Demand for new logistics and warehouse facilities in Gauteng remains high, especially near OR Tambo International Airport and the surrounding main arterial routes, as many occupiers look to consolidate their operations, according to Fortress Reit.
Growth in the sector is also being driven by e-commerce and companies seeking new or additional distribution and warehousing space, the JSE listed real estate investment trust said.
“Increasingly, small and big users look for space in secure logistics parks. With our development pipeline we are confident to meet growing demand,” Grant Lewington, national leasing manager for Fortress Logistics said.
Vacancies in the group’s SA portfolio declined to 0.1% at the end of October from 1.2% in June.
Fortress’s flagship asset is Eastport Logistics Park, northeast of the intersection of the R21 and R25, where construction of a 165,000m² distribution centre for grocer and retailer Pick n Pay is under way.
The R2bn project, including land and construction, is being developed jointly. Pick n Pay, which has a 60% share, is consolidating its Longmeadow distribution centres and three smaller facilities.
In September, Fortress announced a similar partnership at Eastport with Crusader Logistics to develop a R240m distribution centre for the logistics company.
“We will continue with our strategy of joint ownership with tenants as a means of lowering the capital required for our development pipeline, enhancing profitability and lowering risk,” said CEO Steven Brown.
Fortress will continue to convert logistics land into income-producing assets in a measured manner, Brown added.
Lewington said Pick n Pay and Crusader Logistics will join tenants including Teralco Logistics, Savino Del Bene, Takealot and On The Dot. Teraco JB4 Data Centre, one of the largest data centres in the country, also has facilities at EasportEastport.
At Longlake Logistics Park in Gauteng, Fortress has started a speculative development of facilities measuring less than 20,000m², with several tenant negotiations under way.
Longlake, near the N3 Marlboro Interchange, is home to Zest Weg and Cargo Carriers.
Westlake View, completed in 2019, is home to Bongani Rainmaker Logistics, which has occupied about 20,000m² since 2017 and was a tenant with Fortress at a smaller premises before expanding and moving to Westlake. Barron Clothing, which has just over 25,000m², is the other main tenant.
“It is always far much better for us to retain a tenant than attracting a new one,” Lewington said. “We have flexible leasing strategies that enable us to accommodate tenants when they consolidate their facilities or want to move to any of our parks.”
Longer leases of five to 15 years also bode well for the logistics sector. Some of Fortress’s parks are achieving average net rentals of about R85/m² with 8% escalation rates, Lewington said.
The Jones Lang LaSalle (JJL) SA snapshot for the third quarter shows that net rentals for high-specification logistics properties are in the R70/m² to R80/m² price bracket.
JLL said developers until recently had been absorbing building cost inflation, resulting in limited rental growth in the sector. However, these costs are likely to be will be passed on to tenants through provisions included in lease agreements that are concluded before construction of facilities.
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