Industrial tenants get a good deal

THE industrial property market favours tenants at the moment and the current market conditions could continue for the next 12 to 18 months.

Real estate service firm Jones Lang LaSalle said in an overview of Johannesburg’s real estate market this week that industrial-property tenants were favoured by reduced rentals in smaller units and shorter lease tenure with a reduced speculative development pipeline.

According to Grant Lewington, business development executive at industrial and commercial property solutions group Improvon, rentals have been under pressure for the past three years, with the yields of landlords declining.

“The industrial property market is experiencing a bit of a recession and the demand for property is low,” Lewington said.

Last year and 2010 were disappointing. This year might be better, but the possibility of global recession means “we will not see a big increase in the uptake of industrial space”.

According to Jones Lang LaSalle, prime gross monthly rent was R58/m² in last year’s fourth quarter, unchanged from the third quarter.

The group said take-up of industrial space improved somewhat in last year’s final quarter, particularly in Johannesburg’s eastern nodes.

“As uncertainty in the economy prevailed, older buildings with more affordable rentals in primary industrial areas proved more attractive,” Jones Lang LaSalle said.

But new developments continue to come on stream. In last year’s final quarter, 40000m² of industrial space were completed, including space in Improvon’s 32ha N1 Business Park between Johannesburg and Centurion next to the N1.

Lewington said the park was about 50% complete and housed divisions of companies like MTN and Digistics.

Apart from property in the Meadowdale and Longmeadow business parks east of Johannesburg, Improvon recently acquired about 22ha of the 30ha Gosforth Business Park next to Rand Airport in Germiston and will start development there next month.

Improvon co-owns Montague Park in Montague Gardens in Cape Town with the Acucap Property Fund.

Lewington said that, despite slow demand, Gauteng land prices rose almost 50% in the past three years as no new land came onto the market.

“There is a lot of land out there, but the problem is zoning,” he said.

“From a group perspective it is preferable to buy property that is already zoned (for commercial and industrial use) and where all the environmental impact assessments have already been done.”