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South Africa’s Industrial Property Sector Remains Consistent

New developing trends and expansion in South Africa’s commercial market during 2013 compared favourably with global performances

 Industrial Property Highlighted

The 20.9% investor returns on light manufacturing/low grade industrial property during 2013 were highlighted in the Investment Property Databank (IPD) 2013 report released earlier this year. Named as the best money-spinner for local investors, this segment also outperformed super regional shopping centres larger than 100 000m² with returns of 19.4%, and inner city offices at 12.7%. Total returns of 15.3% on retail, office and industrial that reached a six year high of 15.3% were based on the report results of 60% of a sample of 1 354 professionally managed investment properties worth R213-billion. South Africa was shown as the most lucrative commercial property investment destination among 16 countries whose 2013 results were released simultaneously.

 Asset Management Skills

The main reason behind these impressive performances, according to local analysts, is the asset management skills of South Africa’s commercial property owners. Executive director of IPD SA Stan Garrun commented on the sector’s impressive performance: “Property fundamentals continue to demonstrate the sector’s advantages, providing investors with consistently robust and diversified returns. Active asset management and a singular focus on sustainable net income growth have once again shone a light on South African property.”

Positive Returns for Industrial Property

Local financiers view the positive returns for investors as an indication of the professional nature with which the local property industry is managed. The sector’s response to market demands, where exceptional innovation and entrepreneurship creates a competitive edge, has long been a trademark of this sector. Trends are pointing to more quality properties being developed in convenient locations, where customised offerings enhance service levels. Once cemented in, long-term commitments provide greater ease of inflationary adjustments, where good maintenance and upkeep improves capital growth on properties.


Industrial Sector Trends

The latest trend of multipurpose developments with combinations of industrial and office space creates a varied tenant base, says Ken Reynolds of Nedbank Corporate Property Finance Gauteng. He says: “An increasing number of developers are exploring multipurpose developments, as the trend creates new business hubs that prove popular and convenient for South Africans and continue to drive the economy.” A typical example of this trend is the multibillion rand mixed-use Route 21 Corporate Park that is one of Irene’s biggest mixed-use developments with an industrial component. With a varied tenant mix, it offers secure access to a high-tech business park with A-grade offices, industrial and warehousing space, and a small retail element.


Another trend seeing increased demand for sustainable building and development is large companies which invest heavily in the delivery of high end quality specifications in central locations, as seen at Improvon’s R192-million Gosforth Business Park. This project, says Reynolds, offers ideal exposure just off the N3 highway that aims to raise the standards of all the other business parks and estates developed along this route from Johannesburg to Pretoria. Imrovon Group’s Jorge da Costa says that although the industrial market is still experiencing significant vacancy rates, demand for optimally located and affordable industrial space is high, while a lot of the remaining vacancies are limited to older, lower quality or specification stock.


Increased demand for large scale mixed-use development is behind the multibillion rand Cornubia Industrial and Business Estate development in KwaZulu-Natal. This central location, in a strategic position just 15km from the new King Shaka International Airport, is less than 5km from Umhlanga’s Town Centre and Gateway precincts and is conveniently accessible from the N2 freeway, M41 and R102. Cornubia is planned as an environment-friendly and eco-sensitively designed development that makes provision for light industrial use, including warehousing, distribution, service-oriented business and offices. According to Tongaat Hulett Developments, occupants will benefit from safety and security, traffic accessibility, environmental sustainability, attractive landscaped public spaces and close proximity to labour opportunities north of Durban. A large portion of the business estate comprises a landscaped and rehabilitated wetland and open space system.


The registration last year of the non-profit entity, the Cornubia Industrial and Business Management Association (CIBEMA), will serve to take responsibility of the management and maintenance of public and visible private spaces. The safety and security of this environment is set to enhance the overall values of properties in the estate. It is also a prerequisite for owners and buyers to become members of CIBEMA, which will be liable for levies payable to the association. This business and industrial development also intends to integrate disparate communities and add greater value and opportunities for local residents in the area. The long-term aim is for the development of a flagship residential project with a total of 24 000 homes, of which 15 000 are proposed for subsidised housing development by the municipality in partnership with the province, with the balance planned for residents in the affordable housing income groups.


Affordability of constantly increasing utility costs is also seeing green landlords attracting more quality tenants. The inhibiting cost of water and electricity is motivating greater all-round environmental awareness in an industry whose operational habits have historically been subject to wide criticism. Limited budgets within small property companies and private landlords is driving leasing agents and developers toward cost-reducing measures, to optimise their tenant base from the earliest stages. Long-term savings of reduced energy bills are seeing more developers installing energy-saving mechanisms from the outset, while owners of older buildings are increasingly retrofitting and upgrading to harvest daylight and rainwater. Foreign investors are not deterred by the initial capital outlay required for double glazing installations, which has long been considered an excessive luxury by local developers.

 Supply and Demand

Top performing leasing agents are well accustomed to catering for the changing needs of large tenants and property owners by way of custom solutions, says Clive Williamson of Broll Properties Gauteng. This is illustrated by growing demand for practical yet vitally important operational solutions within the logistics industry. Top end multipurpose storage and warehousing facilities within close proximity to airports and harbours are required to offer generous warehouse stacking heights and convenient access points. Positive change and steady growth within the country’s industrial sector offers sound local and foreign investment opportunities.


“An increasing number of developers are exploring multipurpose developments, as the trend creates new business hubs that prove popular and convenient for South Africans and continue to drive the economy.”


Words: Anna – Marie Smith

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