Availability. Affordability. Accessibility. The three unique factors that have turned Nelson Mandela Bay, and Port Elizabeth in particular, into the proverbial Promised Land for investors.
It is clear – even for the untrained eye – that the baby of the country’s five metros is bursting at the seams. Every bit of vacant land is being grabbed up by investors, rezoned for commercial and industrial purposes, and sold off to the highest bidder.
Headlines such as “Landmark property deal for Greenbushes” and “East Cape’s R14 billion shopping bonanza” have become the norm rather than the exception. In less than four years, serviced industrial land prices have risen from less than a hundred rand per square metre, to almost four-hundred.
Without even blinking an eye, it seems, investors are forking out tens of million of rands – often topping a hundred, as was the case with Pangbourne’s recent acquisition of the Greenbushes Industrial Park – for industrial land. Then, without flinching, they invest billions into developing the land before selling it off piece by piece.
And the more development that takes place, the more potential investors are rushing for their wallets, inspiring further development – a snowball effect that has seen the city expand at a rate that may have been beyond comprehension a handful of years ago.
“These days it is all about the bottom line and major investors are like blood hounds when it comes to smelling a strong future,” says local commercial and industrial property broker Warren Jack, from the Warren Jack Property Group, “and they’ve sniffed us out.
“It’s a no-brainer, really. We (PE) have all the bells and whistles that investors are looking for these days, and then some.”
Top of the list, says Jack, is the region’s high potential for economic growth, boosted by a uniquely centralised yet coast-bound location that has investors smiling from ear to ear. Then there are other attractions, which he refers to as “fringe benefits”, such as a lower crime rate than in the mega centres, less traffic congestion and a lower cost of living.
“While a city like Bloemfontein is similarly central in terms of location, PE offers two harbours, which is a significant distribution and storage advantage,” says Jack. “Keep in mind that the Cape Town and Durban harbours have been experiencing capacity issues in recent times and the metro becomes even more attractive as a location.
“Besides the deepwater harbour, Coega also offers 14 000 hectares of pristine industrial land, which gives you all the storage space you need.”
But why are companies in bigger centres peeking over their provincial fences to find greener investment grass in the first place?
“A lack of space, and development land in particular, is the trigger mechanism in places such as Johannesburg and Cape Town,” says Jack. “They are reaching saturation point, which limits opportunities for expansion.
“In contrast,” he says, “PE offers large tracts of land, particularly to the west of the city in the Greenbushes area, that still lie untouched. Whereas opportunities to buy existing buildings are limited, there is an abundance of land, which developers are grabbing with both hands.”
Jaco Rademeyer, from JRE Commercial & Industrial, points out that besides the acres of available land on the outskirts of the city, large nodes of undeveloped land can still be found within its confines as well.
“Who would have thought a couple of years ago that the unsightly vacant land adjacent to Buffelsfontein Road would realise such magnificent developments as King’s Court and Builders Warehouse? The same has happened in 17th Avenue, Walmer, with the Moffett on Main and 17th Quarter retail developments, and the same trend is also becoming evident along William Moffett Expressway.”
According to Rademeyer, it is often the land that seems “undesirable” to other people that attracts developers. “They scout places with potential where land is still affordable,” he says, “and once the land is developed, it stimulates growth in the area.
“The opening of the Walker Drive Shopping Centre in Sherwood is a good example,” he explains. “In just over three years, residential property prices in the area have risen by close to forty percent. Similarly, development in Circular Drive has seen residential properties in the vicinity escalate by about fifty percent in one year.”
He says the positive sentiment displayed by developers is a further element that attracts investors to the region. “It’s a case of building momentum. The more and better the quality of investors, the more likely it is that others will follow – and they are.”
Rademeyer agrees that location is key. “If you look at a map, you will notice that PE is the most central point on the coast between Cape Town, Johannesburg and Durban. It therefore makes sense, for example, for a Gauteng-based company to have warehousing facilities right here.
“Also, if a Jo’burg company services areas such as George or East London, or any place in-between, it makes financial sense for them to use PE as a base.
“And don’t forget, we are home to the country’s motor vehicle manufacturing industry. With companies such as General Motors, Volkswagen, Goodyear, General Tyre and Bridgestone in town, we are the Detroit of South Africa.”
According to figures released by the Eastern Cape Development Corporation, the Eastern Cape has grown faster than the national economy in recent times, with the manufacturing sector – which accounts for over sixteen percent of the total value of production of goods and services – playing a significant role.
The influx of out-of-town investors has led to an interesting social phenomenon referred to as “semi-migration”, says Jack. “Heads of large corporates are increasingly establishing homes on local shores, sending their families ahead to set up, before returning back home to begin the migration of their businesses.”
Besides commercial and industrial property values sharply increasing, the rental market has kept pace, says Jack. “Warehousing facilities are in high demand,” he explains, “and the demand is driving the prices.”
The Nelson Mandela Bay Municipality have also come to the party in making the metro a desirable location. They are in the throes of implementing their two-billion rand “Vision 2020” campaign, which is aimed at stimulating investment and economic growth in the region.
The campaign will focus on twenty-three development projects, which include Coega, the beachfront and gateway beautification, as well as the upgrading of the Uitenhage core area.
As the country’s second oldest city, it has taken PE a while to rid itself of its baby shoes, but with developments such as the eight billion rand Westpoint project on the horizon, the Friendly City is set to mature very, very quickly.
Full Stop Communications