Inospace, South Africa’s leader in last-mile logistics real estate, has reported outstanding results for the quarter ending in August. Despite challenges such as high interest rates, municipal hurdles, and political uncertainty in May, 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 an R1.3 billion 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.
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 R564 million worth of assets ready for sale, with R205 million 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,” said Rael Levitt, Inospace’s founder and CEO.
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,” said Levitt. “South African SMEs have proven resilient, with over half expecting profit growth by 2025.”
This confidence, coupled with economic shifts and the growth of online shopping, has fuelled strong demand for Inospace’s offerings. In the last six months alone, the company signed 101 new leases and renewed 525 client contracts.
Leveraging Technology for Growth
The R3 billion Inospace portfolio continues to grow, 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 emphasised. “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.”
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.
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 R1 billion 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. 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.
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,” Levitt noted. “We’re actively seeking new sites to meet the rising demand.”
Operational Efficiency and Leadership Expansion
In the last 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 CFO Nick Shabason, while David Bernstein was promoted from Chief Investment Officer to Chief Operating Officer.
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.