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Office space repurposed: How derelict office blocks are being transformed into e-commerce and distribution hubs

12th November 2020

     

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A derelict office block in a predominantly industrial part of Wetton, in Cape Town’s Southern Suburbs, has been given a new lease on life and converted into a multi-tenant industrial park. Called Wetton Works, this new space helps meet the growing demand for smaller distribution centres located closer to residential areas, as e-commerce gathers momentum locally and globally. 

“Online shopping was just gaining momentum in South Africa when the pandemic hit, disrupting value chains and logistics around the world. In anticipation of the impending shift towards so-called micro-fulfilment centres with only the most popular products that can be replenished easily, we began aggressively pursuing a strategy of setting up small-format, industrial-based parks targeting urban neighborhoods,” says Rael Levitt, CEO of Inospace.

“The economic and social effects of the COVID-19 pandemic has accelerated the decline of offices as an asset class. The future of offices still depends on how the pandemic plays out and whether large numbers of office workers will head back to work, but the picture is already becoming clear with many large office blocks in prime locations standing empty. Estimates for capital of office property values in 2021 range from a fall of over 20% to 25%,” says Levitt. 

The Wetton Works business park is a case study in repurposing an office block into a small-format logistics park servicing 35 tenants, ranging from food production to online retail. Not only is it Inospace’s first park in the Southern Suburbs, but is the first time an office block has been changed into a multi-let industrial park.

“The pandemic has been called an accelerator, fueling trends that were already on track. Industrial is the prime example. The market has, in many ways, been a beneficiary of the pandemic. On the other hand, office and retail assets were already set for major changes, and now those changes are hitting harder and faster than anyone expected,” says Levitt. “Throughout the world investors are asking how to repurpose and reinvent emptying shopping malls and office blocks. The concept of converting empty office blocks into apartments is not new in South Africa but we see an opportunity of converting vacant buildings into industrial sites. A big opportunity exists and Wetton Works is our live example of how it is possible to do that.”

Wetton Works is located on a site that was, until acquisition, standing vacant. The derelict property had become an eyesore, and was frequently vandalised, much to the chagrin of the local business community. Now this site in Mercury Crescent has been repurposed as a business park that offers tenants a variety of services, including a staffed reception area, meeting rooms, a free business hub and a trendy coffee shop.

“Our first Southern Suburbs business park is a case study of change of use. Refurbished, the business park now provides an opportunity for a ready flow of goods to retail locations within short distances, for final-mile delivery. With their relatively low-cost structure, these business parks provide companies with the ideal avenue to introduce new products and brands with relatively low investment,” says Levitt.

“Every day, Inospace sees many of the goods that make modern life possible flow through our business parks. These days many goods may never see the inside of shopping centres, and many administrative workers do not need to be based at an office but every item needs to be manufactured, stored, or distributed somewhere. The increased demand for Inospace's parks and spaces demonstrates how much multi-let industrial real estate has expanded and will continue to do so.”

Edited by Creamer Media Reporter

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