This according to David Hitch, franchisee for the Rawson Commercial franchise headquartered in Kloof, Durban:

The first, he says, is that there is now a strong demand for smaller industrial spaces and insufficient stock to supply it.  Particularly popular areas, he says, are River Horse, Springfield Park, Briardene, the North Coast Road, Pinetown and its surrounds, and the precincts around the old harbour and the proposed new harbour.

In one New Germany complex with 90,000m² of space launched in July 2010, already over half the space has been signed for.  This, says Hitch, is partly due to its superlink/container acceptance ability but it is indicative of the demand.

This demand, he adds, is driven by the trend at some major companies and corporations to outsource their work and, often, also to cut back on their staff and labour teams, forcing many to “get out there and become independent entrepreneurs”.

The second factor changing traditional patterns of industrial space ownership is that certain manufacturing and service industries which currently own their own premises will in the next two years find themselves cash strapped and having to live on reduced income flows.  To remedy this, Hitch believes these industrialists will consider selling their premises to investors from whom they can then lease them, possibly in the hope of buying them back when conditions improve.

“Commercial brokers with genuine property and financial experience can in these circumstances put together deals that create a win-win situation for all involved.  Our team is now offering this service throughout the greater Durban area – and already we are getting a good response and assisting cash-strapped businesses re-focus their future business plans.”

Investors buying industrial space, said Hitch, were previously able to get a 10 to 12% return on their money.  Today they are probably getting 8 to 9% - but with annual rent increases of up to 10%.

“The situation in industrial property is very different from that in office and retail space,” said Hitch.  “There rents dropped by anything up to 40%, depending, of course, on the area.  Offices that rented at R120 per m² two years ago may now be getting less than R75 per m² - but in industrial premises average prices are now anything from R35 to R55 per m² and have shown no signs of dropping.

Hitch says that for these reasons now is a good time to buy industrial space, especially if it already has a tenant.

“Demand remains so strong and the supply so limited that this is a market on the up and up - a fact which shrewd investors already recognise.”