Industrial property market in Cape Town continues to grow

Montague Park

This is according to the latest Cape Town industrial property market report published by Lloyd Nussey from Baker Street Properties, stating that "there is a continued increase in industrial activity throughout the greater Cape Town area compared to March this year".

Summary of key indicators:

• Average gross rental: increase to R44/m² (up from R42/m² since March 2015).
  
• Average gross rental for new developments: consistent at R60/m²
  
• Escalation rates: consistent at 8%
  
• Overall Vacancy rate: reduction of 2,76% from 386,652m2 to 376,256m²

Significant building and development activity

A significant increase in building and development activity is being seen throughout the greater Cape Town area compared to previous years. In areas where new developments have taken place, notably Montague Gardens and Airport, vacancies of over 1000m² have increased considerably. Furthermore, new industrial nodes such as Rivergate, and Brackengate are also showing signs of good activity. However, Nussey states that "there has been very little change in vacancy rates for premises for the categories less than 500m² and 500m²-1000m², with the greatest contribution to stock supply to larger premises".

Demand driven by efficiencies in modern buildings

There exists good demand in all major areas for owner occupiers and from an investment perspective. However, a major trend is the increased demand for modern buildings and developments motivating relocation: "We are seeing a trend in demand for newer buildings/properties motivated by increase in overall efficiency, and companies are increasingly recognising the cost benefits of modern buildings over the long term." Nussey further highlights traffic and accessibility as other key driving factors motivating relocation.

Furthermore, a key trend is also evident in the logistics industry as logistics operators are expanding their property portfolio to reflect the right balance between property and position. The further decline in manufacturing is seeing an increase in the number of buildings reconverted for logistics purposes.

Various new developments are positively contributing to supply

Nussey identifies main areas experiencing building activity being Montague Gardens, Epping, Brackenfell, Blackheath, Bellville and Airport "Completion of new developments are seeing building work valued at over R622m, with approvals for new developments valued at over R1bn". Nussey concludes that the greatest number of vacancies exist for properties over 1,000m².

To download a copy of the report, go to blog.baker-street.co.za.