News from Business Day - Industrial property buoyant

THE booming industrial property market, which has experienced strong price and rental growth during this year, is expected to continue to perform next year on the back of a weakening rand.

Auction group Auction Alliance, a subsidiary of the Alliance Group, says it has noted huge buyer demand for industrial property, and strong prices obtained for improved industrial buildings and vacant industrial stands.

“Compared with offices and retail, industrial is by the far most buoyant nationwide,” says Rael Levitt, chief executive of the Alliance Group.

One of the reasons for the strength of the market is the weakening rand. “Because the rand is weakening it is fuelling the exports manufacturing sector, which in turn is causing demand for industrial space from industrial users looking to expand, as well as new entrants into the market.”

He says this is pushing up rentals which in turn is pushing up prices.

The Alliance Group’s auction and valuations division says there has been a major surge in industrial rentals with some metropolitan centres such as Port Elizabeth experiencing their best run in terms of rental growth since the 1960s.

Levitt says that in Durban there was on average 5,3% growth in prime industrial rentals for an average 500m² unit over the past 10 years. But over the past year there has been 25% growth in prime rentals in Durban.

He says Johannesburg experienced a 4,3% increase in prime industrial rentals over the past 10 years. But an increase of 23% was recorded last year.

In Cape Town, rental growth was 5,2% on average over the past 10 years. A 24,5% surge in rental growth occurred over the past year. Port Elizabeth recorded a meagre 1,8% growth in rentals over the past 10 years. Last year, a substantial 19,5% growth was recorded.

Levitt says nominal vacant industrial stand values are continuing to grow sharply upwards with values increasing in all major industrial areas.

“Several years ago we didn’t even bother to submit vacant industrial land to our auction catalogues because demand was so dismal. This has been the one sector of the South African property market that has seen the biggest turnaround in the past two years.”

Article by: Nick Wilson - www.businessday.co.za