Redefine Properties says Cape Town faces a significant shortage of quality industrial property assets due to a scarcity of land in the metropolitan area, especially larger pockets of land.
According to Johann Nell, head of development and industrial asset management at Redefine, the City of Cape Town remains a major centre for development and economic growth for the group, with tenant-driven industrial properties a priority in all major metros..
“Demand for new developments remains high and supports Redefine’s focus is to continue to invest in both brownfield and greenfield developments in the commercial, industrial and retail sectors,” said Nell.
Redefine is a real estate investment trust (Reit) with a diversified portfolio in SA and Poland, where it has exposure to retail and logistics sectors.
The company said demand for space at its Brackengate 2 Business Park continues to grow, thanks to a variety of stand sizes on offer with a high concentration of stands covering about 1ha.
In 2016, Redefine and VDMV Property Holdings partnered to develop Brackengate 2 by converting unproductive farmland into serviced industrial and business-zoned stands suitable for logistics and warehousing facilities.
Nell said the development was proving popular because of its convenient location with easy access to the N2 and N1 freeways as well as the Cape Town International Airport.
He said the joint venture has invested R64.5m on developing the Herholdt’s Group expansion, which scheduled for completion during the first quarter of 2024. The development includes a 4,927m2 warehousing and 820m2 office space.
The Herholdt’s Group joins Massmart, GEA Group, Montague Snacks, Bidvest, Teraco and Amazon Web Services at Brackengate 2.
Tenant-driven developments
Gerrit van den Berg, Western Cape head of developments at Atterbury, an unlisted property company, said demand for industrial property in Cape Town has decreased slightly over the past year.
“Though vacancies have reduced substantially over the past two years, there is very little demand for new builds due to increase in construction prices and [high] rentals,” Van den Berg said.
Atterbury has developed mixed-use, commercial, retail and industrial properties in SA, across Africa and Europe including Castle Gate, Longmeadow Business Park, Newtown Junction and Jewel City.
It aims to undertake mega-developments such as mixed-use precincts and business parks that agile to immediate market forces and demand.
Atterbury is developing King Air Industria and Richmond Park in Cape Town, its premium logistics and warehousing parks. Companies including Takealot, Rubicon, WeBuyCars, The Courier Guy and Morgan Cargo have taken occupation of these parks.
Van den Berg said the company doesn’t undertake speculative developments, and with limited land supply in Cape Town they have the best industrial land to develop for the next few years and can wait for the right deals.
He said at King Air Industria, a 54,000m² distribution centre for Truworths is on track for completion in November.
In August, Atterbury broke ground for the new home of sustainable Solar MD at Richmond Park.
The facility will serve as the consolidated headquarters for the technology company, enabling it to streamline operations and meet increasing demand for energy storage solutions through a 10-year triple net lease agreement.
On completion, Solar MD’s 12,500m² premises will comprise of a 10,250m² warehouse, 2,200m² of office space and a 250m² showroom.
Van den Berg said there has been a lot of activity at Richmond with the completion of the Takealot distribution centre and the 6,000m² facility for Brights Hardware, which is due for completion in October.
“We are busy with the planning to expand the Richmond Corner shopping centre with 3,200m² of additional gross lettable area, and we anticipate construction to start before year-end,” he said.
Rentals
Average rentals were difficult to determine as buildings vary substantially in size, height, office size, building use and tenant requirements, he added.
Rentals had increased by about 10% as a result of higher construction costs and interest rates. Normal escalations are about 6.5%-7%.
“Land remains scarce in Cape Town, and we are comfortable on how we are positioned to accommodate the demand, especially on the bigger requirements of 10,000m² and more,” said Van den Berg.
Nell said Brackengate 2, with its new modern buildings attracts rentals of R95/m² and more.
The tenant retention rate by gross monthly rental is nearly 94% across the portfolio, with a weighted average lease escalation of 6.5%.
From a growth perspective, Isuzu distribution centre at S&J measuring almost 23,000m² was completed at a yield of 10.12% in March 2023, he added.
“We are particularly excited about the major refurbishment we have under way at Black River Park, Observatory, and the redevelopment of Golf Air Park in the Airport precinct that is currently in design phase,” Nell said.
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