Picking Your Place

Despite challenges in the domestic and international markets, demand for Grade A warehousing in South Africa remains buoyant. But buyers are particular and want the right location, the right proportions, and buildings that meet technological and green needs.

According to Simon Wilkins, head of Global Corporate Services at consultancy Galetti Corporate Real Estate, the market can expect more technology changes in the short- to medium -term.

“These include partial and full automation in warehousing, which will improve levels of productivity, reduce labour costs and maintain a high degree of efficiency with increased supply chain speed. This function falls mainly with the occupier,” Wilkins says. “But landlords must meet specific base build criteria for this tech to be implemented”.

Tenants are increasing requirements for technology, efficiency and value engineering, he continues.

“Private distribution, 3PL, FMCG and mining sectors have all experienced growth, particularly over the last 6 to 12 months.

“The redevelopment and value engineering of older buildings is becoming a lucrative space for both occupier and landlord, as they can make areas more efficient at lower prices. For example, Inospace is leading currently in the cost/efficiency arena by offering the smaller occupier flexibility in signing shorter all-inclusive lease terms to help start-ups. Interestingly, a good international example of this in a parallel market is what global trendsetter WeWork is doing with office space,” adds Wilkins.

While the state of the domestic economy has been slowed by politics, a weaker rand and rising fuel costs, global growth has also slowed due to fresh geopolitical tensions. All this constrains a rebound in the development sector.

Growing demand for efficient building design

Leading developer Redefine Properties sees a drive for efficient and well-located centres despite the adverse outlook.

“The adversity places pressure on rental growth and drives demand for efficient, well-located facilities. There is growing demand for more efficient building design in well-serviced key nodes. Manufacturing tenants are under increasing pressure due to erratic demand, policy uncertainty and tension in the labour market. While this sector remains defensive, we are growing our market share and improving the quality through development activity,” comments Johann Nell, Redefine’s national asset manager, Industrial.

“There is a huge demand for hi-tech industrial warehousing with modern office space included in the design as well as for generic warehousing that caters for storage, distribution and light manufacturing,” he says.

In Gauteng, Redefine holds 90 per cent of S&J Industrial Park located along the N3 between the Geldenhuys and Elandsfontein interchanges, a joint initiative with Abland Property Developers. The greater development, in this prime location, spans 210ha and caters for a variety of industrial and commercial uses. It offers visibility and convenient access from the main freeways, making it ideal for logistics, manufacturing, warehousing and distribution and big-box retail.

A new R50-million public road extension and services was completed in 2018 and the construction of the first precinct, Ganymede, is underway with several parcels of land being readied. This includes the outright sale of land, turnkey development sale, joint venture development deals and bespoke developments for leasing, all totalling over 150 000m².

“The interest in S&J validates our vision for the project. We have created a unique opportunity for businesses looking to operate from an efficiently designed, well planned and well managed, secure industrial park within an established node,” says partner, Jurgens Prinsloo, managing director of Abland Property Developers.

Another example of a demand-driven development is the Cornubia Ridge Logistics Park by Fortress REIT. At an investment value of R1-billion, this is a joint venture between Fortress and M&F Giuricich Developments.

“The Cornubia Ridge Logistics Park is ideally located on the main routes between Durban and the fast-growing Durban North region and is also in close proximity to the Dube trade port — a special economic zone — as well as King Shaka airport,” says Konrad Kohler, development manager at Fortress. “It has great visibility and access to the N2 and all its major feeder roads and the already functioning greater Gateway development.”

Recently, major South African retail chain Makro opened its 22^nd warehouse store at the Cornubia site, a reportedly “state-of-the-art” 19 000m² store.

According to Kohler, there is reason for optimism in the logistics space. While admitting that there had been some impediments to the growth of this sector, there remained reason to expect further growth because of the ongoing need for the supply and distribution of products to the South African market.