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Cape Town industrial rentals improving

08 Apr 2015

The industrial property market in the Greater Cape Town area continues to show signs of improvement in some sectors. 

The increase in gross rentals has been driven by recent new developments, which now command rentals of more than R60 per square metre, excluding VAT, and the conversion of older redundant factories into more suitable distribution facilities.

This is according to Lloyd Nussey, a director of Baker Street Properties, who says gross rentals for existing facilities have increased slightly and are now averaging R42 per square metre, up from R40 per square metre, excluding VAT, six months ago, with escalation rates averaging 8% per annum. 

This increase has been driven by recent new developments, which now command rentals of more than R60 per square metre, excluding VAT, and the conversion of older redundant factories into more suitable distribution facilities. 

He says a sizeable amount of larger space has been developed and occupied since their last survey six months ago and there a number of buildings under construction with others in the planning stages. 

Areas most active in terms of building activities or future plans are Epping, Joostenberg Vlakte, Montague Gardens, Atlas Gardens, Rivergate, Sheffield, Blackheath, Bellville, Brackenfell and Capricorn Park. 

Nussey says at Baker Street Properties they use their extensive database to track the industrial property vacancies across the greater Cape Town areas, including buildings which will become vacant within the next six months. 

Based on this data, he says they have seen a decrease in the vacancies in the greater Cape Town area from 403 015sqm in August last year to 386 652sqm, a decrease of 4.23% measured in February this year. 

Although this is a much smaller decrease compared to the previous six months, it is encouraging, as it shows a continuing downward trend, which will in turn begin to nudge average gross rentals upwards, he says. 

Other statistics from Baker Street revealed that current vacancies reflected in facilities larger than 1 000sqm for the period were down from 277 167 in August 2014 to 276 173 in February 2015. This decrease represents a total of 71.4% of the overall current vacancies in the Greater Cape Town industrial market. 

For industrial properties between 500sqm and 1 000sqm, the vacancy figure remains at 58 928sqm in February this year, representing a slight increase in the previous period and 15.2% of the current overall vacancies. 

There has been a big improvement in the market for premises smaller than 500sqm, where there has been a vacancy reduction of 25.3% for the overall industrial market, from 64 596sqm in August 2014 to 51 551sqm currently. This means that vacancies for this sector are down 13.4% to February 2015, which is encouraging. 

Nussey says a lot of smaller companies have expanded to larger premises, while some larger companies have consolidated their operations into one large warehouse. A continuing trend is for movement in the logistics companies and warehousing sector, with little in manufacturing. 

Baker Street has found that most enquiries received from prospective tenants are for premises ranging from 800sqm to 1 200sqm. There is also strong demand for owner-occupiers wanting to buy and own their properties. Some of the larger developments taking place currently are in Montague Gardens, Blackheath, Airport Industria and Capricorn Park. 

From a tenant’s point of view, should you find your lease expiring in the next six months, he says to contact them to explore what options are available.” 

“We have seen a marked increase for tenants engaging in our services to assist in renewing their leases. Working on a fee based on a percentage of savings achieved, we find various avenues to add value during these negotiations on behalf of the tenant.” 

Nussey says as a landlord, if you require assistance with tenant retention and need market knowledge and negotiation expertise, to contact them to assist. 

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