OVERVIEW
Construction and property Logistics property is strongly placed for growth. SECTOR INSIGHT Cement and brick manufacturers are hoping for a quick recovery.
Credit: Equites
T
he trend which saw logistics property growing as a sector because of the Amazons of the world needing more space to store their products will speed up in the post-Covid world as more people work and order from home. The Economist focused in its 30 M ay 2020 issue on Prologis, Amazon’s biggest landlord. The American company has assets of $125-billion and 90km² of floor space, and spent $25-billion in 2019 in America and Europe. E-commerce now accounts for about 40% of its construction activity, whereas it was a fifth before the pandemic. A similar trend playing out in South Africa was noted by Nick Wilson in the Business Times (Sunday Times 5 July 2020). The logistics property sector had “boomed in recent years due to the growth of e-commerce” but was likely to do even better because of Covid-19. About a third of Fortress’s R30-billion portfolio is in the logistics sector and it signed contracts in 2020 with Takealot and a Netflix production company. The clients of Equites, a company which focusses on logistics property, include Amazon, Super Group, HDL and DSV, a Danish transport and logistics company. Equites is the only specialist logistics property company listed on the JSE. In six years, its portfolio has grown from R1-billion to R15-billion. There are more than 30 real estate investment trusts (REITs) on the JSE and they generally deliver good value. FNB, which publishes a regular proper t y barometer, has done an in-depth analysis of previous crises to help understand what may occur in the post-Covid proper ty market. According to John Loos, a property strategist at FNB Commercial Property Finance, the most vulnerable sector is likely to be Retail Property. Smaller neighbourhood centres,
SOUTH AFRICAN BUSINESS 2021
72
with more essential items and greater convenience, will be less vulnerable. This is borne out by the results announced by Resilient in 2020. Of the company ’s 28 retail centres across South Africa, the ones that did best were the smaller, rural malls. The South African Council of Shopping Centres calculates that the country has the sixthhighest number of shopping malls in the world. R2-billion was recently spent on Menlyn Park in Pretoria to expand it to 177 000m² of gross lettable space while the Gateway T h e a t re o f S h o p p i n g i n Durban, South Africa’s secondbiggest mall, recently spent R750-million. The lockdown accelerated the trend for people to work f ro m h o m e , a n d s o t h e Office Proper ty sector will come under pressure. Many companies will be reducing office space but, as Loos writes, “Improved technology has gradually been driving a greater remote working trend for some years. Covid-19 has merely sped this trend up.”
