South Africa: Evolution of Industrial Properties

Smart operating spaces with smaller floor areas, but larger volume, will define the industrial property market in South Africa in 2015.

This will be driven by the consolidation of operations as industrial businesses remain under pressure, the immense impact of the Eskom electricity crisis on the industrial sector and continuing increasing energy prices, as well as supply dynamics of industrial space in certain areas.

“The failure of major retailer Ellerines has not only resulted in the failure of retail tenancies at shopping centres, but also the failure of tenancies at distribution centres, yet, while sentiment remains quite negative when it comes to economy, manufacturing output data is showing movement towards positive territory, which is good news for industrial property,” says Engelbert Binedell, Growthpoint Industrial Property Divisional Director.

Industries are working differently and innovating to adapt to the present set of challenges. “Industrial concerns are operating smarter to ensure their sustainability. This is also resulting in their property needs evolving and a new set of desirable specifications to match,” he adds.

Industrial companies change their behaviours to create new ways of streamlining their businesses, like working at off-peak times to benefit from off-peak tariff savings. Industrial businesses are consolidating their operations onto single sites and seeking buildings with smaller footprints but greater volume from an increased height.

Established industrial nodes in Durban include Prospecton, Jacobs and Mobeni in the South, Springfield, Riverhorse and Briardene in the central areas and Westmead, Pinetown and New Germany in the west.

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“Asking rentals within these established nodes are proving far more attractive than what new ‘greenfield’ developments can offer as a result of land costs which are driving up asking rentals,” reports Binedell. However, the N3 Western Corridor, which includes Hammersdale and Cato Ridge, is an exception.

Striving for improved efficiencies and cost savings, national retailers such as Mr Price, Massmart, Bata and Pick ‘n Pay are consolidating their different distribution centres into major distribution hubs. Here too the emphasis is on smaller floor area but larger volume. The desirable specifications include features such as 20m ceilings, super-flat laser screed floors, high-tech racking with in-rack sprinklers and generous hardstand yards. “In KwaZulu-Natal, there is a distinct undersupply, and genuine demand, for these types of logistics facilities,” Binedell points out.

When it comes to the undersupply of logistics space in Durban, the government has progressed significantly in addressing congestion within the port. While the strategic plan for this area is a 10-year project, it is important to know where infrastructure spending is going to take place and where the priorities lie.

Meanwhile, in the Western Cape, Investors and users are starting to move beyond the traditional industrial nodes because of the availability of land, less traffic congestion, improved road infrastructure, more palatable rentals and the ability to deliver specially tailored premises,” notes Binedell.

This article “South Africa: Evolution of Industrial Properties” was issued by REIM –

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