From Cape Town’s supply-constrained industrial precincts to Johannesburg’s diverse market and Durban’s logistics-driven economy, investors need to look beyond purchase price and headline yields to assess long-term value, says Marcus te Vaarwerk, industrial director for Swindon Property.

“South Africa’s industrial property market continues to demonstrate resilience relative to the office and retail sectors, supported by demand for warehousing, distribution and manufacturing facilities. However, investment opportunities vary significantly across the country’s major centres, making location, tenant demand, building specifications and acquisition price critical to long-term performance.

“With R30 million to invest, an investor could access very different opportunities in Cape Town, Johannesburg and Durban. Cape Town offers strong recent rental growth amid constrained supply, Johannesburg provides greater choice and flexibility, while Durban’s industrial market benefits from its role as a major port and logistics hub.”

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

While these figures highlight the strength of Cape Town’s market, rental growth alone does not determine investment performance. The price paid, sustainable rental income, vacancy risk and future capital expenditure are equally important, cautions te Vaarwerk.

Strong demand meets limited supply in Cape Town

Cape Town’s established industrial precincts continue to benefit from sustained occupier demand and constrained availability, supporting rental growth and the long-term prospects of well-positioned assets.

However, competition for quality space can push acquisition prices higher, says te Vaarwerk. “A R30 million budget may secure less floor area than in Johannesburg or Durban, while the purchase price may already reflect expectations of further rental growth.

“Investors are advised to focus on properties where location, building quality and tenant demand justify the price. Good transport access, sufficient power capacity, practical loading facilities and adequate yard space can strengthen a property’s appeal and help retain tenants.

“The challenge is to secure a competitive, lettable asset without paying a premium that compromises initial yields or leaves insufficient room for future growth.”

Johannesburg offers choice, but asset selection is critical

Greater Johannesburg offers one of the country’s most extensive industrial markets, supported by manufacturing, logistics, distribution and other business activities. Its depth provides a wide selection, from older industrial buildings to modern logistics facilities, with R30 million potentially securing substantially more floor area than in Cape Town.

However, says te Vaarwerk, properties and industrial nodes vary considerably in quality and risk. Competing supply can exert pressure on rentals, while older buildings may need significant upgrades to remain competitive, particularly where power supply, eaves height, loading facilities or yard space fall short of occupier requirements.

“Infrastructure reliability, road access, security and the condition of surrounding precincts also influence operating costs and tenant demand.

“A lower purchase price per square metre does not necessarily represent better value if a building requires extensive capital investment or is difficult to re-let. Investors who understand the differences between individual nodes may nevertheless find opportunities to acquire well-positioned assets at competitive prices.

“Johannesburg’s appeal lies in its flexibility and scale, provided investors carefully assess building competitiveness, vacancy exposure and maintenance requirements.”

Value linked to logistics and manufacturing in Durban

Durban’s industrial market is closely linked to the Port of Durban and the N3 freight corridor connecting the coast with Gauteng’s major economic centres.

Precincts such as Riverhorse Valley, Springfield and Prospecton accommodate logistics, warehousing, distribution and manufacturing businesses. For occupiers dependent on efficient supply chains, proximity to transport routes and established commercial networks can be a significant advantage.

Although Durban’s reported rental growth of 4.6% was below that of Cape Town and the selected Johannesburg markets, this does not necessarily make it a less attractive investment destination, says te Vaarwerk.

“A well-positioned warehouse serving established distribution networks may offer a compelling investment case, even where market-wide rental growth is more moderate. Investors should assess transport access, surrounding infrastructure, tenant requirements and the property’s ability to accommodate changing operational needs.

Beyond purchase price and headline yield

“Comparing industrial properties requires more than calculating how much floor space a budget can buy. Price per square metre is useful, but does not account for differences in rental income, building quality, operating expenses, vacancy exposure or future capital expenditure.”

Te Vaarwerk considers two hypothetical properties, each acquired for R30 million. At a net initial yield of 8%, a property would generate approximately R2.4 million in annual net operating income. At 9%, this would rise to R2.7 million, representing a difference of R300 000 a year.

However, he says the higher-yielding property is not necessarily the better investment. A higher initial yield may reflect greater risk, such as an inferior location, an older building, a short lease, a financially weaker tenant or a greater likelihood of vacancy. A lower-yielding asset may offer more reliable income, stronger tenant demand and better rental growth prospects.

Te Vaarwerk advises investors to compare yields on a consistent basis, accounting for acquisition costs and relevant property expenses. Net initial yield should not be confused with gross rental yield or regarded as a guaranteed future return.

Other key considerations include:

  • Tenant quality and lease terms: Financial strength, lease duration, rental escalations and renewal prospects affect income security. Investors should also consider the cost and time involved in replacing a major tenant.
  • Building specifications: Eaves height, floor loading, power supply, loading facilities and yard space determine whether a property meets occupier requirements.
  • Operating costs and capital expenditure: Maintenance, insurance, rates, compliance and refurbishment can materially affect net returns.
  • Location and infrastructure: Transport access, security, utilities and proximity to customers influence tenant demand and operational efficiency.
  • Vacancy and reletting risk: Investors should establish how long it might take to secure a replacement tenant and whether upgrades or incentives would be required.
  • Adaptability: Buildings that accommodate a range of industrial and logistics uses may appeal to a broader tenant base.

One of the most important questions is: ‘If the current tenant vacates tomorrow, how attractive will this property be to the next occupier?’ The answer may reveal more about its long-term prospects than its advertised yield.

No single market offers a universal answer

Each market presents a different investment proposition. Cape Town offers exposure to constrained supply and strong recent rental growth, but competition for quality assets makes acquisition pricing critical. Johannesburg provides scale and choice, with returns dependent on the specific node, building quality and competing supply. Durban offers opportunities linked to logistics and manufacturing, with transport access and operational suitability central to tenant demand.

According to Swindon, evaluating opportunities across these markets requires an understanding of local conditions alongside a detailed assessment of each property.

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