PROPERTY: Industrial Land Prices Contract
Recent Western Cape Business News
Industrial land prices have contracted in Cape Town in the last 9 to 12 months, as demand slows due to the prevailing economic conditions. 12 months ago the average industrial land price was ±R1,350/m², with exceptional sales reaching as high as R1,750/m². Now the average sale rate is barely R950/m² reflecting a 30% decline in pricing. However, we must bear in mind that this land value was in the region of R400/m² (Excl. VAT) in 2005.
“A market correction has also been experienced in rentals - where 9 to 12 months ago R35.00/m² (Excl. VAT) was achieved for reasonable industrial space, now the same space is achieving R30.00/m² (Excl. VAT),” says Andy Beddow, director of Baker Street Properties.
Beddow says that there are currently very few industrial sales and developments taking place, with the unrealistic seller’s expectations (a hangover from the “boom party” of late), compounded by the lack of liquidity in the banking sector.
“On the positive side, with declining interest rates the sales cap. rates are also slowly on the decline, with yields averaging 10% to 11% for good industrial property across the board,” adds Beddow.
Beddow continues,” There are exceptions in the market, particularly in the food related industry where we have been fortunate to have brokered two new development deals on the same site in Bellville South with two national tenants. The first being a new 4,500 m² world-class bakery for a joint Venture between Eastbalt (based in Chicago) and Astral Foods, supplying both McDonald’s and KFC outlets in the Western Cape. The adjacent tenant is Digistics, who are multi-temperature logistics partners to the same restaurant chains. This facility also measures 4,500 m². The combined capitalized lease values exceed R150 million.
“The development of the site is a joint venture between Chiluan Property Developers and Swish Properties, spearheaded by Andrea Taverna-Turisan. Adjacent to these two developments there is surplus land available to build another 5,000 m² warehouse facility with raised loading and a large yard.”
Beddow concludes,” While the current trading conditions in the industrial market may be slow, we can see signs that it is bottoming out. We anticipate a modest upswing towards the end of this year, improving into 2010.”
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