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Industrial occupiers are rental sensitive, but rents are rising as the market battles to meet demand

Durban’s industrial property market is boasting healthy developer confidence with more than 120000m² expected to come onto the market over the next 12 to 24 months.

This is despite South Africa’s struggling manufacturing sector, states JLL’s Durban Industrial Market Report for Q2 2017.

The report also reveals developments continue to lead rental growth, with developments coming in at R75/m² and above. In addition, the take-up of midi and maxi units – 7000m² to 25000m² – improved in the last quarter, although this was mainly driven by the PX warehouse fire earlier in the year.

However, despite this healthy confidence in the city, the report says occupiers are still “rental sensitive”, and even though supply in eThekwini has seen an increase, rents remained flat in Q2 compared to Q1.

Dave William-Jones, of FWJK Developments, says the shortage of industrial land in Durban is pushing prices  “way above” comparative opportunities in Joburg and Cape Town, and this is driving rents higher. 

“This can also force industrialists to look at relocating to industrial parks which offer land at more affordable prices.” He says there has been “steady demand” for industries to relocate to the northern corridor, and the company is “witnessing this strongly” in its mini and micro
factory development divisions. 

“The primary drivers appear to be a shortage of serviced industrial land on the northern
corridor which has resulted in industrial expansion north of the Umgeni River. 

The smaller industrialists tend to want their new factories closer to where they live on the northern corridor to limit travelling, while the same time being close to a large skilled and semi-skilled labour pool.” 

Echoing the JLL report which says the outlook for KwaZulu-Natal’s warehousing and
logistics sector is optimistic because Durban “gains from trade activity which will recover in time”, Johann Nell, national industrial
asset manager at Redefine Properties, says: “Durban is SA’s premier port city for exports and imports, and the city’s industrial sector
continues to remain strong despite a drop in manufacturing and a weaker economy.” 

Ushukela Industrial Park was Redefine Properties’ first development inside Cornubia. It comprises 27 modern midi-units and measures approximately 27 000m². Picture: Redefine Properties

He says the city’s logistical advantages
“continue to draw interest”, and demand is therefore likely to remain strong for additional industrial space despite delays
in bringing the Durban Dig-Out Port on-stream. 

“Of late we have seen supply chain tenants consolidating and moving away
from Zone 1 – around the port – to seek better quality facilities with the security of long leases. Demand for quality
industrial product which offers better configuration and operational efficiencies remains robust.” 

Predicting the market’s
future performance, Nell says industrial property is less susceptible to real estate cycles compared to commercial property
like office space, and economies rely on supply chain infrastructure. 

Durban remains a key location for distribution centres, he says. 

“There is about 2 million m² of developable land for industrial use available from Dube Tradeport in the north to Prospecton in the south, including Hammersdale, close to Cato Ridge.” William-Jones says the shortage of industrial land will trigger private sector establishment of new industrial precincts along the northern corridor.

Industrial property vacancy rates by node:

Umbilo/Mobeni21.30%

Durban North20.50%

Pinetown4.40%

Other Durban1.30%

Data source: SAPOA

Industrial property Q2 gross rentals
by grade: 

Grade A – R65/m² 

Grade B – R55/m² 

Grade C – R50/m² 

Data source: Lambie Spark & Associates

Property360

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