Fortress well-placed to leverage new trends in logistics real estate - transforming Covid disruption into future growth
Written by Jason Cooper, Head of Property Development at Fortress Logistics Real Estate
The whole logistics market has changed and in Fortress’s case, for the better. Our long-term strategy, pivoting the business to a two-thirds logistics real estate weighting composed of state-of-the art modern logistics boxes in key urban locations – in South Africa and Europe – has helped us to buck the trend in what has been a lacklustre year in the real estate sector.
When Covid hit, we had seven new developments under construction, so we were obviously concerned about how Covid would impact these projects. Although the past year was challenging, we have let about 180,000m² of space and we’ve got another 160,000m² of space out on offer.
The 180,000m² that has been let is made up of various deals. This includes two large deals at the Clairwood Logistics Park in KwaZulu Natal. African Sugar Logistics has taken 34,000m² and we have built 56,000m² for Kings Rest Container Terminal. This terminal will be of great benefit to all tenants in the park. In Johannesburg, we’ve signed a long-term deal with Zest WEG for 25,000m² at our Longlake Logistics Park and we have contracted 14,000m² with Clippa at Eastport Logistics Park.
One of the reasons for this growth is that the pandemic has forced companies to relook their supply chain and stock ordering process. We believe that our customers will be holding more stock in the future to ensure that they have enough supply to satisfy local demand. There has been a pivot away from last-minute supply chain due to the severe disruptions that have occurred globally.
The substantial growth in ecommerce has led to a marked increase in demand for well-located logistics real estate assets near or within major metropolitan centres. Our strategy of building prime state-of-the-art facilities with easy access for large, articulated trucks within secure parks is proving to be an attractive proposition for sizeable warehousing users.
While rail is yet to become sufficiently efficient in South Africa, properties with integrated road and rail access are going to become more sought-after. With so much disruption and change impacting the logistics sector, tenants require more flexible and short-term lease structures. If they need temporary space on a short-term basis, we are very happy to assist, as we realise their businesses are ever-changing. Since so many clients’ logistics planning is still unpredictable, the flexibility of lease or part-ownership arrangements – providing various options to scale up - at our prime logistics sites is sustaining vacancies in the region of 3% despite the pandemic disruption.
Consolidation, as clients look to combine three or four logistics facilities into one, is driving demand for new, quality, fully serviced and well-located properties. With inventory and supply receiving a greater share of business attention - and budget allocation - space, location and security are all better addressed through consolidation. Significant savings in risk, staff and payroll are achieved by consolidating, especially if the security, fire and other infrastructure services are provided on-site by the landlord.
Fortress’s current new developments, delivering over 170,000m2 in the last six months in South Africa alone, ensures that the business is well-placed with quality assets, and has a development pipeline with land in sought-after locations around South Africa’s key ports and urban population hubs.
By staying true to our two-thirds logistics strategy, we have been able to leverage the growth – and powerful investment proposition – represented by the development of cutting-edge logistics real estate in support of emerging global trends in ecommerce and omnichannel, despite widespread disruption in other real estate sectors.