Capitalising On E-Commerce

Industrial property is benefitting from declining in-store retailing and the huge growth in data consumption.

- Glenda Williams

For the most part, industrial property (factories, logistics warehouses and distribution centres) has been the poor relation in the local property investment landscape. Even South Africa’s listed property and real estate investment trusts (Reit) sector has largely fixed its attention on retail and office assets.

According to Bridge Fund Managers, on 31 July 2020 only 18.3% of the FTSE/JSE Listed Property Index (SAPY) comprised exposure to the industrial sector. Of that, 6.6% being traditional industrial (primarily manufacturing) and 11.7% logistics (warehouse storage and movement of goods). The FTSE/JSE REIT SA Index figure is somewhat higher at 23.5%, split between 5.7% traditional and 17.8% logistics.

Ironically, given lower exposure to the asset class, industrial property is cheaper to own and operate compared to other asset classes.

“A lot of the costs are pushed to the tenant, and per square metre, it is much cheaper to build,” Steven Brown, CEO of Fortress REIT, tells finweek.

But the approach to the asset class has been upended by the Covid-19 pandemic, which has brought with it strong e-commerce and e-tailing tailwinds on the back of declining in-store retailing – advancing the gains the industrial sector has made in recent years due to retailers requiring more efficient supply chains and e-commerce.