PROPERTY: Positive Signs For The Industrial Property
Recent Western Cape Business News
There is some good news for the industrial property market. ”Positive economic data that was released recently by Kagiso Purchasing Manufacturers Index (PMI) indicates that the manufacturing sector is expanding again, even if ever so slightly,” says Andy Beddow, director of Baker Street Properties.
Beddow adds “In addition the relief given by the Reserve Bank by dropping the repo rate to 6.0% p.a., thereby reducing prime to 9,5% p.a. going forward, is the first time interest rates have been this low (and stable) in over 30 years. It is hard to believe that in August 1998 prime interest rate peaked at 25,5% p.a.
“It is early days but we are starting to see more activity in the Cape Town Industrial Property market with our enquiry level picking up. However there is a large vacancy level in the market to erode. Our latest figures reflect an overall market vacancy of 526,000 m² in the greater Cape Town area, reflecting an increase in vacancies in almost all locations.”
Beddow says that 50% of this vacancy lies in the older industrial areas including Epping, Parow, Maitland and Bellville. There are some anomalies such as an unusually high vacancy factor of 30,000 m² in Paarden Eiland, which traditionally is tightly held.
The vacancy figures show that 66% of vacancies across the board are represented by properties larger than 1,000 m², while mini-units measuring 500 m² or less represent 19% of the vacancies.
Thus it continues to be a tenant’s market and is a good time to structure long term leases now. Not only are rentals flat (gross rentals average around R28.00/m² to R30.00/m² excl. VAT), but escalations are also showing downward pressure from the 10% p.a. level down to 9% p.a. and even the 8% p.a. level.
Beddow concludes,” On average vacant land remains at the R1,000/m² mark, although we have brokered deals recently at R1,250/m². These land sales are few and far between with a limited number of “greenfields” developments following. However, those users who develop now would enjoy a very competitive construction market with contractors hungry for work”.
“While it is expected that the last quarter of 2010 will show some confidence in the industrial market with moderate take-up of vacancies, property rentals are not expected to start increasing until well into the first half of 2011.”
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