What's driving Cape Town's warehousing boom?

Source: Supply. The Rhenus facility at Meadowview was custom designed in collaboration with the client resulting in a state-of-the-art, world-class distribution centre spanning over 30,000m².

These nodes are strategically located, offering proximity to airports, major highways and key roads, as well as access to a skilled workforce, robust infrastructure and secure environments. Additionally, they feature modern, A-grade buildings with architecturally appealing landscaping.

Mark Truscott, head of leasing at Improvon commented: “With a growing focus on cost-efficiency, tenants are increasingly opting to lease spaces in new developments, where operational efficiencies help reduce occupancy costs.”

Truscott said the Rand Airport Commercial Park in Gauteng is an example of an investable node. This site, which is home to Improvon’s new Dakota Precinct development, exemplifies the type of location tenants seek: close to markets and customers, with all the characteristics of an investable node.

He said Improvon’s warehouses and distribution centres are designed with tenants’ needs in mind, incorporating 24-hour security, wide roads and deep yards for truck circulation, ample volumetric capacity and features such as double glazing for insulation, solar geysers and heat pumps, grey water systems, rainwater harvesting and LED lighting.

Truscott said there is demand in some of Johannesburg’s notable nodes – and this trend is expected to continue into 2025. Cape Town, with limited supply of stock and land scarcity is experiencing demand. The metro is also experiencing increased speculative development activity compared to Johannesburg.

Source: Supplied. Rand Airport Commercial Park: Located in Gauteng, it is home to Improvon’s new Dakota Precinct development.

In addition to the Rand Airport development, Improvon is developing the Meadowview Logistics Hub in Linbro Park, which is ideal for logistics- and distribution centre users, as well as North Link in Midrand. These strategically located parks are designed to meet the growing demand for space in high-investment areas, according to Truscott.

Improvon group chief executive officer, Stefano Contardo said that Cape Town experienced significantly higher demand compared to Johannesburg due to several factors which were compounded by a lack of supply.

“The metro is viewed as well-governed, with efficient service delivery creating a favourable environment for property developments and investments. Additionally, the ongoing semigration to Cape Town is driving demand for both residential and commercial properties, as there is a need to accommodate the influx of people and businesses relocating to the area.”

Contardo said there is robust demand within the firm's portfolio for warehousing and distribution facilities, as well as for third-party logistics (3PL) users. This demand primarily comes from businesses looking for space to store and distribute goods to end users or retail outlets seeking to establish a stronger presence in the market.

Regarding the 2024 industrial property market performance, Contardo said the formation of the Government of National Unity (GNU) and the peaceful political transition following the elections provided a boost to South Africa as a whole.

Source: Supplied. Rand Airport Commercial Park: Located in Gauteng, it is home to Improvon’s new Dakota Precinct development.

This positive shift was reflected in a surge in demand, with many businesses that had been delaying decisions now beginning to act. “This signals promising future prospects, with expectations of rate cuts and a potential economic recovery, which bodes well for the industrial property sector,” he said.

However, Contardo also emphasised that while overall sentiment has improved, the logistics and distribution sector’s growth depends on a rise in consumer spending.

Contardo said from a distribution-centre perspective, smaller e-commerce players are struggling to compete as major players like Amazon enter the market.

“We are likely to see some small, emerging e-commerce platforms fall by the wayside over the next 12 months, as the full impact of interest-rate cuts takes time to be felt in the market,” he said.

Limited supply, high demand

He also highlighted that in South Africa, retail centres are increasingly becoming hubs for last-mile logistics. An example of this is Checkers Sixty60, which has revolutionised the way goods are distributed and how consumers shop.

Truscott explained that Cape Town, facing limited supply of quality industrial spaces and land scarcity, has experienced slightly higher rental growth compared to Johannesburg, which has been playing catch-up.

“On a percentage basis, rental rates for existing spaces in Johannesburg have remained stable, while speculative developments have seen significant rental increases. In Cape Town, however, both existing spaces and speculative developments have maintained similar rental growth," he said.

Improvon anticipates that investable industrial property nodes with high-quality buildings in prime locations will continue to command higher rents and attract tenants.