By Nick Wilson

There is strong demand for industrial property in the greater Cape Town area as a result of a booming economy, according to Old Mutual Investment Group Property Investments.

The group said yesterday it had signed leases valued at R331m for industrial space in the 12 months to March 31. Its shares rose 0,72% to R25,28.

"Demand for good-quality industrial premises has escalated rapidly over the past two years," said Orin Varney, the group's Western Cape leasing manager. "Because of a shortage of quality space and rising building costs, rentals have escalated by more than 30% in this period."

Amelia Beattie, the group's regional general manager for Western Cape, said there was "certainly a big shortage of industrial space".

She said Old Mutual had no vacancies in its industrial property portfolio. This was the lowest the vacancy rate had ever been.

"There is big demand for smaller industrial units of about 1500m?. But there is as much demand for the bigger units," said Beattie. She said the strong fundamentals in the South African economy were driving demand for industrial property.

"There is a shortage of quality space. There is very little industrial land left in Cape Town," said Beattie.

In April, auction group Auction Alliance reported that industrial land and properties were becoming "hot items" on the auction floor in Cape Town and Johannesburg.

The group said the general shortage of industrial property and zoned industrial land was driving prices up every time an auction was held, with 100% price rises in industrial land values recorded over the past year.

Norman Raad, head of commercial property for Auction Alliance in the northern region, said at the time that in Johannesburg, zoned industrial land, especially in the airport area, was fetching "top-dollar prices".

According to an index recently launched by commercial property association Sapoa and Investment Property Databank, the industrial property sector recorded the highest returns last year with a return of 31,1%. This was the second year in a row that the sector had outperformed retail property and offices.

Business Day