Anyone running a commercial franchise (or a conventional brokerage), primarily handling industrial property in the greater Durban area, has to accept, firstly that there is a serious shortage of land zoned for commercial use; secondly, that, having established connections with those companies that are looking for new premises, it can take time to meet all their criteria; and thirdly, that the rezoning of land in areas identified as suitable can, again, be time-consuming. Nevertheless, the market is now “ideal” for buyers looking to get in ‘on the ground floor’ while prices are still low and purchases of unzoned properties will be worth substantially more once the rights are in place.
This was said recently by David Hitch, one of the Rawson Property Group’s more successful commercial franchisees, who is also active in the residential field (he owns the Kloof franchise). His broker, Winston Sjouerman, was Rawson Commercial’s top performer in 2012.
Hitch’s commercial operation takes in the whole of the greater Durban area. He bought the franchise just over a year ago and now employs five commercial brokers.
“Right now,” said Hitch, “there are relatively few companies looking to buy large industrial spaces or to establish themselves in big new premises. However, we are in touch with several and are working steadily to meet their specifications. We have several agents experienced in handling turn-key and package operations, the advantages of these are that the final price is known right at the outset and all the details are sorted out by ourselves. Our successes in the field are due to the fact that we work with Durban’s top professionals and design and quantify surveying associates, many of whom have extensive rezoning experience.”
Hitch said that in general, prices are now well off their 2007 peaks and investors looking for bargain opportunities should be investigating the many good opportunities open to them now, particularly in areas such as Cornubia (a new commercial trade zone near the King Shaka Airport) and Cato Ridge. The challenge, however is to find stable tenants who will commit to long leases.
The Rawson Commercial team, said Hitch, has been exceptionally busy with rentals in recent months, often signing up three to six rentals per month.
Rental demand, said Hitch, is particularly strong for premises in the 400m² to 2000m² bracket – and here, he says, there is now a serious shortage of suitable space. This shortage has caused rents to stabilize over the last two years and annual increases of up to 5% are now generally accepted. In River Horse and Briardene, said Hitch, today’s rents are pitched at around R55 per m², in Pinetown they are from R30 to R40 per m² and in Jacobs and Mobeni from R30 to R38 per m².
Those looking to invest in industrial land which could have a promising future, said Hitch, should also be looking at the old airport. The government’s plan to turn this into a ‘badly needed’ container harbour, with its own dry dock and rail link to a new container depot at Cato Ridge, means that within five to eight years, land here could be prime industrial property.
“Looking generally at commercial property in Durban”, Hitch repeated, “it is quite clear that now is the right time to buy. With prime at 8,5%, it is possible to find good industrial land in upcoming areas, at anything from R500 to R2500 per m². Within the next five to ten years these prices will, I am confident, seem ludicrously low – because the current big dip in the economy, although the most serious we have experienced since the 1930’s, will not, I am convinced, last forever.”
