New property developments add resiliency to industry in face of Covid-19

3rd August 2020

By: Donna Slater

Features Deputy Editor and Chief Photographer

     

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JSE-listed diversified real estate investment trust (Reit) Redefine Properties says accelerating trends like e-commerce and data centres are adding resiliency to industrial property against the backdrop of the Covid-19 pandemic. 

The company points out that, as people’s daily lives move online, the data centre is fast becoming a key asset for service providers, and that demand for data centre space continues to grow in step with technology, which has touched every aspect of modern life and business.

Redefine industrial national asset manager Johann Nell says that, while online sales (R14-billion in 2018) still constitute a fraction of what South Africans spend in malls, online shopping has shown exponential growth and this has had a direct impact on real estate demand.

“The promise of same-day delivery or overnight shipping, a benchmark in fulfilment, requires massive warehouses to be situated close to communities and these are, in many cases, larger than traditional warehouses.”

He adds that the trend in demand for data centres is driven by key changes like remote working and a rise in e-commerce and on-demand streaming services, mainly as a result of the pandemic.

“Like e-commerce, the big data phenomenon is not new, yet, it was not until the pandemic that it started to manifest itself in the real estate sector.”

Two of Amazon Web Services’ three availability zones in Cape Town are situated at Redefine’s Brackengate 2 and a new one at the R3.5-billion Atlantic Hills business park.

The Atlantic Hills precinct is situated on the Potsdam interchange, aligned with the M12 extension with immediate access onto the N7. The 45 ha park has rights for industrial and commercial uses and offers prospective tenants and investors space ranging from 600 m2 to 40 000 m2

Nell says the industrial property sector stands to benefit from the huge growth in data consumption, as well as the Internet of Things.

“We believe the remote working trend is going to be triggered more widely across other industries and that’s going to drive the need for very strong data centre capacity. Today you can conduct a face-to-face meeting with anyone, anywhere by simply clicking on a Web application and even record the conversation.”

The rollout of fifth-generation networks is another positive development that is set to promote growth in the data centre market, according to Redefine.

The promise of artificial intelligence can only be actualised when data centres can store, process and analyse data faster. These innovations bode well for industrial property and distributed data centres.  

Redefine’s projects like Atlantic Hills and Brackengate 2 in Cape Town and S&J Industrial Estate in the east of Johannesburg offer purpose-built warehouses, vacant land for investors, as well as high speed Internet connectivity. These factors seamlessly fit into the growing Edge computing trend which seeks to bring computing services closer to the customer.

Meanwhile, Redefine also points out that servers use vast amounts of electricity and generate a lot of heat, which in turn requires extensive investments in cooling systems.

In this regard, he says in the current scenario, power is of genuine concern. “However, at our properties we are getting around it through better use of power and using it more efficiently. We are able to generate our own power through tri-generation methods that includes gas and solar as energy sources, thereby supplementing constrained grid access in certain nodes.”

“Like e-commerce before the data revolution, South Africa is still very much in infancy and a lot of work still needs to be done for data centres to emerge as an asset class. Long-term prospects depend on long tenure, security of demand and new age thinking. Deal structures will certainly involve a need for tailor-made solutions that benefit all.”

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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