September 12 2024 16:00
Silo Exchange Belville Triangle
Inospace, the South African leader in last-mile logistics real estate, has reported outstanding and record-breaking results for the quarter to end-August 2024. This is despite challenges such as high interest rates, municipal hurdles, and political uncertainty in May. In fact the company experienced a significant post-election recovery, achieving a 12.2% overall rent roll increase for the financial year, with 7.2% growth on a like-for-like basis.
The privately-owned company, which operates a R1.3bn joint venture with Fortress Real Estate, marked its seventh consecutive year of over 10% like-for-like rent roll growth. Inospace maintained a robust cash collection rate above 95% for the quarter, showcasing its operational resilience.
Inospace stands out as the country’s top owner and operator of last-mile logistics parks and it is one of the country’s fastest-growing private commercial property companies. Since its formation in 2017, the group has captured much of the multi-let industrial property market by buying older industrial buildings and converting them into innovative parks with a range of value-adding products and services aimed at smaller business entities.
Inospace’s success remarkable given the plethora of challenges which the South African commercial property market has faced in recent years including low economic growth and rising unemployment, the pandemic and a rising cost of money. There is now optimism that interest rates will fall in September and beyond. Inospace has also pivoted from traditional real estate investment to a fusion of space and technology solutions. This strategic shift positions the company as a comprehensive logistics and leasing systems provider which creates innovative solutions for a new generation of entrepreneurs.
Island Workshops Paarden Eiland
Strong Financial Performance and Capital Recycling
Inospace has seen a sharp rise in Net Operating Income (NOI) of 18%, with occupancy rates across its portfolio nearing 96%, driven by strong tenant demand. The company remains focused on recycling capital, identifying R564m worth of assets ready for sale, with R205m sold in the last quarter alone.
“We’ve seen strong interest from investors in acquiring our branded properties while we continue operating them as the blue-chip tenant. This model allows us to reinvest capital profits into new growth opportunities. Recycling capital is one of our key strategies,” Rael Levitt, Inospace’s founder and CEO said on Thursday.
SME-focused Business Model Driving Success
Inospace’s success stems from its innovative business model, which provides flexible, serviced spaces for small industrial, logistics, and e-commerce businesses. Founded in 2017, the company transforms traditional industrial properties into dynamic logistics parks, offering a blend of space and value-added services tailored to SMEs.
“In our June 2024 survey of 300 SME owners and leaders, 88% expressed confidence in their future,” Levitt said. “South African SMEs have proven resilient, with over half expecting profit growth by 2025,” he said.
This confidence, coupled with economic shifts and the growth of online shopping, has fuelled strong demand for Inospace’s offerings. In the past six months alone, the company signed 101 new leases and renewed 525 client contracts.
Leveraging Technology for Growth
The R3bn Inospace portfolio has grown steadily since the company was formed in 2017, powered by its tech-enabled leasing platform, Lisa. This system streamlines leasing processes, offering digital workflows, integrated tenant services, and real-time analytics that enhance client experience and operational efficiency.
“Technology is central to our growth,” Levitt said. “
Last year, we launched an e-commerce fulfilment and scalable warehousing service in Cape Town. Many tenants need scalable space to manage seasonal fluctuations, while others require smaller showrooms or offices with outsourced e-commerce functions,” he said.
This value-added service has become highly profitable and created significant new revenue streams for the company. Inospace plans to roll out its logistics services and courier aggregator to other sites. The company was recently appointed as an official Takealot partner, offering courier services to its fulfilment clients.
Island Works Paarden Eiland
Inofort Joint Venture Delivering Strong Results
Inospace’s joint venture with Fortress Real Estate Investments Limited, Inofort, has been another key driver of the company’s growth. The partnership, covering 20 industrial parks, delivered impressive results, including a 17.5% increase in NOI and a 12% rent roll growth, with occupancy rates reaching 95.7%.
“The success of Inofort reflects the strength of our collaboration with Fortress,” said Levitt. “The consistent performance and rising tenant demand highlight the effectiveness of our strategy.”
Strategic Acquisitions and Expansion in the Western Cape
Inospace has committed over R1bn to new acquisitions, focusing on expanding its footprint in high-growth areas of the Western Cape. Recently, the company acquired the Telkom telephone exchange on Cape Town’s Foreshore, located at the entrance to the V&A Waterfront, which one of the most popular tourist attractions in the country. This prime location will be transformed into a city-based last-mile delivery and storage hub, providing vital services to businesses and entrepreneurs in Cape Town’s central city and the nearby Atlantic Seaboard. The company is also expanding its footprint to the booming Stellenbosch and Paarl suburbs, where it has seen enormous demand.
Lanzerac Works, Midrand
Cape Town has emerged as a major growth area for Inospace, with rental growth outpacing other regions and occupancy rates approaching 100% across its parks.
“Cape industrial rentals will soon reach rates close to R100 a square metre. Yet our biggest challenge in Cape Town is a shortage of space. We’re actively seeking new sites to meet the rising demand,” Levitt said.
Operational Efficiency and Leadership Expansion
In the past two quarters, Inospace has prioritised driving operational efficiencies and reducing operating costs. As a result, the company saw its profitability increase sharply. To strengthen its leadership team, Inospace welcomed new chief financial officer, Nick Shabason, while David Bernstein was promoted from chief investment officer to chief operating officer.
The Inospace team with Bruce Collins, head of asset mamagement at Fortress Real Estate
Looking ahead, Inospace remains optimistic about its continued expansion in South Africa and beyond. The company is exploring additional value-added opportunities, including reinvesting in strategic assets to support long-term growth.
Partner content for Insopace
alistair@propertyflash.co.za
