Industrial stand values paint bleak picture
Declining Central Witwatersrand real industrial stand values over the last decade paints a bleak economic picture – and indicates a distressing slowdown in the demand for vacant stands.
Nominal stand values for 1000m² units here declined to R131/m² in quarter 2001:2, measured against R147/m² in the second quarter of last year, and leads the downward stakes over Cape Town and Durban.
So says the editor of Rode’s Report on SA Property Market, Dirk de Vynck, in the latest issue of this authoritative report. De Vynck also says Rode CEO, Erwin Rode, is giving the trend serious attention at the upcoming Rode Conference in Johannesburg and Cape Town, later this month.
Explaining the trend, De Vynck says one of the structural reasons for this could be greater mechanisation, which has led to a slowdown in the demand for factory space for manufacturing purposes.
“Another structural change that could have led to the decline in the demand for vacant industrial stands, is the move away from older industrial townships to new sexier industrial parks that are closer to the decision makers’ residential areas.”
If industrial stand values decline, he says, it is because the demand for industrial developments are doing the same. This can be seen as one of the contributing factors to the building industry’s poor performance over the last few years.
As for industrial rentals in the major cities, all areas, again with the exception of the Central Witwatersrand, continued their upward trend in quarter 2001:2. Durban tops the list with real growth of 4,6% compared to the same period a year ago.
However, a worrying aspect is that manufacturing production a proxy for demand for industrial space has been trending down since the beginning of 2001. This can be an indication that the global slowdown is having a negative impact on this sector.
A worsening scenario for the manufacturing industry does not bode well for the industrial property market, he says, and implies that the upward phase in manufacturing production, which started in mid-1999, could be at its end, and that a flatter growth pattern can be expected this year.
“Furthermore, it is a sobering thought that real rentals in the main industrial areas of Central Wits and Durban are below levels seen in 1990. It is only Cape Town that has managed to improve from the level in 1990,” he says.