The industrial property market has been suffering critical shortages for at least the last two years with the situation having reached crisis point, according to Broll Property Group director: industrial broking, Alan Hendricks. “Until early 2004, take-up of existing space and available land was gradual, but the last two years have seen strong demand as a result of the South African economy becoming more focused on importing and distributing goods, rather than manufacturing,” he observes.

“This shortage is going to have a negative impact on the country’s economy, as companies’ growth will be stunted by their inability to expand organically into suitable space. In the past, where we had a situation of high demand in the face of short supply of suitable properties, it was simple enough to build the space you required, in spite of the extended time it would take to do so, as land was readily available.

“Traditionally, companies in the industrial and distribution sectors prefer to own their premises, but there simply isn’t appropriately proclaimed and serviced land available any more, around any of the main business nodes in South Africa, to build new industrial space,” he continues. “The current situation has removed the owner-user from the market, as there is simply no space for him to build his premises. Favourable interest rates have created the perfect climate for SME owners to build their own buildings, and something has to be done to meet this demand.”

Hendricks suggests that part of the solution to the shortage of land on which to build industrial space, is that so-called brown field space within the main areas of cities – such as the space formerly taken up by mine-dumps in Johannesburg - be made available to company owners for the construction of customised space. However, the process of reclaiming these sites is expensive and time consuming, and there is not nearly enough of it.

Another option is to purchase agricultural land on the inside of the urban fringe, to change the usage criteria, and create industrial townships. “Local planning authorities have devised well researched Local Spatial Development Frameworks that support different components of the market, including industrial development,” he says. “However, it’s those enforcing environmental legislation that have had the most negative impact on plans to develop more, much needed industrial townships. The recent changes to the EIA legislation should improve matters, however, only time will tell.”

Hendricks acknowledges and supports the need for environmental impact studies – relevant to humans, fauna and flora in an area - but decries the ‘one size fits all’ approach to projects. “While office space makes use of bulk on a smaller physical area, industrial buildings work on coverage rather than bulk. This means that they should be handled differently.

“The modern industrial buildings that we need to build are clean; they do not produce noxious effluent, and can be well accommodated within the urban fringe. Deciding to embark on developing your own premises has a direct impact on cash-flow in terms of time, and obstructive authorities that are sluggish in their response discourage potential owner-developers from even entering the fray.

“Industrial growth is vital for this country’s future, to create sustainable jobs for the unemployed. We need to build more, we need to get speculative developers back into the market, creating industrial townships that are available to more than one client, and the authorities have to come on board,” he says. “If they fail to do so, then rentals will continue to spiral due to rapidly increasing land prices, caused by the shortage of suitable space. As we see it right now, there’s no short term answer to this shortage.”

For further information: Alan Hendricks
Tel: 011 441 4557 / 083 653 5853

Issued by: Cullum Johnston
Imbongi Communications
Tel: 021 461 1705/ 083 500 8144