The Durban port area is experiencing a steady demand for warehousing and logistics as ongoing supply chain improvements and proximity to Durban’s port — despite challenges associated with it — have resulted in a big drop in vacancy rates.
However, as land availability shrinks rental prices are on the rise, ramping up competition in the market, according to insights from commercial real estate and investment management group Jones Lang LaSalle (JLL).
Recent reports from the Road Freight Association (RFA) indicate that there have been many complaints and requests for assistance regarding issues at the Durban port. Transporters continue to face challenges with the booking system, as slots frequently show as “not available”, leading to delays.
This led to a reduction in the flow of cargo, said RFA CEO Gavin Kelly.
Speaking to Business Day, JLL research manager Mieke Purnell said the improved performance in this sector was partly due to port congestion. This issue had prompted many local retail manufacturers to relocate or near-shore their operations after having shifted production of goods back to SA from abroad.
“This trend boosts demand for modern facilities domestically, with strategically located properties remaining in highest demand from manufacturers,” said Purnell.
Demand for logistics, warehousing and distribution centres in and around Durban is expected to remain steady in the future, with the region having attracted significant investment from real estate funds and blue-chip corporations.
According to JLL’s second-quarter research report, prime rentals in the greater Durban region per month average from R99/m2 -R125/m2, with developers still able to pass on increased construction costs to tenants.
“New developments will continue supporting positive rental growth trends, as will continual development of transport infrastructure linking Durban and Johannesburg. Further negative rental reversions are forecast to take place, albeit at a slowing pace, and the region may face vacancies arising from business closures given the weakened economy,” Purnell said.
However, medium-term rental growth prospects look more promising, especially as the development pipeline diminishes.
Supply near the ports remained constrained despite the presence of many older industrial units. However, because most modern logistics facilities were purpose-built for specific tenants, rental prices were primarily influenced by construction costs, including land expenses and the developers’ profit. As demand rises, land costs in these prime locations increase, which is reflected in the rental rates, she said.
Improvements to the N3 corridor infrastructure are having a positive effect on industrial areas further from Durban Port, such as uMhlanga, Riverhorse Valley/Avoca and Hammarsdale.
Fortress head of investor relations and corporate finance Ryan Eichstadt said its Clairwood, Durban logistics park was largely tenanted by third-party logistics companies such as Sammar, ASL, Gantrans and Super Group.
“The logistics sector continues to benefit from demand for well-located, secure, high-quality logistics parks. Clairwood is fully let and has benefited from demand from a variety of users who have identified this area as strategic given the security and locality to the port and road infrastructure,” said Eichstadt.
He said high-quality, secure logistics space continued to perform well and had experienced buoyant demand over the past 12 months with very low vacancies across prime locations.
“Fortress has developed about 120,000m² of high-quality logistics space in the past 12 months, of which 100% was let before completion. Moreover, Fortress’s current logistics development pipeline consists of about 70,000m² in SA and 83,000m² in Poland, of which 85% is pre-let,” he said.
Purnell said sustainability, safety and security features were crucial for leasing success in this sector, especially in light of the various challenges the region had faced recently.
“Port upgrades and expansions often lead to increased cargo handling capabilities, driving demand for additional warehousing and distribution centres in the vicinity. In addition to the development of port infrastructure, upgrading the surrounding road networks also boosts demand for logistics facilities as suitable development land in the immediate vicinity of the ports becomes increasingly scarce,” Purnell said.
A prime illustration she referred to was the increasing attractiveness of Durban’s “outer west” industrial hub, which was being developed alongside the N3 development corridor and served as a key centre for intermodal transportation.
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