BRING RETAIL TO THE PEOPLE
By Anna-Marie Smith
Investors are increasingly capitalising on retail success in areas where consumers live and work within close proximity.
Bankers and developers say they no longer regard high foot traffic as unique to top end malls in exclusive residential areas. Shopping malls in and around townships, where consumer convenience includes short distances to retail and entertainment destinations, are also reflecting high foot traffic compared to those in rural regions where consumer shopping experiences are largely dependent on limited means of public transport, resulting in low foot traffic. The ripple effect following the demise of desolate shopping malls in isolated areas remains the worst nightmare for consumers, owners, bankers and developers.
“By bringing retail to the people, historic events can be rectified,” says Richard Thomas of Nedbank Corporate Finance. Although consumer spending remains affected by infrastructural challenges, such as transport and limited employment opportunities close to home, retail convenience does stimulate economic growth. When it comes to investment funding, Thomas says it is essential to understand the growth within communities, as well as its ability to support a retail facility within a specific environment.
This principle has lead to various successful retail developments in townships, financed by local financial institutions, while aiding sustainable community development, playing a role in uplifting the country. One such investment is the R123.5-million redevelopment of the township facility at Kagiso Mall near Krugersdorp, which entailed a demolition and extensive rebuild before reopening last year.
“Strategic planning for the execution of funding is vital as different situations are playing out in various property sectors,” says Thomas. “When considering any good funding opportunity, be it into the listed sector or directly into property, it is essential to understand the development space, as it relates to the consumer.” He says when feasibility studies are completed, it will show the demand required for a specific space, while accounting for the demographic ability of consumers to support a new shopping centre.
Growth resulting from demand and supply within different sectors of the commercial property market is also stimulating residential development, both in inner city and suburban spaces. This phenomenon is particularly obvious at high foot traffic properties, including Cape Town’s V&A Waterfront and Century City, as well as at Melrose Arch in Sandton and Menlyn Park in Pretoria, where increased demand for retail and office space has lead to catering for the lifestyle needs of consumers.
This includes new residential development, in particular that of sectional title units such as recently seen at the V&A Waterfront. The provision of high quality office space provided at the V&A caters to a specific business sector that provides the momentum with which to attract top end retail tenants. This has also resulted in several new high end brands becoming available to a sophisticated consumer base.
V&A Waterfront CEO David Green says that one of the upshots of this demand is a huge upgrade of the precinct’s broadband facilities. He says that by catering directly to tenants, residents and tourists, high end consumers now have the ability to check prices of top brands at boutique outlets online, while in a store.
Also vital is the recognition of potential long-term growth when doing feasibility studies. A recent example of such potential investment is seen in Braamfontein, where Nedbank Corporate Finance has granted R42-million to Capstone Property Group for the purchase of The Media Mill office park. This building is positioned within close proximity to a retail strip at 44 Stanley. Here, a trendy set of creative media employees have easy access to an eclectic mix of decor, design and entertainment offerings. “As a result, existing retail facilities here are set to benefit from increased foot traffic generated by The Media Mill,” says Brian Azizollahoff of Capstone Property Group, a former executive at the Resilient property group. He says the area is calling out for a residential component that would take advantage of a ‘work, play, live’ concept as seen at the successful Wembley Square development in Gardens, Cape Town.
Other precincts benefitting from retail demand include university towns such as Grahamstown, Stellenbosch, Rondebosch and Potchefstroom, as students represent a considerable number of retail consumers, and they are also residents within close proximity of retail facilities. Research shows that retail trends in these towns rely heavily on the stability of 11-month student accommodation leases. This, despite a one-month vacancy period typically attracting brief, high season holiday rentals, as well as preferred vacancies for landlords to complete annual maintenance prior to January intake. The financing and development of the massive upgraded Eikestad Mall has resulted in additional top end residential accommodation to cater for increasing consumer demand in the area.
“However, as the dynamics of communities change for the better, increased wealth makes greater demands on retail facilities,” says Thomas. As has been seen at Cavendish Square in Cape Town’s affluent Southern Suburbs, where initial foot traffic has changed significantly over 20 years. This motivated an extensive upgrade resulting from a change of LSM levels, mostly of Grade 3 to 4, to top end consumer foot traffic within LSM 1 and 2.
But, high foot traffic is not the answer to every aspect of successful retail development. Property investors and financiers are lured by reliable tenants, who play a vital role in attracting consumers in the first place. And, to attract tenants in good standing, property companies able to prioritise good management that produces well run centres automatically show better occupancy rates than neglected and poorly managed facilities.
Coastal retail centres dependent on seasonal demand are known to suffer the effects of slow economic growth. Yet, in areas where large infrastructural and industrial investment is present, small coastal towns have been known to thrive.
The West Coast town of Langebaan is currently seeing increased demand for retail space, directly resulting from development taking place in nearby Saldanha Bay. Emil Weiss, Rawson Property Group’s Langebaan franchisee says that retail rentals along the main road has doubled in the past five years, where demand is seeing rental escalations to have reached R100/m2. Weiss maintains that contrary to public perception, the town is moving away from being only a holiday destination – as proven by approximately 700 daily commuters between the city and neighbouring towns.