Business park owner and operator Inospace and JSE-listed Fortress REIT Limited are collaborating to unlock significant opportunities that exist in last-mile logistics.
The partnership will be launched with an initial portfolio of twenty industrial properties in Cape Town and Johannesburg.
Through Inospace, the deal will provide a combination of warehouse, logistics, storage and workspace at an initial valuation of R1.25 billion. Fortress contributed twelve multi-tenant assets, with Inospace contributing the rest.
The combined portfolio covers a total lettable area of 200,000 m2, with more than 600 tenants. All parks will be branded and redesigned to provide Inospace’s value-added facilities, such as staffed business centers, meeting rooms and belongings storage.
A new range of equipment will be introduced at the parks to help SMEs with last mile logistics, including rigging and lifting equipment, material handling devices, packaging materials, consignment note printers and an online courier and shipping platform.
The ongoing management of the joint venture assets is governed by a management agreement, which ensures that Inospace will use its technology platform to optimize, market and operate the assets.
“Our collaboration with Fortress represents a significant opportunity for both companies, and the Inospace team is excited to be able to expand our footprint and thereby enhance our value-added customer offering,” explained Inospace CEO Rael. Levitt.
From supply chain lockdowns to surges in online ordering, the utility of logistics-focused assets has exploded over the past two years, driving unprecedented demand for delivery and distribution space and services.
According to Levitt, the demand for SME-focused industrial space predates the Covid pandemic. “With few multi-tenancy mini-industrial new builds in a decade, favorable supply and demand fundamentals have resulted in low vacancy and strong demand from small businesses. We are in a dynamic real estate niche with strong tailwinds that prove to be structurally resilient”.
Steve Brown, CEO of Fortress, commented: “This partnership provides us with immediate scale in a growing niche and asset class through the formation of an attractive portfolio into which Fortress and Inospace bring assets. We are delighted to be working alongside a best in class operator specialist who is reinventing the tenant/landlord relationship”.
The transaction results from a trial with two Fortress-owned properties in Gauteng, which have been successfully repositioned into serviced micro-logistics and business parks named Wadeville Works and Electron Exchange. Of this, Brown says, “Specializing in small urban industrial and last-mile logistics spaces has proven to be a high-growth sector.”
Subject to suitable investment opportunities, Inofort may consider opportunities to grow the joint venture’s portfolio primarily by acquiring and reallocating additional assets from Fortress or finding other portfolios suitable for their optimization model. The partnership will capitalize on the asset management expertise of Fortress and Inospace, which bring complementary skills to the joint venture.
“We are excited to grow our business by strengthening our partnership with Fortress,” said Director Jeremy Katzen. “We are poised for growth, both organic and through acquisition, and are uniquely positioned to capitalize on growing demand for our trending offering in this rapidly growing globally recognized real estate niche.”