Deglobalisation delivers local supply chain and manufacturing opportunity

Jul 5, 2022 | News

Commentators report the world in the throes of deglobilisation a trend whereby countries are reducing their interdependence on global economies, cultures and populations and relying more on local support. This shift in economic activity is impacting the flow of investment, people and information, and most notably cross-border trade in goods and services resulting in an upswing in local manufacturing and distribution.

With the subsequent demand for warehousing on the increase, it seems South Africa has adopted this transformation and local markets will benefit.

“As a result of deglobalisation our reliance on China and other manufacturing countries is forcefully being reduced and Africa is having to start on-shoring their supply chain of goods as well as finding locally manufactured commodities – this bodes well for the property sector and is driving the demand for warehousing,” says Quintin Rossi, CEO of JSE listed Spear REIT.

The disruption to global supply chains compounded by the war in Ukraine, the ‘side-effects’ of Covid, elevated logistical costs and economic instability have pushed corporate leaders and investors to reassess and re-evaluate their current strategies and look to local to support the dwindling supply chain. Similarly the commercial and industrial real estate sector is having to look a little closer to home and tweak their offerings – factoring in property sizes, the distance from ports, outlets, airports etc. to combat rising fuel costs and traffic congestion.

Already you have big corporations such as TFG and Pep adopting this China plus-one approach having to on-shore and manufacture locally due to supply chain constraints, and in an environment where you have the transportation of goods – the cost of which has increased by 400% from China to end-destination – there is no other option but to find local suppliers says Rossi.

As a regionally focused REIT which only owns Western Cape assets with a Cape Town bias, Spear has been acquiring warehousing on the City’s periphery that will service any and all types of industry. “We are in a position to provide manufacturing and storage space of between 2000m2 to 30 000m2 for these local operations,” says Rossi. Ideal tenants include bulk storage companies, transport, courier and logistics, removal companies, manufacturers, and distribution-focused warehousing.

Off the back of successful FY22 results, Rossi adds that Spear’s focus is to continue with their growth strategy and increase its investment into multi-let industrial, warehousing, logistics and convenience retail assets in the Western Cape that are accessible and conveniently located in well- established nodes or in growing nodes, across the metro and the Province all the way up to George. This will complement their existing core portfolio comprised of high-quality assets underpinned by strong lease covenants and superior tenant profiles.

This shift to onshoring will hopefully yield a more sustainable form of global trade and investment, help reduce transport costs and traffic congestion, create jobs, improve our local economy, restore investor confidence, and further boost the real estate sector as the Covid blues are shaken off and a brave new world is encountered.

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