Increased investment into the Eastern Cape is seeing more retail solutions being developed as banks and the property industry are joining forces in answering consumer demand. New shopping malls cater to the needs of residents gravitating toward employment opportunities in large cities, such as East London and Port Elizabeth, and in further outlying towns, as well as those close to the Lesotho border and former Transkei towns of Mththa and Tsolo.

Consumer spending on the rise is also seen in a rebound in national foot traffic since the 2009 recession, as reported at all shopping centres larger than 25 000m² in the SAPOA Retail Trends Report March 2014.When considering that average consumer price inflation was at 5.7% during the same period, the increase of 5.2% in annualised trading density (sales per square metre) represents marginal negative growth in real terms (inflation adjusted).

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Convenience shopping: Kamma Crossing in Lorraine, Port Elizabeth by developer Vargalor

As top performers in this sector, super regional centres continued a stable trading history, driven by nodal dominance and a large variety of categories of consumer retail products and tenants. Following closely on their heels were community centres (from 12 000-25 000sqm) delivering a solid performance. A major influencing factor, according to SAPOA, is reduced disposable income and high fuel prices, motivating consumers to shop closer to home and where parking is freely available.

Also recorded from 2003 to 2013 are the significant increases in shopping activity during the peak shopping month of December. Super regional centres showed a 24% increase in trading, with small regional centres following closely at 20.9% and regional centres at 20.6%.

While all centres larger than 25 000sqm experienced a rebound in foot traffic since the recession of 2009, current levels of foot traffic per m² are still significantly off the highs of 2004 when real economic growth was above 4%. Consumer spending per head for all centres larger than 25 000m2 currently averages R160 per visit. Super regional centres average R225 per visit, while regional and small regional malls average R172 and R136 per visit respectively.

Consumer driven demand in the Eastern Cape is behind significant retail property deals financed by Nedbank Corporate Property since June last year. Most recent projects include a R17-million loan to developer Vargalor for the Kamma Crossing convenience shopping centre in Port Elizabeth, where Shoprite and Clicks have been secured as anchor tenants. Regional executive for Nedbank Corporate Property Finance Cape Richard Thomas says the decision to finance this project was based on the Shoprite Checkers Group recognising a gap in the market in this particular area and securing the land on behalf of the developer.

Financing of another substantial retail project of R1.1-billion by Nedbank in March this year will see the Billion Group developing the BT Ngebs Mall in Mthatha. As a regional mall, this retail facility also marks the Billion Group’s third regional shopping mall development since last year, and the largest of its kind both in the city and the region. The mall will cater to consumer needs of approximately 390 000 existing households in an area with a current retail undersupply of 477 341m2. Consumer spending at regional shopping malls (measuring 50 000-100 000 m²) is reported by SAPOA to have shown increased trade in December averaging 20.6% over 10 years, which compares favourably with small regional malls at 20.9% and super regional malls at 24%.

Also underway is the R1.721-billion development project of the 87 500 m² Bay West Mall super regional shopping mall in Port Elizabeth, which marks the largest ever Nedbank finance deal and joint venture between South African property giants Billion Group and Abacus Asset Management. This facility will be built in an area earmarked as a vital development node within the city’s 2020 growth plan.

Ken Reynolds, regional executive of Nedbank Corporate Property Finance, says the Bay West Mall finance agreement is the largest property development sum ever agreed to by the bank and will fund the first phase of the Bay West Mall, which is central to the greater 300 hectare Bay West City Precinct development.

These developments are also serving the need for industry transformation. Economic development and social upliftment in the region through relationship building between stakeholders is key to securing sustainability, says Sisa Ngebulana, CEO of Billion Group. “There is still significant scope in South Africa for growth in black-owned property development and investment companies, but this much needed growth will only be fully facilitated through forward thinking partnerships such as the one Billion Group enjoys with Nedbank Corporate Property Finance,” says Ngebulana.

Baywest managing director Gavin Blows says construction of Baywest Mall started in June last year and is set for completion in March 2015 when it will cater to more than 800 000 monthly shoppers. Blows says Abacus Asset Management and Billion Group, together with the Nelson Mandela Bay Municipality, areaddressing the need for improved public transport to the mall and the inclusion of the mall on the city’s Integrated Public Transport System route. He says a R300-million road network is being developed around the mall, where on and off ramps to the N2 freeway next to the mall are being equipped with public transport lanes.

Anchor tenants Pick n Pay, Checkers, Woolworths, Game, Foschini and Truworths are expected to attract the most foot traffic into the mall. He says tenants will benefit from energy and cost saving installations introduced by architects DHK, who have incorporated current best practices by maximising the use of natural light while limiting the heat load on the centre. Plans include rain water harvesting for irrigation purposes and targeted energy saving for lighting, heating, ventilation and air conditioning. Solar energy will be used to power Baywest City precinct security devices as well as precinct security, while solar powered street lights will be installed in some parking areas.

Another essential element to upward growth for owners and retailers at new shopping malls, particularly in outlying areas, is an uptick in reputable property management companies expanding their services to the Eastern Cape. As one of the country’s largest property managers, JHI Properties has expanded its footprint in this region by establishing offices in Port Elizabeth and Mthatha. The company manages sizeable retail and office portfolios on behalf of property funds such as Arrowhead, Capital, Fortress, Resilient, Vukile, Dipula, Matlotlo, Khula, Intaba Investments and Nvest Properties. Amanda De Lange, portfolio manager of JHI Properties, says JHI East London manages City Centre and Circus Triangle Shopping Centre in Mthatha, Ziyabuya Shopping Centre in Port Elizabeth, Equinox Mall in Jeffreys Bay, Market Square in Grahamstown plus Queenstown Mall and People’s Place in Queenstown.

A significant impact on the local economy of the Eastern Cape due to direct and indirect job creation as the result of sustainable development, new retail opportunities and management services coming to this region is set to continue.

Text: Anna-Marie Smith