Demand for large industrial space rises in Cape Town

Enquiries for industrial space to let in the Cape Town area have increased, to the extent that there is a great deal of movement in the upper segment of the market, from 1 500-10 000sqm in size, reports JHI Properties leasing and sales broker Johan Store.

“There is considerable demand from large scale users who are actively looking to take up leases in this sector,” he says.

Store recently concluded a transaction for a five-year lease of the 1600sqm former Electrolux building situated on the corner of Stella and Dawn Roads, Montague Gardens - a popular industrial area which is close to Cape Town harbour and surrounding container depots.

“This property is in a prime location, just off Koeberg Road near the old Makro site, with easy access to all major routes including the N7 and N1 freeway. It comprises 1200sqm of warehousing and 390sqm of showroom and offices, which is an ideal mix for the new tenant, Corex IT Distribution Dynamics,” he says.

Established in 2003, with branches in Cape Town, Johannesburg and Durban, Corex is a distributor of IT-related products and provides value-added services to various market sectors, including medical, hospitality and mining, among others. Corex’s product offering includes point-of-sale, digital signage, IP surveillance and industrial computing, as well as global brand name IT components for consumers.

Store says businesses currently seeking large industrial space are mainly those requiring it for warehousing, distribution and logistics. “From experience we find that many large industrial users in this upper bracket sit in the position where they are effectively locked into long term leases and as soon as these come up for renewal they wish to relocate to a property more suited to their needs.  They may consider building a property for their own use or partial use, with tenants taking up the remainder of space, thereby acquiring an investment which will appreciate in value. We facilitate developments on a regular basis and the consensus is that if you build to let on this scale, you need to secure the end user or tenant at a minimum of R47 per square metre for the transaction to be feasible.” He says renting existing, well maintained, secure large scale warehousing will cost in the region of R40-R45 per square metre.

“For many prospective tenants and buyers Blaauwberg Road forms an imaginary divide, splitting Montague Gardens from Killarney Gardens and recent industrial developments such as Racing Park and The Stables. Despite the last mentioned areas being safe with relatively few reported incidents of crime, we find there is a misconception to the contrary, and as a result of this end users will rather consider options out in the Northern Suburbs such as Brackenfell or Airport Industria instead of looking at Racing Park, The Stables or Atlas Gardens.

“However, we believe this phenomenon will soon change as local authorities are investing generously in infrastructure to upgrade the area in question, the Potsdam precinct,” says Store.
At present a 73 500sqm site in The Stables is being developed for the new Integrated Rapid Transit (IRT) bus depot. The Cape Town City Council has awarded the contract for the upgrading of the roadways, including the IRT lanes all the way along Blaauwberg Road and Potsdam Road, terminating directly in front of The Stables, with road works having already commenced. In addition, the council has awarded the contract for the Eskom electrification of the Doornbach area and will remove all temporary electrical wiring.

Says Store: “Further positive news is that construction of the remainder of the new M12/Sandown Road link from the Potsdam Road/N7 intersection right through to the R27/West Coast Road is scheduled for completion before 2013. This link will connect Sunningdale and Parklands with the N7, effectively connecting current outlying areas of Racing Park, The Stables and Atlas Gardens with surrounding residential areas. This will put these industrial areas on the map as Cape Town expands up the West Coast.”

Recent Developments:

He adds that a number of recent developments bode well for the future of these industrial areas. The new Hirsch’s Home Store on the corner of Koeberg and Racecourse Road is scheduled to open in April 2012, incorporating over 5000sqm of retail and warehouse space.  Cape China Mall, which is being developed on 1.8ha between Paddocks Shopping Centre and Stodels, will consist of wholesale retail units comprising in excess of 10 000sqm in total. Stor-Age self-storage facility is nearing completion on the old Killarney hotel site at the intersection of Blaauwberg and Koeberg Roads. This multi-storey facility is developed on a 9000sqm site.
The Montague Park development, which is well underway, with first units ready for occupation in mid-2012, comprises a total of 50.25ha on the northern border of Montague Gardens. Including both business and industrial zones, the development has the potential for over 140 000sqm of warehousing with office space - all within a secure access controlled industrial park with generous yards and turning circles.

In BP Road in Montague Gardens, construction of a multi-unit industrial park on a 6400sqm site is nearing completion, with units to let being launched to market in May 2012. Store says plans on the drawing board include those for Silverstone Industrial Park situated in Killarney Gardens, comprising five 800sqm units available to let – with building works scheduled to begin in the near future.
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