Warehouses in SA are adapting to changing needs of e-commerce
These requirements have seen warehouses evolving over the decades in response to the growing and changing needs of commerce, e-commerce and manufacturing processes.
Explaining the history of warehousing in the country, property economist Erwin Rode, of Rode & Associates, says these properties have gone through three generations: before and shortly after World War II; from the 1960s; and the past decade.
In the first period, he says warehouses had low eaves of less than 4m, many support pillars, and often more than one storey. They were “adequate” in an age where goods were mainly manoeuvred by hand.
“In the 1960s, a second generation of warehouses developed. These were on ground level only and had eaves higher than 4m, with fewer internal pillars to allow for stacking, using pallets and forklifts.”
He says the second generation warehouses are still regarded as prime in contrast to the now-obsolete first generation warehouses.
“It seems warehouses do not age as fast as office buildings and malls. Another factor in favour of warehouses is that they are rarely built on spec, which makes their returns less volatile than those of office buildings.”
However, office and industrial properties have had similar total returns (income yield plus growth), and this is not expected to change. In the US though, warehouses are now worth more than offices.
Another impact on the warehousing sector is the ongoing growth of South Africa’s population and the need for infrastructure development, says Joshua van Zyl of Cape Industrial Property.
“On-going road upgrades and housing projects cause a trickle-down effect on the growth of logistics and warehousing.”
In a sector as broad and diverse as warehousing, it’s important to be ahead of the curve.
“Amazon and Alibaba, the global e-commerce leaders, are setting the trends in terms of warehousing and logistics. Things we can look forward to in the future include warehouse robotics, the rise of artificial intelligence in warehousing management systems, autonomous goods vehicles, and the blurred line between logistics and technology services.”
The vehicle industry in South Africa is also seeing a rising demand for industrial or warehousing solutions following digital trends in dealerships and customers undertaking their decision-making process online, says Cape Town’s Baker Street Properties.
Director of commercial leasing Dave Russel says Dealers Online, which specialises in the sourcing and distribution of vehicle or fleet assets, is “leading the way forward”, facilitating warehousing amenities in all the major provinces.
“As to be expected, innovative brands in this sector have a unique set of requirements such as considerable yard space, growth potential of the facility, and ease of access. Vehicle movement and pick-up services place an even greater focus on accessibility and location requirements.”
In the US, real estate investment trusts that specialise in industrial properties are outperforming those that focus on malls, residential rentals and office buildings. And it is all about e-commerce.
Online shopping still accounts for less than 10% of retail sales in the US but is reconfiguring supply chains and shaping the fortunes of warehouse landlords. Demand is especially keen in and around big cities, where online shopping has caught on fastest.
Those are the places – New York, Boston, Chicago, San Francisco and Los Angeles – where land parcels big enough for the latest warehouses and loading docks are the most scarce, and rents are highest. Online retailers require about three times the warehouse space of brick-and-mortar stores, and more sophisticated logistical services.
“E-commerce has taken a business that was already pretty solid and turbocharged it,” says Hamid Moghadam, chief executive of US industrial real estate investment trust Prologis.
In South Africa, Rode says malls have been the best performers over the past 40 years but they are going through a difficult patch due to excess retail space. – Additional reporting by Bloomberg