Rising demand and limited land supply make Cape Town and Durban attractive investment destinations
In the dynamic world of real estate, two cities in South Africa - Cape Town and Durban - are standing out as premier logistics and industrial investment hubs. These cities are experiencing a surge in demand, driven by accelerated e-commerce growth, supply chain optimization, and the need for climate-resilient infrastructure.
Cape Town: A Hub for E-commerce and Semigration
Cape Town is witnessing growth fueled by e-commerce expansion and semi-industrial migration, also known as semigration. Rents are on the rise, vacancy rates are at historic lows, and the industrial land supply is critically limited. Key industrial areas like Brackengate and Richmond Park are expanding, while older precincts such as Epping and Parow are being redeveloped.
Cape Town benefits from stable infrastructure and governance, making it more attractive than some other regional markets. The city's infrastructure, lifestyle appeal, and political stability are reinforcing the e-commerce trend.
Durban: Chronic Land Scarcity and High Demand
Durban faces chronic land scarcity, particularly for "flood-free" industrial land. Despite this, demand remains very high, reflected in record low vacancy rates. Durban's industrial market caters to a broad range of users, from small units to large distribution centers near the port.
Municipal taxes are high in Durban, but the city is considered a stable, low-risk environment for industrial investment. Proximity to port infrastructure offers a decisive cost advantage.
Global Trends Shaping Local Demand
E-commerce and supply chain shifts globally are reshaping local demand, driving strong growth in third-party logistics (3PLs) and modern warehousing needs. Supply chain reconfiguration favors cities with strong port infrastructure and good logistics, which is supporting both Cape Town and Durban's industrial real estate growth.
Climate Risk: A Key Factor
Climate risk is an increasingly important factor influencing investor and tenant preferences. There is a rising demand for climate-resilient industrial zones that can withstand environmental hazards, which leads to higher lease rates and longer tenancy durations in both cities.
Land Scarcity: A Major Constraint
Land scarcity is a major constraint, especially in Durban where no new suitable land has appeared in over 10 years. This push on existing industrial zones intensifies demand and contributes to elevated rents. Cape Town also experiences tight land availability, which is contributing to rent increases and fueling redevelopment of older industrial areas.
Investment Opportunities
Investment opportunities include modern, efficient warehousing with high ceilings, cold storage facilities, and logistics hubs near ports. There is also potential in automated warehouses and redevelopment/repurposing of urban industrial land to meet growing logistics demands.
In summary, the logistics and industrial markets in Cape Town and Durban are driven by the accelerated growth of e-commerce and supply chain optimization, tempered by the scarcity of industrial land and the need to build climate-resilient infrastructure. These factors create a highly competitive marketplace with rising rents, low vacancies, and strong demand from investors and end-users alike, positioning both cities as premier logistics investment hubs in Africa.
[1] JLL Research, South Africa Logistics and Industrial MarketView Q3 2021 [2] PropertyX, South Africa Industrial Market Overview 2021 [3] Knight Frank, South Africa Industrial Market Report H1 2021 [4] PwC, South Africa Industrial Property Market Overview 2021 [5] CBRE, South Africa Industrial MarketView Q3 2021
- The energy-intensive e-commerce industry in Cape Town is contributing to the increasing demand for reliable and sustainable infrastructure, such as efficient warehousing and logistics hubs.
- In the retail sector, businesses are looking to establish themselves in industrial areas close to ports in Durban to take advantage of the cost-effective logistics and infrastructure.
- The sports industry can benefit from Cape Town's redeveloped industrial zones by creating sports facilities and training complexes, capitalizing on the city's favorable political climate and lifestyle appeal.
- Durban's municipal authorities, in collaboration with the private sector, could explore the potential of urban repurposing and automation to address land scarcity challenges and meet the modern warehousing needs of the growing sports and e-commerce businesses.
