There has been very little change in the industrial property market in the greater Cape Town area in the past 12 months according to annual survey conducted by Cape based, Baker Street Properties.
The market remains tenant driven with a slight improvement in rentals. The average gross rental for existing space has marginally grown to R32.00/m from R30.00/m where it has languished since 2009, according to Andy Beddow director of Baker Street Properties.
“Our current records reflect an overall vacancy of ± 611,500 m² in the greater Cape Town area, 69% of which is in industrial buildings over 1,000 m² in size (or 418,000 m²),” said Beddow.
“Development of new facilities for the larger users, although limited, is being driven by redundancy of existing space and a lack of available modern A Grade facilities. With the drivers of the Cape Town industrial market being predominantly the retailers and 3rd party logistics – their requirement is for high volume distribution centres with raised loading and extensive yard areas to accommodate large commercial vehicles. However new development gross rentals average R60.00/m plus, double the existing property rentals.”
“Tenant driven new development continues in Airport City, at Sheffield Park (bordering Lansdowne Road and the N7) and Brackengate off the R300, while Improvon have been successful developing large warehousing on risk in Montague Industrial Park (bordering Plattekloof and Koeberg Roads),” adds Beddow.
During the period surveyed, there was no discernible manufacturing take up – even perhaps some shrinkage. There is however interest from developers wanting to take positions in the older central industrial areas, such as Epping, Parow and Bellville, where prices are reasonable for older almost redundant properties that can be held until it becomes viable to redevelop the site for a large tenant.
The survey also revealed that annual escalations remain 7,5% to 9% although the latter only for shorter term leases. Longer term leases attract more favourable escalations. Average land values have shown a marginal increase to around R1,050/m² (Excl. VAT). The more popular areas being Airport City, Brackengate and Sheffield Park. There has also been renewed interest at Capricorn Park in the Southern Suburbs.
Beddow concludes, “Despite the vacancies in the market we have minimal industrial buildings for sale. Reasonably priced buildings tend to sell quickly. From a tenants point of view, should you find your lease expiring in the next 6 months, please make contact with us to explore what options are available, as we have some very keen landlords available ready to negotiate very attractive rentals.