South African demand for industrial space has seen new industrial property developments come into the market and being quickly snapped up.

Artist’s impression of Westside Industrial Park

Brokers report that investors who held back over the past years due to poor market conditions are now back and have confidence in the industrial market again.

They say buyers are queuing up looking for investment properties as well as owner occupiers to up or down size especially in the Cape Peninsula.

The South African Property Owners Association (Sapoa) and Investment Property Databank (IPD) reported in the second quarter of 2011 that over the most recent years, three, five and 10 year periods, industrials have averaged higher total returns than both the retail and office sector.

The industrial income return in 2010 grew to 10.0 percent up from 9.5 percent in 2009 as a result of a combination of declining capital values in 2009 and strong income growth in 2010.

Vacancies in the industrial sector fell to 5.4 percent from 6.9 percent at the end of 2010 which helped to support the strong rental growth of 9.0 percent for the year.

The report states that the rental growth was particularly strong at the high-value end of the market coinciding with lower vacancy rates.

Industrial properties suffered the most from electricity price increases with the average cost per square metre jumping to 50.5 percent over the year.

The full price rise of electricity was passed on to tenants as was most of the 13.8 percent increase in municipal costs.

The KwaZulu-Natal industrial market remains in a much stronger position than the other major markets of Gauteng and Western Cape both in terms of investment returns and fundamentals.

In the Western Cape, the new industrial development set to open in February 2012 is already sold out.

The Westside Industrial Park, a five factory development within the Westlake precinct, has been let on long-term leases according to Quagga Property Brokers. These units measure between 185 square metres and 210 square metres.

Len Pears, director of Quagga says investors are now buying and they expect returns of between 8.5 percent and 11 percent with three year plus leases and solid tenants.

In Gauteng, Johannesburg Stock Exchange largest listed property company, Growthpoint Properties is set for good times as space is hugely in demand at its new property.

Top companies continue to invest at Growthpoint Industrial Estate in Germiston, Gauteng.

Growthpoint Industrial Estate in Meadowdale, Germiston is a high tech industrial estate with bulk for future development opportunities.  

Situated close to OR Tambo International Airport and major highways including the N12, R24 and R21, the estate is described as one of a scarce number of large sites in established, zoned industrial areas in proximity to the airport.

Growthpoint says of its original capacity to supply some 125 000 square metres of industrial space only 50 000 square metres now remains.

The estate attracts leading international and national industrial users such as Barloworld, Avon Justine, Fast and Furious and Ricoh South Africa.

Ricoh, an existing commercial tenant of Growthpoint in Bedfordview, extended their relationship with Growthpoint Properties when seeking new premises for its distribution and technical operations.

Cape Town’s Milnerton area is proving to be a popular node among industrial users.

JHI Properties recently concluded a lease at a total rental value of R7 million. The tenant relocated from nearby Montague Gardens as they needed bigger premises.

Martin Botha, JHI Properties leasing and sales broker says being only about 14 km from Cape Town’s city centre, this industrial area has good security and is within easy reach of key routes such as the N2, M5 and N17.

This Killarney Gardens industrial property in Milnerton is quite popular with industrial users.

Botha explains that the industrial market is slowly becoming attractive again with interest from both local and international businesses looking for upmarket industrial locations.

He adds that there is a growing interest from the Chinese the business sector in areas such the China Town at Sable Square in Milnerton in addition to the existing China Town in Ottery as well as a second facility being built at The Paddocks shopping centre. – Denise Mhlanga

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