rental time series Quarterly frequency References: 1. International Council of Shopping Centres 2. Sapoa 3. Bureau of Market Research, University of South Africa 4. International Valuation Standards, 2017

181 Rode s Report 2018:3 X Annexure 2 Technical background to the Rode surveys Rode has been surveying the crucial variables of the property market in South Africa since the beginning of 1988 using the expert-panel method. Broadly speaking, the researcher has two potential approaches available to him. These are: 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 o o o o A paucity of transactions in most nodes, making statistical inferences impossible. Hence the danger of relying on outlier data (mainly the result of small samples) Dated transactions The cost The unwillingness of the parties to report the details of individual deals. 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/Brokers: 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. Escalation rate (for industrial leasebacks). The question put to the panellists is: Owners/Brokers: 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)? 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.

182 Rode s Report 2018:3 XI X Annexure 2 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. Industrial rentals: The question put to panellists is: In your opinion, what are the current gross achievable/market rentals per m² (NOT asking rent, NOT exception deals, NOT escalated contractual rents) for prime industrial buildings for the industrial nodes and floor-area sizes indicated below? (Exclude VAT.) The assumed floor area sizes are: 250 m², 500 m², m², m² and m². Respondents are also asked to fill in their vacancy estimate for prime industrial space, using a scale of 1 to 9. See the table below for detail on the vacancy scale. 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 (NOT asking price, NOT exception deals) for vacant, serviced levelled stands in the industrial nodes and and for the stand sizes indicated below? 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. The information is required for stand sizes of m², m², m² and m². 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 Vacancy scale for industrial townships <10% 10 20% >20% Low Medium High

183 Rode s Report 2018:3 XII Annexure 3 How to interpolate industrial rental rates and land values The industrial rental and land value tables in the body of the RR contain regression equations in natural log (ln) form in order to allow the reader to interpolate rental rates or industrial land values for area sizes other than those given in the tables. (All references below are to the industrial rental tables. However, they also apply mutatis mutandis to the industrial land value table.) The regression equations are in natural log (ln) form because the relationship between the rental rates and area sizes leased, is curvilinear. This means that the rental rate for area sizes other than those quoted cannot be calculated by straight linear interpolation. In order to calculate the rental rate for an area size other than those quoted, use the following equation from the tables: ln Y = a + b(ln X), where: ln Y = the natural log of the rental rate, i.e. the value which we want to calculate. ln X = the natural log of the applicable floor area in 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 r 2 is an indication of the goodness of fit of the curve, i.e. how much confidence we can put in the interpolation we want to perform. An r 2 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 e x key on your financial calculator. The answer is R10,89 per m².

184 Rode s Report 2018:3 XIII Annexure 4 Approximate building cost rates as at 1 July 2018 Source: AECOM AFRICA PROPERTY AND CONSTRUCTION COST GUIDE 2018 This section provides a list of approximate inclusive building cost rates for various building types in South Africa. Rates are current to 1 July 2018, and therefore represent the average expected building cost rates for It must be emphasised that these rates are indicative only, and should be used circumspectly, as they are dependent on upon several assumptions. 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, Second Edition (effective from 7 November 2007), published by the South African Property Owners Association (SAPOA). Construction cost normally vary between the different provinces of South Africa. Costs in parts of the Western Cape and KwaZulu-Natal, specifically upper-class residential, for example, are generally significantly higher than in Gauteng due to the demand for this type of accommodation. Rates have, therefore, been based on data received from Gauteng, where possible. Be mindful that cost differences between provinces at a given point in time are not constant, and may vary over time due to differences in supply and demand or other factors. 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 value-added tax (VAT).

185 Rode s Report 2018:3 XIV Annexure 4 Building rates 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 /m² R7.700 R9.500 specification 2. Low-rise prestigious office park development /m² R R High-rise tower block with standard specification /m² R R High-rise prestigious tower block /m² R R Note: Office rates exclude parking and include appropriate tenant allowances incorporating carpets, wallpaper, louvre drapes, partitions, lighting, air-conditioning and electrical reticulation. Parking 1. Parking on grade, including integral landscaping and ground preparation /m² R500 R Structured parking /m² R3.800 R Parking in semi-basement /m² R4.100 R Parking in basement /m² R4.400 R6.800 Retail 1. Local convenience centres (not exceeding 5.000m²) /m² R7.600 R Neighbourhood centres (5.000m² m²) /m² R8.200 R Community centres (12.000m² m²) /m² R9.000 R Minor regional centres (25.000m² m²) /m² R R Regional centres (50.000m² m²) /m² R R Super regional centres (exceeding m²) /m² R R Note: Super regional centres and regional centres are generally inward trading with internal malls, whereas convenient, neighbourhood and community centres are generally outward trading with no internal malls. Retail rates include the cost of tenant requirements and specifications of national chain stores. Retail costs vary considerably depending on the tenant mix and sizing of the various stores. Industrial Industrial warehouse, including office and change facilities within the structure area: 1. Steel frame, steel cladding and roof sheeting (lightduty) /m² R3.800 R Steel frame, brickwork to ceiling, steel cladding above and roof sheeting (heavy-duty) /m² R4.400 R Administration offices, ablution and change room block /m² R7.200 R Cold storage facilities /m² R R19.000

186 Rode s Report 2018:3 XV Annexure 4 Residential 1. Site services to low-cost housing stand (250m² - 350m²) /site R R RDP housing /m² R1.900 R Low-cost housing /m² R2.900 R Simple low-rise apartment block /m² R7.100 R Economic duplex townhouse /m² R7.100 R Prestige apartment block /m² R R Private dwelling houses: Economic /m² R5.000 Standard /m² R6.300 Middle Class /m² R7.600 Luxury /m² R Exclusive /m² R Exceptional ( Super luxury ) /m² R R Outbuildings /m² R3.600 R Carport (shaded): Single /no. R4.300 Double /no. R Carport (covered): Single /no. R6.800 Double /no. R Swimming pool Not exceeding 50kl /no. R Exceeding 50kl and not exceeding 100kl /no. 12. Tennis court Standard /no. Floodlit /no. R R R R R R Hotels 1. Budget /key R R Mid-scale (3 Star) /key R R Upper scale (4 Star) /key R R Luxury (5 Star) /key R R Note: Hotel rates exclude allowances for furniture, fittings and equipment (FF&E). Studios 1. Studios: dancing, art exhibitions, etc. /m² R R Conference Centres 1. Conference centre to international standards /m² R R31.000

187 Rode s Report 2018:3 XVI Annexure 4 Retirement Centres 1. Dwelling house middle class /m² R7.900 luxury /m² R Apartment block middle class /m² R8.100 luxury /m² R Community centre middle class /m² R luxury /m² R Frail care /m² R Schools 1. Primary school /m² R6.300 R Secondary school /m² R7.500 R8.000 Hospitals 1. District hospital /m² R Note: Hospital rates exclude allowances for furniture, fittings and equipment. Stadiums 1. Stadium to PSL standards /seat R R Stadium to FIFA standards /seat R R Stadium pitch to FIFA standards /pitch R R Prisons Inmate prison /inmate Inmate prison /inmate 3. High/maximum security /inmate R R R R R R Infrastructure airport development costs Rates exclude any future escalation, loss of interest, professional fees, VAT and ACSA direct costs. Apron stands (incl. associated infrastructure) 1. Code F stand (85m long x 80m wide = 6.800m²) /m² R Code E stand (80m long x 65m wide = 5.200m²) /m² R Code C stand (65m long x 40m wide = 2.240m²) /m² R6.400 Taxi lanes (incl. associated infrastructure) 1. Code F taxi lane (101m wide) /m R Code E taxi lane (85m wide) /m R Code C taxi lane (49m wide) /m R78.000

188 Rode s Report 2018:3 XVII Annexure 4 Service roads 1. Service road (10m wide) /m R Dual carriage service road (15m wide) /m R Taxi ways (incl. associated infrastructure) 1. Code F taxi way (70m wide) /m R Runways (incl. associated infrastructure) Code F runway (3.885m long x 60m wide = m²) /m R Parking (excl. bulk earthworks) 1. Structured parking /bay R Basement parking /bay R Perimeter fencing/ Security gates 1. Security walls with perimeter intrusion detection (PIDS), etc. /m R Security gate /no. R Super security gate /no. R Terminal & other buildings (excl. bulk earthworks, external site & services works) 1. Terminal building (excl. terminal building baggage & X-ray) /m² R Pier terminal building (excl. telescopic air bridges, seating & aircraft docking system) /m² R Telescopic air bridges /unit R Aircraft Docking System /unit R Building services Electrical installation 1. Office buildings standard installation /m² R550 R Office buildings sophisticated installation /m² R750 R Office buildings UPS, substations, standby generators /m² R350 R Residential /m² R500 R Shopping centres /m² R750 R Hotels /m² R850 R Hospitals /m² R1.200 R1.600 Electronic installation 1. Offices - standard installation /m² R350 R Offices sophisticated installation /m² R500 R Residential /m² R300 R Shopping centres /m² R700 R Hotels /m² R650 R Hospitals /m² R700 R900 Note: Electronic installation include access control, CCTV, public address, fire detection, data installation, WiFi, CATV, PABX (Private Automatic Branch Exchange) and Building Management Systems (BMS). Fire protection installation 1. Sprinkler system including hydrants and hose reels (excluding void sprinkler) /m² R250 R350

189 Rode s Report 2018:3 XVIII Annexure 4 Air-conditioning installation 1. Ventilation to parking/services areas /m² R400 R Office buildings: console units /m² R750 R Office buildings: console/split units /m² R900 R Office buildings: package units /m² R1.200 R Office buildings: central plant /m² R1.750 R Office buildings: Variable Refrigerant Flow /m² R1.600 R Residential: split units /m² R900 R Shopping centres: split units /m² R1.000 R Shopping centres: package units /m² R1.200 R Shopping centres: evaporative cooling /m² R750 R Hotels: public areas /m² R1.750 R Hospitals central plant /m² R2.250 R Hotels: console units /key R R Hotels: split units /key R R Hotels: central plants /key R R Hospitals: operating theatres /theatre Notes R R 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. 2. Value added tax (VAT): As the majority of developers are registered vendors in the property industry, any VAT on commercial property development is fully recoverable. Therefore, to reflect the net development cost, VAT should be excluded. Should the gross cost (i.e. after VAT inclusion) be required, the VAT at the ruling rate (currently 15%) should be added. Cognizance should be taken, however, of the effect of VAT on cash flow over a period of time. This will vary according to the payment period of the individual vendor. In all cases, however, it will add to the capital cost of the project to the extent of interest on outstanding VAT for the VAT cycle of the particular vendor. 3. For guidance with regard to the cost of buildings rated under the Green Star South Africa rating tool system, see the latest edition of the AECOM publication entitled Quick Guide to Green Design Attributes.

190 Rode s Report 2018:3 XIX Annexure 5 Monthly forecast of in-contract building costs (Haylett formula) Work group 180 Lump Sum Domestic Buildings (December 2016 = 100) Forecast date: September Month Index % ch Index % ch Index % ch Index % ch Index % ch Index % ch Index % ch Jan 93,2 3,7 100,3 7,6 104,4 4,1 110,0 5,4 115,9 5,4 121,7 5,0 129,7 6,5 Feb 95,1 6,0 101,1 6,3 104,4 3,3 110,5 5,8 116,1 5,1 122,1 5,1 130,0 6,5 Mar 95,4 5,6 101,3 6,2 104,6 3,3 110,7 5,9 116,4 5,1 122,8 5,4 130,7 6,5 Apr 96,2 5,7 101,5 5,5 104,9 3,3 111,1 5,9 117,0 5,3 123,8 5,8 131,8 6,5 May 96,4 5,8 102,4 6,2 105,0 2,5 111,4 6,1 117,3 5,3 124,4 6,0 132,3 6,4 Jun 97,4 6,4 102,1 4,8 105,5 3,3 111,9 6,1 118,1 5,5 125,4 6,2 132,9 6,0 Jul 97,7 6,3 102,2 4,6 106,7 4,4 112,5 5,4 118,6 5,4 126,2 6,4 133,7 5,9 Aug 97,8 6,9 102,7 5,0 107,4 4,5 112,8 5,1 118,9 5,4 126,5 6,4 133,8 5,7 Sep 98,0 7,2 103,4 5,5 108,4 4,9 114,0 5,1 120,0 5,2 127,6 6,3 134,7 5,5 Oct 98,4 6,8 104,2 5,9 109,0 4,6 114,7 5,2 120,5 5,1 128,5 6,6 135,5 5,5 Nov 99,1 7,6 104,8 5,8 109,4 4,4 115,2 5,3 120,9 5,0 129,1 6,7 135,7 5,2 Dec 100,0 8,6 104,9 4,9 109,8 4,6 115,6 5,3 121,4 5,0 129,6 6,8 136,2 5,1 Avg. 97,1 6,4 102,6 5,7 106,6 3,9 112,5 5,5 118,4 5,2 125,6 6,1 133,1 5,9 Source: Bureau for Economic Research (BER); Medium-Term Forecasting Associates (MFA)

191 Rode s Report 2018:3 XX Annexure 6 BER Building Cost Index (non-residential tender prices) 2005=100 First quarter Second quarter Third quarter Fourth quarter Average ,3 156,1 161,4 164,9 158,9 %ch 8,9 4,7 9,2 5,2 6, ,0 165,7 173,3 171,8 170,5 %ch 11,6 6,1 7,4 4,2 7, ,2 186,6 191,2 194,3 187,8 %ch 4,8 12,6 10,3 13,1 10, ,2 191,2 194,8 197,2 195,3 %ch 10,6 2,5 1,9 1,5 4, ,9 206,2 211,5 208,6 205,3 %ch -1,7 7,8 8,6 5,8 5, ,6 215,3 220,7 217,8 216,8 %ch 9,6 4,4 4,3 4,4 5, ,1 231,0 %ch 9,1 7,3 227,1 2,9 Source: The data for 2012 to 2017 is from the Report on Building Costs of the Medium-Term Forecasting Associates, P.O. Box 7119, Stellenbosch, 7599, Tel , and is published with their permission. The data for the first two quarters of 2018 is based on Rode s own estimates

192 Rode s Report 2018:3 XXI Annexure 7 Prime overdraft rate at month-end (%) (proxy for trends in mortgage rates*) Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year ,3 16,3 16,3 16,3 16,3 16,3 16,3 16,3 16,3 16,3 15,3 15,3 16, ,3 15,3 15,3 15,3 15,3 15,3 15,3 15,3 16,3 16,3 16,3 16,3 15, ,3 17,5 17,5 17,5 17,5 17,5 18,5 18,5 18,5 18,5 18,5 18,5 17, ,5 18,5 18,5 19,5 20,5 20,5 19,5 19,5 19,5 19,3 20,3 20,3 19, ,3 20,3 20,3 20,3 20,3 20,3 20,3 20,3 20,3 19,3 19,3 19,3 20, ,3 19,3 18,3 18,3 18,3 22,3 24,0 25,5 25,5 24,5 23,5 23,0 21, ,0 21,0 20,0 19,0 19,0 18,0 17,5 16,5 16,5 15,5 15,5 15,5 18, ,5 14,5 14,5 14,5 14,5 14,5 14,5 14,5 14,5 14,5 14,5 14,5 14, ,5 14,5 14,5 14,5 14,5 13,8 13,5 13,5 13,0 13,0 13,0 13,0 13, ,0 14,0 15,0 15,0 15,0 16,0 16,0 16,0 17,0 17,0 17,0 17,0 15, ,0 17,0 17,0 17,0 17,0 15,5 15,5 14,5 13,5 12,0 12,0 11,5 15, ,5 11,5 11,5 11,5 11,5 11,5 11,5 11,0 11,0 11,0 11,0 11,0 11, ,0 11,0 11,0 10,5 10,5 10,5 10,5 10,5 10,5 10,5 10,5 10,5 10, ,5 10,5 10,5 10,5 10,5 11,0 11,0 11,5 11,5 12,0 12,0 12,5 11, ,5 12,5 12,5 12,5 12,5 13,0 13,0 13,5 14,0 14,0 14,0 14,5 13, ,5 14,5 14,5 15,0 15,0 15,5 15,5 15,5 15,5 15,5 15,5 15,0 15, ,0 14,0 13,0 13,0 11,0 11,0 11,0 10,5 10,5 10,5 10,5 10,5 10, ,5 10,5 10,0 10,0 10,0 10,0 10,0 10,0 9,5 9,5 9,0 9,0 9, ,0 9,0 9,0 9,0 9,0 9,0 9,0 9,0 9,0 9,0 9,0 9,0 9, ,0 9,0 9,0 9,0 9,0 9,0 8,5 8,5 8,5 8,5 8,5 8,5 8, ,5 8,5 8,5 8,5 8,5 8,5 8,5 8,5 8,5 8,5 8,5 8,5 8, ,0 9,0 9,0 9,0 9,0 9,0 9,3 9,3 9,3 9,3 9,3 9,3 9, ,3 9,3 9,3 9,3 9,3 9,3 9,5 9,5 9,5 9,5 9,8 9,8 9, ,3 10,3 10,5 10,5 10,5 10,5 10,5 10,5 10,5 10,5 10,5 10,5 10, ,5 10,5 10,5 10,5 10,5 10,5 10,3 10,3 10,3 10,3 10,3 10,3 10, ,3 10,3 10,0 10,0 10,0 10,0 10,0 10,0 10,0 Source: SARB *Average mortgage rates for new bonds are, on average, below the prime overdraft rate. Individual mortgage rates will depend on the creditworthiness of the mortgagor.

193