Commercial News

Strong demand from logistics operators for large warehousing and distribution space

As South Africans have become more accustomed to shopping online and having goods delivered to their doors, we can expect to see a significant increase in demand for warehousing and distribution space from logistics operators and other companies, as well as a demand for industrial properties across the board, says MC du Toit, CEO of online property platform, BidX1 South Africa.

“I believe that traditionally sought-after areas with ease of access to transportation routes will remain key locations. With our vast distances to traverse in South Africa, and speed of delivery critical, logistics plays a major role in the property industry. Positively, we already have a number of enquiries from prominent companies who are looking to expand their distribution centres, as well as some smaller companies. We should also see some new entrants into this market.”

“Notably,” says du Toit, “we have seen an increase in our enquiries across the board. Time will tell as to where and which types of properties are most in demand, but I anticipate that we will see demand from investors for almost all sectors since property offers such an attractive investment option at present. The return on investment certainly makes sense, especially considering the favourable interest rate environment.

“In fact, we’re already seeing investors divesting of some existing assets in order to free up liquidity for other purchases, in anticipation of the attractive investment opportunities expected to become available in the near future.

“This also means that first-time home buyers may be able to purchase in areas where, prior to the rate cuts, they would not have been able to afford.

“Meanwhile, our advice to landlords in the current market is to assess their personal situation. For some property owners, it maybe be beneficial to sell now, while others may want to hold onto their asset. There are many factors that need to be considered in the new economy and each property will need to be assessed on its own merit. Professional advice could prove valuable for those considering whether or not to sell at this point.

“As far as distressed sellers are concerned, we’re currently assisting those who were struggling financially even before the lockdown was imposed and for whom the crisis has proved a tipping point. We may also see a delayed effect, with more distressed sales taking place over time.”

Commenting on the far-reaching impacts of the Covid-19 lockdown, du Toit says it’s somewhat premature to forecast. “As John Loos of FNB points out, the office sector has been under pressure for some time and companies are likely to take the opportunity to reduce space as more employees work from home. However, it is too early to gauge the extent of this. While we have had instructions to place some office space on the market, these sales are not the result of the lockdown.

“What we have been seeing for some time now are large organisations centralising some of their divisions to consolidate space into one location in order to conserve expenditure; however, these economies of scale are not always feasible due to the vast geographical size of our country.”

Adds du Toit: “The retail industry has been one of the hardest hit, having already experienced poor performances prior to lockdown due to the economic recession. Consumer spending will probably remain muted after restrictions are lifted, and we’ve already seen Edcon, which was struggling before the lockdown was implemented, go into business rescue.”