The industrial market, however, is the current star performer, while commercial property has also seen high returns.
Growing industrial sector
One of the companies reaping the benefits of South Africa’s booming property sector is Metboard Properties, South Africa’s largest, focused industrial-property fund managed by the Investment Property group. The company’s property port-folio, valued at R1,9-billion at a market capitalisation of R1,4-billion, comprises industrial parks, mini units, warehouses, light- and heavy-industrial property and retail warehousing property. Metboard executive director Estienne de Klerk tells Engineering News that especially retail warehousing, consisting of motor showrooms, motor-related product retailers, tile and bathroom showrooms and factory outlets, is growing at a tremendous pace. Motor sales and related products and services impacted positively on industrial-property performance. Increased property develop- ment and investment have also had a positive spin-off for industrial properties, especially for tenants in home d�cor, hardware furnishings, fixtures and fittings. South Africa’s top-performing listed property-counter of 2005, Redefine Income Fund, is another company that is also experiencing a tremendous upswing in the property market. Redefine, which is not only focused on industrial property, but also commercial and retail, is expecting growing prospects for the industrial sector and portfolio manager Grant Abrahams reports that the demand for industrial property has led to excess stock being taken up, resulting in a space short- age.
All the traditional nodes, such as Johannesburg, Durban, Cape Town and Port Elizabeth, are currently starting to experience industrial space shortages. “We see an opportunity for the redevelopment of old warehouses and have identified land in Isando, Kempton Park, to develop,” he says, adding that Red-efine is going to develop 35 000 m2 of industrial space in this area on a demand-driven phased basis.
Indicative of an improving market, vacancies have also declined and, as a result, pushed up rental prices. In prime locations, gross rentals are reaching R35/m2 for warehousing and R75/m2 for A-grade office space.
Metboard reports that the company’s vacancy rate was ten per cent three years ago, but that it is currently less than two per cent. It is not only a declining vacancy rate that is pushing up rentals, but also increasing building costs and the shortage of proper land for industrial development. Metboard is currently involved in a demand-driven industrial-property development on the East Rand, Gauteng.
Executive director Tyrone Goven- der explains that the company is developing a 5 000 m2 office and yard facility for the Swedish truck manufacturer, Scania.
Owing to Scania’s being in an expansion phase, it required an additional facility and approached Metboard, which identified one of the properties it currently owns, the 63 000-m2 Hilltop Industrial Park in Elandsfontein, Gauteng, as an ideal development spot. Demolition work on the R12-million development will start early next month and practical completion on this functional facility will be reached on October 1, he reports. De Klerk adds that Metboard only undertakes demand-driven property development, as Investec Property group manages its assets.
“Investec Property group develops the properties and we buy the assets from it,” he explains, adding that this enables Metboard to have access to a wide range of expertise and resources within the Investec group.
Rural areas show investment opportunities
Apart from growing its industrial-sector property portfolio, Redefine is also seeking other innovative ways of achieving further growth in the current market. In terms of rental income streams, the company has a low vacancy rate of 2,8% across its portfolio, comprising industrial, commercial and retail properties, and is now looking at other ways of expansion, as opposed to only property acquisitions, such as new developments and redevelopment opportunities.
Abrahams tells Engineering News that Redefine is looking at new developments and opportunities in previously-disadvantaged areas and rural parts of South Africa. He reports that Redefine is also focused on the redevelopment of A-grade properties in decentralised areas, such as Rosebank and Sandton, in northern Johan-nesburg. “Our strategy is also to focus on our existing assets in terms of life-cycle regeneration,” Abrahams says. The company will invest around R15-million in upgrading The Posthouse and Post House Link, formally Bryanston Wedge, and transform these two centres into a vibrant retail and leisure node.
Together, Posthouse and Link will function as one entity and will cater for young professionals and families within the surrounding residential areas.