INDUSTRIAL land prices have soared over the past 12 months in SA’s major metropolitan centres, a strong indicator that developers and owner-occupiers want to expand industrial premises on the back of the retail boom.

Property economist Erwin Rode, of Rode & Associates, says consumption is driving the industrial property market. Retail sales are creating a demand for imported and locally produced goods, and these must be warehoused.

As a result, industrial property is booming in Johannesburg, Durban and Cape Town.

"When industrial land prices are rising like they are, it implies there are developers or owner-occupiers who want to build industrial properties because they are expanding," says Rode. This is also a healthy sign for the economy in general.

Colin Murray, a director of Cape Town-based Baker Street Properties, which specialises in the sale and leasing of offices and industrial properties, says land prices have increased dramatically in Cape Town over the past 12 months.

"The position has now been reached where land in the popular established areas is becoming almost impossible to find, forcing investors to look further afield," Murray says.

In Montague Gardens, industrial land prices were R300/m² a year ago. Land now costs R600/m², a 100% increase on a year ago.

In Killarney Gardens, where land cost R200/m² a year ago, prices have surged 150% to R500/m².

Other areas where prices have surged include the Airport Industria node in Cape Town, where prices have risen 89% from R185/m² a year ago to R350/m², and Epping, where prices rocketed 66% from R150/m² to R250/m².

"The fastest-moving area in terms of land sales in the past six months has been industrial land in and around Cape Town International Airport. Airport Industria is now sold out, while phases one, two and three in the Airport City development have also sold out. There is already a waiting list of buyers for phases four to six, which will be ready for transfer in about September this year," says Murray.

He says industrial rentals have firmed on the back of stronger demand and rentals will rise to accommodate the higher land and construction prices.

Roger Perkin, MD of listed property unit trust Martprop, a predominantly industrial property fund, says industrial land values are rising in Durban and this is primarily due to the scarcity of good industrial land. He says the highest price is R350/m² for land in a new industrial park called Riverhorse Valley.

"What’s happened with the strong economic performance generally, is you have seen demand pick up and businesses expanding, with the result that vacancies in existing industrial properties are at (record) lows," says Perkin.

"That obviously gives rise to pressure for new developments and that is what is driving land values in SA’s major metropolitan areas."

David Green, MD of commercial property brokers Pace Property Group, says that industrial land prices in Johannesburg have risen between 25% and 35% over the past six months.

Green says that even land that previously traded at R100/m² in City Deep, Alrode and Wadeville has increased to R180/m².

He says that in popular nodes like Longmeadow and Linbro Park, land that was trading at R240/m² now trades at R350/m² or more, with prime highway-fronting sites trading from R380/m² to R400/m².

But Johannesburg has not yet reached the R500/m² mark. "I think the difference between Johannesburg and Cape Town is there is more zoned industrial land available in Johannesburg than in Cape Town."