This morning I was up bright and early and bushy tailed running around looking at warehouses for an upcoming business project that is due to start in March/April. I have an idea of what I would like to spend on a monthly rental and needed to double check if what is in my head is even realistic. Certain areas are far more expensive than others and I visited one of the lower end areas today.
Warehouses have kind of increased in pricing year on year and is the most resilient part of the property market. Just doing a quick search and there is less than 5% vacancies and these do not last very long. I know what I would like to pay and this is in the R60/sqm price range and today I was looking at R70 sqm plus pricing.
Most of these property listings were listed for rental or for purchasing and can understand why people buy the buildings outright because within 5 years you could own the building outright and be rent free. The pans I have are not long term here and would definitely consider buying in Europe when that happens. The market is too small here to think this warehouse property expansion growth is sustainable as the number of consumers is not increasing and one would think a correction in the market has to happen..
The problem is I require food grade standard facilities which would normally have epoxy coated flooring. Many warehouses or should I say the newer builds would most likely pass the health inspectors even though these are just standard specifications.
When Covid hit retailers were forced to go online and this created a demand for warehousing never seen before. Every business needed a supply chain distribution center and since 2020 the number of new warehouses being developed has exploded. One would think there would be low occupancy levels due to the new inventory, but there is literally less than 5% even though the numbers have doubled.
When I look at our current warehouse it may be old and tired, but the price reflects this and why there would be many tenants wanting what we have as we are paying half of what the market is paying. This took months to find and was able to get a great lease due to the quirky spaces which would put other businesses off. For me it was ideal as I just said you cannot charge me for these areas as they are dead space, but we use them and make it work to our benefit.
My friend and I who are setting this production plant business up are paying all the costs so knowing what the start up costs will be and the monthly costs is important to know ahead of time. My wallet is not a bottomless pit and setting up in March is just around the corner. The start up costs will actually be fairly cheap and expect to be under $10K each which is extremely good. For the right project I do not mind spending and sharing the expense with someone you know and trust makes things that much easier. My friend asked me to come on board and I was not really looking for another project.