Presenter: Lindsay Williams  Guest(s): Marc Schneider 

Industrial property remains the top performing sector across South Africa with 65% rental growth over the past two years, and 30% in 2005 according to the latest eProp rental barometer. With eProp research director Marc Schneider

LINDSAY WILLIAMS: Marc, tell us about the rental barometer - how is it compiled?

MARC SCHNEIDER: The compilation is made up of rentals that are listed on our system - as eProp we do that on behalf of all the major property management and property owning companies in South Africa.

LINDSAY WILLIAMS: It’s very encouraging that industrial property is doing so well, given the fact that there are certain problems in the manufacturing sector of the economy - we are lead to believe that it might be in a shrinking phase. Again, I thought that retail was the top performer - obviously not...

MARC SCHNEIDER: Retail has obviously been the darling of the property industry - outside of residential in any event - for the last couple of years. That’s obviously following the strong retail sector in large part. The rentals in retail are also strong - but remember that’s off many years of sustained growth - so industrial is coming off somewhat of a lower base. In real terms it probably hasn’t grown much, so we are beginning to see rentals moving into territories where obviously new developments and so on becomes feasible.

LINDSAY WILLIAMS: Geographically what area is doing the best?

MARC SCHNEIDER: KZN is obviously a very strong market, and the greater Durban market - I think there are a lot of promising opportunities there, not least of which in my opinion is the Dube Trade Port initiative that’s going to lead to many years of opportunities around that concept.

LINDSAY WILLIAMS: In terms of industrial land what sort of trends are you seeing? Is it small industrial facilities that are doing better than bigger ones - can you identify a trend?

MARC SCHNEIDER: There’s no real discernible trend. A few years ago it was certainly a mini-unit boom - that petered off a bit for no particular reason. The demand that we’re seeing now - because we track space people are looking for online - shows a pretty strong trend towards logistics warehousing type facilities, of which there aren’t that many modern facilities around. That obviously represents an opportunity - obviously it represents a large investment too. There’s a fair demand for that, and not a huge amount of supply - so that’s an area people are venturing into.

LINDSAY WILLIAMS: Could there be a problem there - in terms of the fact that there’s not enough supply and so much demand - could that put the brakes on the manufacturing sector of our economy?

MARC SCHNEIDER: I don’t necessarily think so - I think there’s obviously a whole lot of components that go into the success of the manufacturing sector. The property facility is only one, but certainly it’s an increasingly important aspect, especially when it comes to certain business areas - especially logistics and warehousing - where having the right kind of facility is tantamount to a successful business. So I wouldn’t say it’s necessarily a limitation, but certainly the sentiment is that there is a bit of a dearth of suitable facilities, and there’s obviously opportunity to improve on that. There is certainly a lot of supply coming on stream - if we look at the amount of space that’s in the pipeline it’s certainly a big jump on 2004 levels. Again Durban springs to mind - I think they’ve got double the amount of space in the pipeline that they had in 2004.

LINDSAY WILLIAMS: How can we take advantage of this industrial property boom?

MARC SCHNEIDER: It depends from which perspective…

LINDSAY WILLIAMS: As a JSE investment...

MARC SCHNEIDER: No doubt you would probably want to look a little bit more closely at some of the funds that are more focused on the industrial sector. Metboard, Pangbourne, Martprop spring to mind - I wouldn’t want to say categorically which one to go into, but you know there are obviously a few key focused funds around that focus on industrial. It is a different animal, and it’s good that there are funds that are specialising in industrial - it’s not the same as offices, and it is obviously not the same as retail.