What first-time warehouse tenants need to know
SOUTH Africa’s industrial and warehousing market continues to be the star performer of commercial real estate. In 2024, the sector delivered a robust 15.2% total return, outperforming office and retail assets and reinforcing its reputation as the most resilient segment in a challenging economy.
But for businesses entering the warehousing market for the first time, the process can feel intimidating. Industrial leases are complex, heavily technical, and carry long-term operational implications. Choosing the wrong space can constrain growth; choosing the right one can unlock efficiency and cost savings.
Paul Stevens, CEO of Just Property, says the most successful tenants are those who understand how to align a warehouse’s features with their operational model — not just its price tag.
What First-Time Tenants Should Know
- Start With the Space That Fits Your Operation
The Gross Leasable Area (GLA) is your starting point. Consider throughput, pallet volumes and inventory turnover. Modern A-grade warehouses typically offer 8–13m eave heights, with premium facilities exceeding 15m to support high-volume racking.
- Yard and Docking Design Drives Efficiency
Not all yards are created equal. Critical features include:
- Dock levellers and on-grade doors
- Weather-protecting canopies
- Adequate yard depth for container trucks
- Staging areas for loading and offloading
A standard dock height of 1.2m will suit most fleets.
- Floor Strength Matters More Than You Think
High racking, forklifts and heavy equipment require strong slabs with the right thickness, jointing and load-bearing capacity. Underspec’d flooring is a costly mistake.
- Secure Power and Resilience
Power interruptions can halt operations instantly. Ask whether the site offers:
- Three-phase power
- Capacity for rooftop solar
- Space and permissions for generators
- Water resilience measures
- Safety and Compliance Can’t Be an Afterthought
Fire protection is essential. Warehouses with sprinklers should comply with:
- ASIB certification
- SANS 10400-T (Fire Protection)
- SANS 10287 (Sprinkler Design)
Many insurers require ASIB sign-off before issuing cover.
- Zoning and Permitted Use: Don’t Assume
Ensure the property is zoned for your activities. Zoning rules vary across municipalities, and approvals can take time.
Certain operations require additional compliance:
- Hazardous materials: Must align with SANS 10228 and may trigger Major Hazard Installation (MHI) requirements.
- Customs-bonded storage: SARS licenses A/B/C-type bonded warehouses with strict control conditions.
Checklist: What to Review During Site Visits
Use this checklist to compare different warehouses before making a decision.
- Access & Logistics – Yard depth, dock types, truck turning circles, parking
- Dimensions & Capacity – GLA, eave height, stacking height, floor loading
- Insurance – Landlord vs tenant cover requirements
- Lease Costs – Rent, ops costs, deposits, escalations, VAT
- Lease Terms – BO/TIA, renewals, expansion rights, sub-letting, reinstatement
- Office & Amenities – Office ratio, ablutions, disabled access
- Power & Utilities – Three-phase, solar readiness, water reliability
- Repairs & Maintenance – Landlord vs tenant responsibilities
- Safety & Compliance – Fire systems, certificates, hazardous material permits
- Support Infrastructure – Security, fibre, 24/7 rights, driver facilities
- Sustainability Features – LED lighting, solar, water efficiency
- Timing & Location – Occupation dates, IT/telecoms lead times, staff proximity
- Zoning & Approvals – Confirm current zoning and future permitted uses
Understanding Your Lease: The Contract Is Everything
Unlike residential leases, commercial leases are governed primarily by contract law. The Consumer Protection Act generally does not apply to companies with turnover above R2 million, meaning protections are limited.
Key terms to understand:
- Base Rent
- Quoted per square metre, excluding operating costs (rates, security, insurance, VAT).
- Escalations
- Annual increases typically range from 8–10%, though CPI-linked escalations are becoming more common.
- Deposits and Guarantees
Landlords usually require 1–3 months’ gross rent. Deposits may be cash or bank guarantees and should be held in trust, with clear refund terms.
Fit-Out Support
Landlords may offer:
- Tenant Installation Allowances (TIA)
- Beneficial Occupation (BO)—a rent-free period to complete fit-out
These depend on lease length and negotiation.
Heads of Terms (HoTs)
This document outlines all key deal points — rent, escalations, BO/TIA, renewal options, maintenance obligations, and termination rights. Always have a legal advisor review it.
Green Clauses
More leases now include measures covering:
- Energy-data sharing
- Solar PPAs
- LED retrofits
- Water-saving commitments
These can materially reduce operating costs.
Types of Commercial Leases
Gross Lease – Tenant pays fixed rent; landlord covers most operating costs.
Net Lease – Tenant pays rent plus a portion of operating expenses.
Triple Net Lease (NNN) – Tenant pays rent plus shared maintenance, taxes, and building insurance.
Why Expert Guidance Matters
Stevens says that choosing a warehouse is about more than securing space — businesses must consider long-term operational efficiency, cost stability and compliance exposure.
“Each decision carries operational and financial consequences. A knowledgeable broker can help tenants ask the right questions early and avoid expensive mistakes,” he says.
With demand for industrial space remaining high and returns outperforming other asset classes, taking a strategic, well-informed approach to leasing is essential. The right warehouse doesn’t just house your business — it supports growth, efficiency and resilience.
