There is some good news for the industrial property market.
”Positive economic data that was released recently by Kagiso Purchasing Manufacturers Index (PMI) indicates that the manufacturing sector is expanding again, even if ever so slightly,” says Andy Beddow, director of Baker Street Properties.
“In addition the relief given by the Reserve Bank by dropping the repo rate to 6% per annum, thereby reducing prime to an annual 9,5% going forward is the first time interest rates have been this low (and stable) in over 30 years. It is hard to believe that in August 1998 prime interest rate peaked at 25,5% p.a.
“It is early days but we are starting to see more activity in the Cape Town Industrial Property market with our enquiry level picking up. However, there is a large vacancy level in the market to erode. Our latest figures reflect an overall market vacancy of 526,000sqm in the greater Cape Town area, reflecting an increase in vacancies in almost all locations.”
Beddow says that 50% of this vacancy lies in the older industrial areas including Epping, Parow, Maitland and Bellville. There are some anomalies such as an unusually high vacancy factor of 30,000sqm in Paarden Eiland, which traditionally is tightly held.
The vacancy figures show that 66% of vacancies across the board are represented by properties larger than 1,000sqm, while mini-units measuring 500sqm or less represent 19% of the vacancies.
Thus it continues to be a tenant’s market and is a good time to structure long term leases now. Not only are rentals flat (gross rentals average around R28/sqm to R30/sqm (excluding VAT), but escalations are also showing downward pressure from the 10% per annum level down to 9% per annum and even the 8% per annum level.
Beddow says on average, vacant land remains at the R1000/sqm mark, although we have brokered deals recently at R1,250/sqm. These land sales are few and far between with a limited number of “greenfields” developments following. “However, those users who develop now would enjoy a very competitive construction market with contractors hungry for work.”
“While it is expected that the last quarter of 2010 will show some confidence in the industrial market with moderate take-up of vacancies, property rentals are not expected to start increasing until well into the first half of 2011.”
Meanwhile, the JHI property services group reports an increased demand for warehousing accommodation in the Johannesburg area, mainly regarding light manufacturing, distribution and storage facilities.
And an area which is strategically positioned to capitalise on this trend is Isando, a centrally situated and well established industrial hub in Kempton Park which is located between major highways - the R24, N12 and R21, says Jonathan Klimek, leasing, sales and investment broker for JHI. “It is the central point of the industrial east region in Gauteng, being surrounded by other industrial areas such as Jet Park, Spartan, Anderbolt, Pomona and Meadowdale.
“Isando’s convenient access and good exposure to these key routes, coupled with its close proximity to OR Tambo International Airport, the Gautrain and rail links, offers significant appeal and value for industrial businesses, particularly from a distribution aspect, and especially in terms of large users. The area is already home to major manufacturers such as Simba, Lion Match, Barloworld, Caterpillar and Supercare Group, among others.
“Not forming part of the Toll Gate system, and as a result not as affected by increased travel costs as other areas, Isando also stands to benefit from upgrades in micro and macro infrastructure - both currently and in the future,” says Klimek.
These upgrades include the re-tarring of Isando Road and re-tarring and widening of other roads in the area; improvements to nearby highways which include re-tarring and widening of the roads and improvements to on- and off-ramps; and the possibility of the development of feeder routes to industrial areas once the remainder of the Gautrain route is open.
“Bearing these advantages in mind, as transport costs and access to key routes are critical factors in any manufacturing and/or distribution business, Isando again comes to the fore. From a logistics perspective, the area has easy access to major traffic networks linking to Midrand and Pretoria (R21), Mpumalanga (N14) and the N3 leading to Johannesburg’s Southern Suburbs and running through to KwaZulu-Natal. Of importance to employees is the fact that Isando is also in close proximity to Rhodesfield Gautrain Station for those commuting to work.
“The current demand is mainly in the size range from 500-1000sqm as well as for larger warehousing space up to approximately 5,000sqm and above. Enquiries include those from light manufacturing and local and international distribution/logistics companies seeking to consolidate operations in central areas for increased cost effectiveness, as well as storage and distribution operations wanting to be located near major highways and the airport. Another key factor for such manufacturers is the availability of sufficient electricity – which Isando offers.” – Eugene Brink and Cape Business News
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