Coronavirus: South Africa’s Comair lands into business rescue
Comair, the listed regional and local airline operator, has ordered an immediate halt to trading in its shares and entered into voluntary business rescue.
By David Whitehouse
South African investors in real estate for logistics have so far been largely shielded from non-payment of rent caused by lockdown.
The need among retailers to be able to supply customers who are increasingly demanding about the channel of delivery means that demand for warehouses has strong prospects for growth.
“We favour logistics and warehousing globally,” says Garreth Elston, chief investment officer at Reitway Global in Cape Town.
“South Africa is no exception,” but the sector’s outlook can’t be divorced from that of the overall economy, he says.
READ MORE: Coronavirus: Ramaphosa ramps up economic relief measures as pandemic grows
Retailers still have a lock of unsold stock sitting in warehouses and will be wary of making new agreements to take on more space, says Elston.
Still, the logistics sector has “stood up quite well” during the lockdown. Cashflows have remained strong despite a degree of stress caused by lockdown.
“People are paying their rent. In terms of four walls and a roof, it’s the sector we’re most positive on,” he adds.
In the future, there will be a stronger need for space for fast-moving consumer goods such as food and beverages, he says. “That’s where the global trend is.”
Retail driven warehousing, storage and distribution spaces are “on a strong growth path in the short to medium term” given the trend towards e-commerce, according to research from Jones Lang Lasalle (JLL) on South African real estate in the first quarter.
“Logistics is likely to be a beneficiary of the acceleration of the increasing penetration of e-commerce,” says Craig Smith, head of research and property at Anchor Stockbrokers in Johannesburg.
READ MORE: African e-commerce investment must continue when the Jumia party stops
While real-estate investment trusts (REITs) in South Africa such as Growthpoint and Fortress have some exposure to logistics, the only pure play, Elston says, is the Equites REIT.
Equites invests in logistics properties in South Africa, which accounts for 75% of portfolio revenue, with the rest coming from holdings in the UK.
The strategy is to hold logistics properties close to major transport links and urban centres. New acquisitions include properties at Meadowview West and Witfontein in Gauteng.
Bottom line: Real estate for logistical use offers one of the few clear growth stories available in South Africa.
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