Fortress Reit set to have R20bn in logistics parks by 2026
The real estate investment trust says demand for logistics parks rather than warehousing is rising
Fortress Reit, the JSE-listed real estate investment trust (Reit), is on track to have two thirds of its directly held property assets in high-end logistics, such as industrial parks, within the next three to five years, according to CEO Steve Brown.
In that market, the landlord will compete head-on with Equites Property Fund, the only pure logistics landlord on the JSE, as well as unlisted groups such as Improvon and JT Ross.
The company will double its logistics assets base from R10bn to R20bn, Brown said in an interview with Business Day on Thursday.
Fortress will then own about R6.5bn worth of SA retail assets with a focus on commuter shopping properties. The company already owns Thrupps Centre in Illovo and Pineslopes in Fourways. It also owns a 23.6% stake in East European shopping centre owner, Nepi Rockcastle, worth about R13.5bn.
Many property owners are investing in industrial logistics and warehousing across SA, but Fortress argues that the quality of its assets outweighs that of its competition.
Unlike a common warehouse, logistics parks offer a larger amount of space for storing goods and products. They are more spacious and also better managed than warehouses. They are built in a way that allows easy space for current clients, while leaving enough space for any future expansions or clients, according to Brown.
Warehouses, because of their size, are generally in more remote places. However, logistics parks tend to be in urban centres or near ports, such as those in Durban.
“We have spent a few years selling our smokestack factories and other weaker industrial assets in favour of investing in high-end logistics properties, specifically industrial parks. These set us apart from owners of single warehouses because of very strong security, better finishes and better maintained space,” Brown said.
Fortress has developed and let 250,000m2 of logistics space in the past three years. It has as much as 320,000m2 under development and planning. It is the largest owner of logistics space in SA. The second largest listed owner is Equites, which owns an SA portfolio worth R8bn and a UK portfolio worth £250m (R5bn).
Jason Cooper, head of development at Fortress, said more companies were seeking high-end warehouse space during the pandemic as they were unable to sell certain goods. “The strategy equipped [the company] with the ready-built runway to support key clients’ new supply and logistics strategies in response to the Covid-19 pandemic,” he said.
He said increased roof heights and yard dimensions are meeting increased global fire regulation, security and insurance standards, which underpin Fortress’s success in signing new leases throughout the pandemic.
He said the company's signature development in KwaZulu-Natal, Clairwood Logistics Park, performed extremely well during the pandemic. Fortress concluded a deal with Kings Rest Containers for about 56,000m2. African Sugar Logistics took up a further 35,000m2 and will move in early May 2021.
At Cornubia Ridge Logistics Park, close to Umhlanga, “we completed our first speculative building, which is fully let to UPL and Retailability”, said Cooper.
Fortress will soon start construction on its next two speculative developments on Cornubia’s lower platform. One is a building of about 10,000m2 and the other about 6,500m2.
In Gauteng, Fortress’s Eastport Logistics Park, close to OR Tambo International Airport, has signed with Teraco’s JB4 data centre. Africa’s largest data centre, the Teraco development will comprise 50,000m2 of built space.
Fortress also recently concluded a lease with USN, the sports nutrition group. It took up 14,000m2 of prime warehousing in December 2020 on a 10-year lease at Fortress’s Louwlardia Logistics Park in Centurion.
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