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Sales and rental prices of industrial property improve with many areas reporting a shortage of stock
Sales values of industrial properties in Durban’s strategically located northern corridor, which extends from the Umgeni area through to Cornubia, have since the start of 2023 experienced a substantial increase, with elevated prices indicating a shortage of stock, according to Mike van Schoor, KwaZulu-Natal director for Swindon Property.
“Over the past six to eight months, this area has seen a spike in the value of sales on a rand per square metre basis,” says Van Schoor. “For example, in Riverhorse Valley the value has risen by 10% over the past four to six months. In Q1 of 2021 values here stood at around R8,500 per square metre to a maximum of R10,000, while currently, the maximum range is up to R12,000 per square metre with the majority of sales concluding around the R11,000 per square metre mark.
“Similarly, other areas in this node between Springfield Park and Glen Anil have seen sales being concluded at levels that are setting new benchmarks. There is very little stock available, and although sales are being made, the demand outstrips supply so until there is an equilibrium between current market prices and new development prices – which are considered to be up to 30% higher, new properties won’t be built, making this a seller’s market.”
Riverhorse Valley for sale
SHORTAGE OF RENTAL STOCK
Van Schoor says rental prices have experienced similar improvements, although, as with sales, different areas command different price points. The overall increase in rental, no matter the area, is however quite evident, with rental inflation averaging between 20% and 25% since 2021.
“This hub, which comprises predominantly general to light industrial property, has been a growth node for industrial and commercial space for many years due to the fact that the south basin – including Congella, Clairwood, Mobeni, Jacobs and Prospecton, is almost entirely built up with very little development land available,” says Winston Sjouerman, head of Industrial Brokering for Swindon Property in KZN. “There is however a general lack of stock in KwaZulu-Natal across the board, from industrial to office space. Westway Office Park, which has encountered challenges over the past few years, has seen a number of lease transactions concluded, while uMhlanga, which had numerous vacancies post-Covid, has enjoyed a considerable space uptake with the vacancy square meterage being reduced by over half.
“The demand for large warehousing and logistics-friendly properties has soared post-lockdown and has placed Durban and the harbour in the spotlight. The upgrading of the port of Durban remains on the cards, with tenders having closed in February this year 2023, although construction work has yet to begin.”
Glen Anil to let
MORE DEMAND, BETTER PRICES
Sjouerman says two years on from lockdown, demand for industrial property remains strong with asking prices of rentals and sales having increased significantly. “A contributing factor has been the dearth in new development during lockdown, with the latter fuelling a trend towards distribution and logistics-type businesses. “Due to their central location, Springfield Park, Briardene and Riverhorse Valley remain the most popular industrial areas in Durban, and along with nearby Red Hill and Glen Anil, have generally commanded strong interest not only in respect of leasing, but also in sales,” says Sjouerman.
Springfield Park to let
CHAIN REACTION
Recent sales by Swindon Property include a 1,094m² unit purchased for R10.4m by an end-user, a 1,155m² building in Glen Anil sold for R9.6m also to an owner-occupier, and a mini-factory complex in Briardene acquired for R18m by an investor. Industrial lease transactions concluded by Swindon Property include 1,150m² in Briardene let on a four-year lease to a logistics company, 1,808m² in Briardene let on a three-year lease, and 2,600m² in Briardene with a 3.5 year let.
Says van Schoor: “The surge in demand has been a significant drawcard for large distribution-type end-users, and has proven a catalyst for a demand-driven push from various developers to complete planned big-box developments sooner rather than later. This, in turn, has created more demand for smaller industrial spaces for businesses that support or provide products and services to larger end-users.
“In a similar vein, Pinetown and the Westmead/Maxmead industrial areas are also quite densely populated with largely standalone, or midi to maxi-sized warehouses in secure complexes.”
According to FNB property sector strategist, John Loos, only the industrial market is perceived as having demand that exceeds supply, with eThekwini listed as one of three coastal metros where the market strength lies in industrial property.
