Value of industrial stands still declining

Posted On Wednesday, 29 August 2001 03:01 Published by
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VALUES of vacant industrial stands in major cities are continuing to decline a trend property consulting group Rode says is cause for concern.

VALUES of vacant industrial stands in major cities are continuing to decline a trend property consulting group Rode says is cause for concern.

The latest Rode Report on the SA property market focuses on the declining value of industrial stands in the central Witwatersrand area over the past decade. It points out that this has been a result of a slowdown in demand for industrial vacant stands, which in turn paints a bleak macroeconomic picture.

Nominal stand values for 1000m² units in the central Witwatersrand area declined to R131/m² in the second quarter of 2001, against R147/m² in the second quarter of last year.

The report says structural reasons underlie this trend, among them mechanisation, which has led to slowing demand for factory space for manufacturing purposes. 'Another structural change that could have led to the decline in the demand for industrial stands is the move away from older industrial townships to new, sexier industrial parks closer to the decision makers' residential areas,' says the report.

'If industrial stand values decline, it is because the demand for industrial developments is doing the same.' It says this can be seen as one of the contributing factors to the building industry's poor performance over the past few years.

As for industrial rentals in major cities, all areas with the exception of the central Witwatersrand region continued their upward trend in the second quarter of this year.

Durban tops the list with real growth of 4,6%, compared with the year-earlier period.

However, a worrying aspect is that manufacturing production has been in decline since the beginning of 2001.

A deteriorating scenario for the manufacturing industry does not bode well for the industrial property market and implies that the upward phase in manufacturing production that started in mid-1999 could be at its end.

Real rentals in the main industrial areas of the central Witwatersrand and Durban are below 1990 levels.

Only Cape Town has managed to beat its 1990 rentals.

Real rentals in the central Witwatersrand area were about R6,90/m² in the second quarter of this year, compared with R7,90/m² in 1990. Durban showed R7,50 in 1990 and is now at about R6,50. Cape Town was R5,90 and is now R6,90.

Publisher: Business Day
Source: Business Day

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