Rental deals available due to increase in industrial property vacancies

Vacancies continue to creep upwards in the local industrial property market, says Andy Beddow, a director of Baker Street Properties.

This information is contained in the biannual analysis that the company has just completed of the vacancies across all industrial nodes, breaking the figures down into the sub-500 m², 500 m² to 1,000 m² and plus 1,000 m² categories.  See accompanying pie-chart. 

According to Beddow, using the figures from the biannual analysis, there is an increase to over 463,000 m² of vacant space in the greater Cape Town area. This is a slight increase of 4% from May this year when we Baker Street Properties did the last analysis.

Beddow adds,” Most notable increase was the vacancies in the mini-unit sector for units under 500 m² , where vacancies increased by 17% from May this year.

“This indicates that smaller businesses are struggling in this economy and that a significant number of these have closed their doors, or have mandated the brokers to find sub-tenants as quickly as possible.

“Another striking vacancy increase was noted in Montague Gardens, where vacancies have increased by 39% since May this year, to an overall total of 68,575 m², predominantly in the larger industrial properties, which are over 1,000 m².”

Beddow says that rentals have remained static in the last 12 months and are not expected to increase during the remainder of the year.  Average gross rentals across the board remain at R30.00/m² (excl. VAT), however the market is seeing deals being done now at R28.00/m² (excl. VAT) in popular industrial nodes, where previously  R30.00/m² (excl. VAT) was the minimum.

Another factor is that power availability still remains scarce.  Users looking for large power supplies have a very limited choice in terms of property alternatives.

“Industrial land sales are scarce and it is difficult to place an average rate on this due to lack of volume of sales.  However, there is definitely pressure on land prices and we have seen offers accepted at rates half of the asking prices from the peak in 2008.  Even with lower interest rates, access to development finance is limited.

“In a reversal of the past few years, there are also some large good qualities warehousing units available now on the market. These units previously did not remain vacant for long, “says Beddow.