By Joan Muller

Senior writer

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RETAIL property owners are not the only people benefiting from South Africa’s consumer boom. Industrial landlords are also seeing higher returns flowing through as the retail spending spree boosts demand for warehousing and distribution space. After all, retailers need space to manufacture and store additional volumes of goods sold in shopping malls to end consumers.

For example, the Edcon group (including Edgars, Jet, Boardmans and CNA) has seen its need for storing goods and sorting facilities grow to such an extent that it recently had to invest R55m to build a new warehouse/distribution facility on the East Rand.

Analysts say that increased demand for industrial space has already translated into strong rental growth. Latest figures from property economists Rode & Associate show that rentals on the West Rand increased by almost 30% in 2004 (see table).

Durban also posted strong rental growth last year, with an increase of 20%, followed by central Witwatersrand (16,6%), Port Elizabeth (14,4%) and Cape Peninsula (11%).

Industrial vacancies have also improved markedly over the past 12 months. Rode & Associates’ vacancy figures show that Durban and the central Witwatersrand were down to 2% at end-2004 from 3,5% in 2003. The Cape Peninsula and Port Elizabeth fell from 8,5% to 3,5% over the same period.

Rode & Associates CEO Erwin Rode says that manufacturing volumes grew by almost 4% in 2004 (compared to a decline of 3% in 2003). The strong growth was fuelled by domestic demand on the back of low interest rates and increased consumer confidence. Rode expects that trend to accelerate in 2005, given the rosy prospects for economic growth.

Alan Hendricks, a development and land specialist at Broll’s industrial division, says that demand for industrial property has taken off to such an extent that there’s now a shortage of hi-tech space, particularly in greater Johannesburg. There’s also a growing shortage of suitable land for new development, putting upward pressure on rentals and land prices.

Hendricks says that the fact that large institutions are no longer developing industrial parks on a speculative basis, plus authorities not releasing land for development as quickly as they used to, is further squeezing industrial property stock levels.

It seems that property investors are already focusing more attention on the industrial sector: listed property stocks that are predominantly exposed to the industrial property market have recorded strong share price growth in the 12 months to 17 March this year. These include iFour (up 46%), Spearhead (up 44%), Pangbourne (up 37%), Metboard (up 32%) and Martprop (up 27%).