THE industrial property sector offers growth potential given a limited supply, particularly of larger units, says Old Mutual Properties MD Ian Watt.

Bigger users are looking for premises better equipped than what is on offer, says Watt.

'This is leading to select developments, notably for owner-users, and increasing opportunities for redevelopment in older, industrial areas,' he says.

Conditions in the industrial market are in contrast to those of the oversupplied office sector.

The industrial property sector has been outperformed by the office and retail sectors in terms of total returns.

Latest figures from property industry data bank Sapix-IPD show the industrial sector posting a total return of 7,4% last year compared to 7,7% for offices and 13,3% on retail. In 2000 industrial property posted a return of 7,1%, offices 12,7% and retail 10,4%.

Industrial property returns were solely from income; capital investments shrank. But the tide could be turning as the office sector suffers from oversupply.

Watt says the discipline of building to demand is at least apparent in the industrial sector.

While newer nodes in Midrand, Gauteng, and Montague Gardens in Cape Town offer opportunities for development, longer established areas offer interesting prospects as well.

He makes an example with Paarden Eiland in Cape Town. Buildings in the area are obsolete, but the factors that made the area a pre- eminent industrial area good location and access to the port and arterial routes remain.

'It would be unwise to ignore areas such as these for redevelopment,' says Watt.