Distribution And Warehousing: The Strong Survive - Business Media MAGS

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Distribution And Warehousing: The Strong Survive

It is easy to dismiss warehousing as the Cinderella sister of commercial property development. Gareth Griffiths looks at how that is changing with the increased requirement for A-grade warehouse space on a global scale.

A glance at the World Bank’s 2018 biennial assessment of the state of the global logistics industry shows that South Africa does not lag the world stage too greatly in this regard, although our ranking on the Logistics Competence Index (LCI) shows we are losing traction since 2017/2018 compared with the aggregate mean score over the immediate four assessment periods.

At position 33 on the list, South Africa is ahead of fellow BRICS partner states, Brazil, Russia and India, but slightly lags China.

South Africa does not fare too badly on the LCI, but Simon Wilkins, head of global corporate services at Galetti Corporate Real Estate, says a matter of considerable concern is that South African ports are facing pressure from other major ports in Africa due to Transnet being unregulated and uncompetitive when compared to ports up north.

Bringing It Home

Johann Nell, Redefine’s national asset manager: industrial, sums up the prevailing situation in the country: “South Africa’s markets have been weighed down on the domestic front by political headwinds, a weaker rand and rising fuel costs all contributing to a subdued economic outlook. At the same time, on the external front, slowing global growth due to fresh geopolitical tensions forced constraints on any prospects of a rebound. In between, we also saw the demise of many large construction businesses as well as increased pressures on the steel industry.”

Notwithstanding this, Nell says: “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.”

Wilkins agrees that the industrial sector has outperformed the office market over the past 12 to 18 months. But small occupiers are hard hit and the larger occupiers are rationalising their space. So, he sees the warehousing market remaining relatively flat into 2020, and growing as supply is taken up into 2021 with an increased drive for efficient and well-located properties at competitive pricing.

Over the past three years, Redefine has collaborated with multiple industry players. In Gauteng, Redefine holds 90 per cent of S&J Industrial Park (1 599 503m² developable land) located along the N3 between the Geldenhuys and Elandsfontein interchanges and is in the process of proclaiming the first township at the S&J Industrial Park, Jupiter  Ext 9 with a land size of around 118 350m². “We are selling 53 550m² to an owner-occupier, and developing 18 580m² for letting there,” says Wilkins. The company has partnered with Abland Property Developers in this venture.

“S&J will be one of the biggest industrial estates of its kind in Gauteng and South Africa. New roads will ensure value appreciation in the area and allow businesses convenient access to major freeways. The tremendous interest in S&J validates our vision for the project.

“We have created a unique opportunity in the market for businesses looking to operate from an efficiently designed, well planned and well managed, secure industrial park, within an established node,” says Jurgens Prinsloo, managing director, Abland Property Developers.

In the Western Cape, Redefine is invested in Atlantic Hills Business Park (balance of land available for sales and leasing is about 248 000m²), a new industrial precinct located close to Montague Gardens along the N7; as well as Brackengate 2 Business Park (balance of land available for sales and leasing is about 312 000m2), close to the R300/N1 interchange.

Efficiency From Centralisation, Technology And Rebalancing

Retail giant Shoprite Group comments that its ability to source product from any part of the world and distribute it to even the most remote corner has changed the face of modern retail in Africa.

According to the Shoprite media team, “the group’s supply chain is based on a central distribution model with more than 633 700m² of space across 28 distribution centres. Central distribution provides suppliers, both big and small, with a more efficient route to market as opposed to the traditional ‘direct-to-store’ model where suppliers incur additional costs due to extra mileage and time spent, as well as contributing to road congestion, on deliveries direct to stores”.

As a consequence, the group has expanded its distribution network into Africa, including a recently opened 4 700m² facility in Lagos, Nigeria occupied largely by Freshmark and owned entirely by the retail group in Nigeria. There are plans to establish new facilities and distribution depots in Zambia, Nigeria and Madagascar.

Fortress REIT says that its development of the Cornubia Ridge Logistics Park in KwaZulu-Natal forms part of a deliberate strategy to expand its logistics-focused asset base to about two-thirds of its total portfolio by 2020. This rebalancing process is aimed at capitalising on where it sees greater growth opportunities in the foreseeable future.

The land on which the Cornubia multiuse development is situated was purchased from Tongaat-Hulett by Fortress together with M&F Giuricich Developments in 2016. More than 1.2 million cubic metres of soil was moved to prepare the three building platforms located on the split-level precinct.

“We remain cautiously optimistic about the logistics sector,” says Konrad Kohler, the development manager at Fortress. “There is certainly space for further growth because even in a fairly stagnant economy there is still a need for distribution of products.”

Indeed, a major tenant within the Cornubia Ridge Logistics Park is Massmart, with a large Makro retail warehouse measuring 19 000m² located within the 28-hectare Cornubia Ridge Logistics Park. The building was completed in December 2018 and the client successfully launched its Cornubia store in March 2019.

Fortress also plans to build another 23 000m² speculative warehouse on the Cornubia Ridge Logistics Park’s second platform with construction likely to commence in the first quarter of 2019.

Image: S&J Industrial Park

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