By Martin Bailey, Industrial Logistic Systems.
Run out of space? Looking for a new warehouse facility? Should you build a new facility or should you develop your own world-class infrastructure?
IN the commercial office space, there is a huge oversupply. This has slowly led to extensive discounting of office space in certain areas. If you are a blue-chip client, today you can pick up space at 50 to 60 percent of what you would have paid ﬁve years ago.
However, in the warehouse space things are a bit different. Here are a whole lot of inﬂuences:
- The market centre has changed over the past few years, for example, from the traditional East and West Rand to places such as Linbro Park, Longmeadow and Midrand.
- Warehouses have changed shape. We now build most facilities 15 m to 20 m high, with special ﬂoors and related integrated docks.
- Many developers have been doing well in the warehouse space (demand sometimes exceeding supply), and that means the cost of existing warehouse supply can be as high as new space.
- Many of the older facilities maximised buildings on the sites and did not focus on receiving and dispatch of trucks. This has pushed clients to rather develop new infrastructures.
- Centralisation has led to the growth in warehouse sizes. The general trend is bigger rationalised facilities are better.
- Land prices in ‘popular locations’ have grown way above inﬂation – you could now easily pay R2 000/m2 for land. This has pushed up the price of new developments
So, where to from here?
The COVID-19 lockdown will certainly have a massive inﬂuence on many operations. Some will survive and grow (if you are in food consumables or medicines).
Others will have to downsize (if they survive). In the medium term, lots of existing facilities will become available at lower rentals. I see gross rentals for many facilities dropping well below R40/m2 per month. As developers all desperately chase the companies that are still growing, I reckon new build costs will also drop (possibly well below R60/m2 per month).
So, if you want a new warehouse, you are in a very powerful position. I am sure there are some good deals in the pipeline.
Reprinted from Logistics News – visit www.logisticsnews.co.za