Commercial and industrial property prices in Durban south should get a shot in the arm as key developments come to fruition there. The most notable of these is Clairwood Logistics Park and the JT Ross development in Sydney Road. A third, more long-term development is the massive auto supplier park being established to service Toyota’s car manufacturing plant. South Durban and the back of the port area have a bad rap because of environmental complaints and businesses gripes that the area is often gridlocked. Many post World War 2 buildings are increasingly unfit for purpose with bad truck access and no docking bays or hoists. But, for many firms whose proximity to the port is critical, the area remains doggedly popular.
Last week in Durban commercial property specialists In2Assets held its monthly auction, where 16 properties came under the gavel, securing R79 million in sales. Of those three properties were in the heart of Durban South and knocked down for a combined R19,4 Million. Bidding at the auction was brisk when these three properties came were up, reflecting the inherent demand for the area, said In2assets director Rainer Stenzhorn. Fortress Income Fund, listed on the Johannesburg Stock Exchange, is investing R4 Billion in the redevelopment of the old racecourse into Clairwood Logistics Park. It is set for completion in 2020, but development manager Nico Prinsloo says the first spec warehouse will be completed by October 2018, which should drive up interest in what is already a talking point in the area.
The development is the subject of a case that is being heard in the Durban High Court, brought by the South Durban Environmental Alliance which wants the judge to overrule the government permission for the park on the grounds that the racecourse was a green lung and the new build will worsen pollution-related illnesses in the area. R540 Million on Clairwood so far Fortress paid R430 Million for the site and has pumped R110 Million into development costs, plus another R135 Million on infrastructural upgrades around Clairwood, mainly to the roads, creating a new intersection off the freeway and re-routing the area’s sewer lines. “Everything is going according to plan,” Prinsloo says. “The last building is expected to go up in 2020, but we have already commenced with the construction of a spec building of 25 000 m². We are well aware of the needs of logistics operators and that building will probably fulfil 75% of those needs.”
In total, the park has a bulk offer of 368 000 m² and is looking at tenants with a minimum requirement about 5000 m². Prinsloo’s colleague, Grant Lewington, the national leasing manager for Fortress, says there is a lot of interest in Clairwood, but he expects commitment from companies once the park’s infrastructure and first warehouse are completed. People find it difficult to visualize what is proposed beyond the earth works taking place. That said, with existing leads brought to Fortress, the company could fill approximately 120 000 m² if the park opened tomorrow, he says. “We are engaging with a lot of interested parties in Durban, especially those in close proximity to the park. There are a lot of potential users. This is the last remaining big piece of flat land in close proximity to the port. “Our main competition in terms of space comes from the old, surrounding areas which don’t offer the same standards and best logistics practices we offer, which will differentiate us.” Prinsloo and Lewington say there will be huge emphasis on easy traffic flow and large yard space in Clairwood Logistics Park, trying to meet the dire need for appropriate facilities.
As for price, they say existing rentals in the area, where there are few vacancies, are between R60-R65/m², but most of these facilities are outdated and compromised. “Taking into account annual escalations, we envisage bringing our first building on stream at approximately R70/m². The speculative 25 000m² facility will be ready for occupation in about October 2018.” Prinsloo says the total spend on Clairwood, over eight years and including the purchase price paid in 2012, will be in about R4 billion. “We believe this commitment will have a massive effect on the economy and a
much-needed upgrade and stimulus for business in the area.” Recycling old spaces There are high hopes for a rejuvenation of the Sydney Road area with the JT Ross development there. People are likening it to the redevelopment unleashed by JT Ross when it transformed the historic Lion Match factory in Umgeni Road. In the last year, JT Ross has bought and redeveloped the old Dunlop Plant off Sydney Road. Railway lines separate the real estate gem from the harbour and made the purchase a no-brainer says JT Ross development director Grant Smith.
The company has extracted 80 000m² in rentable area, plus refurbished a 4000m² office block. Says Smith: “265 Sydney Road is unique in its history, size and location. The iconic building is over 100 years old and lies on the fringe of Glenwood’s suburbs, close to Maydon Wharf and on the arterial routes in and out of the CBD. “Its placement has attracted logistics and distribution tenants who benefit from the proximity to the harbour. The office block associated with the site has a certain retro charm to it.” Stenzhorn, from In2assets, says Durban South offers great value for firms that need port access. But, he says, some parts of the area need a make-over or a municipal vision to capitalize on the property assets there. “There is a lot of stock on the market and because of the outdated design of many buildings, there is a high vacancy rate. Vehicular access in some places can be a problem. Developments, by Fortress, JT Ross and Shree Properties have and will boost confidence in the area because they repurpose buildings and provide modernized amenities.
“In spite of the negatives associated with Durban South, many businesses need to be close to the port and there is a finite supply of port side property,” Stenzhorn says. Ed van Niekerk is Maxprop executive director and KZN chair of South African Property Owners Association. He says Clairwood, the auto-supplier park and the JT Ross development are all good news for confidence in the area. “There is not a lot of vacancy down south and rentals seem to be holding upwards of R55/m². Rentals aren’t supporting new developments. It makes sense for building owners to refurbish and do brownfield developments, and more people there are taking advantage of that. The area still has a strong value proposition because it is back of port.”