ALTHOUGH the industrial property market is showing signs of recovery, the past year has been a buyer and tenant's market, says Andy Beddow, director of Baker Street Properties, one of Cape Town's largest commercial, industrial and retail property broking organisations.
Rentals, other than those charged for new developments, and land prices have remained virtually static, Beddow says.
'Because of the high cost of construction, few speculative developments have been initiated.
'Gross rentals for new developments now exceed R22/m2.
'Those for older buildings are averaging between R14 and R18/m2, depending on size and location.
'Escalations have reduced slightly, but average between 10% and 11% a year.
'Construction costs for a factory of about 1 500m2, including a 10% office and ablution facility, are in the region of R1 500/m2.
'An example of a site measuring 2 500m2 at a sales rate of R250/m2 indicates that prices are approaching R2 000/m2 for land and buildings.
'Land sales have been slow, with the exception of Westlake, where a considerable number of sales and developments have taken place. This reinforces the view that secure locations are the most desirable.
'There are signs that a recovery is on the way as vacancies are starting to diminish, especially in larger A- and B-grade warehousing.'
With fewer vacancies, it could be expected that the rentals for established properties would begin creeping up, Beddow said.
'Rising exports and increased tourism should help to fuel the resurgence in industry. Another positive sign is that the Gauteng industrial property market has picked up in the past year, which should also start influencing the market here.
'Leading economists are advising us that the prime interest rate of 17% to 18% is set to remain at this level for another 12 months before declining.'
This would probably encourage the redevelopment of established properties and dampen new developments, Beddow said.
Publisher: Weekend Argus
Source: Weekend Argus
