The South African industrial property market remained the top-performing segment among major non-residential property types in the third quarter of 2025, as per Rode’s data. This strong position is primarily due to low vacancy rates, which supported robust rental growth across the country. Nominal gross market rentals for industrial spaces of 500 m² showed an 8.4% increase in Q3 2025 compared to the same period in 2024, slightly improving on the growth rate seen in Q2. Rentals were approximately 31% higher than the pre-pandemic level in 2019, underscoring a notable recovery despite challenging economic conditions. Regionally, Cape Town stood out as a top performer, benefiting from strong demand and relatively limited supply.
At the national level, rentals for industrial space of 1,000 m² grew at a similar rate of roughly 8% year-on-year in Q3 2025. Persistently low vacancy rates accompanied this rental growth, with the average vacancy at 3.8%—a slight increase from 3.6% in Q3 2024. Vacancy levels have hovered near 4% for the past two years with some signs of gradual upward movement. The industrial market’s strength is buoyed by a lower incidence of speculative development compared with offices and by rapidly growing online retail sales, which have escalated demand for larger warehouses, especially logistics-focused properties. These logistics warehouses generally experience lower vacancy rates, are often bespoke and customised, and thus command higher rentals due to land and elevated construction costs. Major property owners such as Growthpoint and SA Corporate have strategically shifted focus towards such logistics-oriented industrial properties.
The fundamental drivers of the industrial property market lie in the manufacturing and retail sectors. Manufacturing drives demand for industrial space necessary for production, while retail relies on warehouses and distribution centres to facilitate the flow of goods through local manufacturing and imports. However, manufacturing output has contracted by 1.8% in the first eight months of 2025 and remains well below pre-COVID levels, indicating underperformance. Consequently, manufacturing has not been the main growth driver for the industrial property market. In response, some REITs are rebalancing portfolios by shifting from older, manufacturing-linked assets towards the logistics sector, which holds stronger growth prospects.
The Absa Purchasing Managers’ Index (PMI), reflecting manufacturing sector conditions, averaged 45.4 points in Q2 2025—below the 50-point threshold that separates economic contraction from expansion—and improved marginally to 50.8 points in Q3, signaling tentative expansion. However, this recovery is uneven and volatile due to factors like weak export demand constrained by US trade tariffs. Such volatility hampers sustained growth in manufacturing activity.
The retail sector’s health also significantly influences the industrial property market. Real retail sales (inflation-adjusted) grew by 4.1% year-on-year in the first eight months of 2025, up from 2.5% growth in 2024. This improvement was supported by lower interest rates and retirement fund withdrawals. Regionally, rentals show mixed performance: Durban has been the poorest performer since 2019 but experienced a 5.9% nominal rental increase in Q3 2025. Gauteng’s East Rand and Central Witwatersrand (Central Wits) submarkets posted stronger rental growth at 7.1% and 4.3%, respectively.
A property market expert noted that the Gauteng industrial market remains strong with steady rental increases, driven by rising construction costs, limited new speculative developments, and sustained demand from logistics, fast-moving consumer goods (FMCG), and e-commerce users. The scarcity of new stock increases landlord negotiating power, especially for premium logistics and distribution spaces.
Across South African conurbations, vacancy rates stayed below 5% on average during January to September 2025, though some regions showed mixed trends when compared to the previous year. Bloemfontein and Gqeberha recorded the highest vacancy rates.
While nominal rentals have climbed, real rentals (adjusted for construction cost inflation) have generally declined since the late 2000s, because building construction costs have risen faster than nominal rents. However, there has been recent improvement as nominal rental growth accelerates and construction cost inflation slows down.
To benchmark potential future market rental growth, pioneer rents—long leases signed on newly built, on-demand industrial premises—are compared to current market rents for prime industrial space of 1,000 m². Pioneer rentals reflect today’s construction costs and developers’ expectations for a fair immediate return on investment. These rents thus act as an early indicator of the market rental levels likely to be reached once demand matches supply during anticipated future economic growth.
Operating expenses also play a vital role in evaluating a property’s profitability or viability. Gross operating expenses generally exclude utility charges such as tenant-paid electricity, refuse removal, water, and sanitation. Rising utility costs at a rate faster than CPI inflation can diminish tenant viability and the rent tenants can afford, reflecting the cost of inadequate municipal service delivery.