2022 started with a rush of interest in the industrial property market and later led to a significant uptake of stock indicating that the market is indeed showing signs of returned positivity with restrictions being eased and business optimism returning, albeit during a challenging economy. Out of all the real estate classes the demand for modern, practical, and efficient industrial space still wins the day.

Most of the interest and uptake has been for warehousing and logistics, from mini units to distribution centres.  We are noticing a lot of expansion, consolidation, as well as mergers amongst logistics companies as smaller operations are absorbed into larger ones.

Developers are not disappointed at the rate of take up of spec developments some of which have been secured before completion, or just after, leading to more developments and an increased demand for land especially in certain pockets where the demand is. Not to mention the massive turnkey/tenant driven developments currently underway for blue chip tenants e.g. Eastport Logistics Park’s 36 hectare JV with Fortress and Pick ‘n Pay.

Some examples of significant vacancies filled since the beginning of the year on the East Rand and North East:

Meadowview – 7 904 m² (spec development)

Lords View – 12 200 m² (spec development)

Longmeadow – 13 088 m² (existing warehouse)

Jet Park – 7 000 m² (existing warehouse)

Linbro Park – 4 881 m² (existing warehouse)

Greenstone – 9 083 m² (existing warehouse)

Longmeadow – 6 358 m² (existing warehouse)

Isando – 11 250 m² (existing warehouse)

Pomona – 10 723 m² (existing warehouse)

Spartan – 8 429 m² (existing warehouse)

These are just some of the bigger facilities, the demand for warehouse space across all sizes in general is solid and some industrial parks are now 100% let for the first time in years. In fact Fortress, one of the largest listed property funds, recently declared their lowest vacancy rate in 4 years.

It should be noted that not all deals are necessarily to new tenants and there has been some ‘juggling’ with landlords moving existing tenants within their portfolio’s. Some deals have been direct deals between landlords and tenants, whilst the balance have been concluded via brokers.

There has also been an almost ‘dilution’ of listed stock because of funds disposing of assets to either tenants or own occupiers or smaller investors as tenants and purchasers alike secure their space.

As vacancies fill, asking rentals will increase and we are noticing that already with asking rentals on existing stock exceeding the R55/m² mark to R60/m² plus. In terms of new developments building prices continue to rise and consequently developers need to ask more than the R65/m² nett and prices are starting to reach R75/m² nett, depending on spec and area.

On the negative side interest rates are beginning to rise which means the cost of finance increases and cap rates/yields will also be pushed up.  In general however we expect the demand for industrial property from both a leasing and sales perspective to remain strong throughout the year, specifically the demand for warehousing.

Should you be considering buying or leasing warehouse space or are looking to invest in the market then contact us today to assist you.