David Green, head of Marriott Property Services, which manages the properties of seven funds, says rents are rising by between 10% and 15% as manufacturers and distributors expand after years of stagnation.

"And if you look through the overall 14% vacancy in the subsector, you will see that modern, desirable space is hard to find - perhaps 2%-3% of that stock," adds Green. The rest is obsolete, with poor gantry heights or inadequate transport access and circulation. He says industries will soon have to expand into newly built properties, and that will push rents up further. "It also means there will be a shortage of good stock for funds to buy."

Green predicts rents will grow most strongly at Linbro Park and Longmeadow, north of Johannesburg's N3 highway; Centurion near Pretoria; and Jet Park near Johannesburg International airport.

The main beneficiaries of the upswing will be property unit trust Martprop, and property loan stocks Pangbourne and Metboard. The three main property analysts - Provest's Angelique de Rauville, Barnard Jacobs Mellet's James Templeton and SCMB Securities' Len van Niekerk - all say Martprop will gain most. Its 68% industrial property component consists mainly of modern distribution facilities in KwaZulu Natal.

De Rauville says Martprop CEO Roger Perkin has been actively trading the portfolio to improve performance. Payouts are forecast to rise by 1,3% after falling for three years.

Gauteng-based portfolios Pangbourne (78% industrial) and Metboard (100%) are not as high-quality as Martprop. But that is not necessarily a bad thing, says Pangbourne CEO Atholl Campbell. For instance, he has pushed rents in an old 12 000 m² Isando building from R5/m² to R15/m², after spending R100/m² improving transport access. Rising building costs will make it economical to convert many obsolete properties.

Campbell says some areas are still depressed. "Vacancies, mainly of good properties, are at about 12% in Midrand, which has been hit by access and road congestion problems."

Van Niekerk says he expects revenue to improve at Metboard too. "They have worked hard at reducing vacancies - now at 5,2% - and trading their stock."

Capital, a small-cap property unit trust with a 69% industrial holding, mainly in Gauteng, is likely to be swallowed soon by one of the bigger funds, or by new funds being brought to market by Old Mutual, Sanlam and Absa. Resilient, a new fund (49% industrial), may be worth watching too.

Financial Mail