“Vacancies are declining, retail rentals are holding stable and global retailers continue to expand into South Africa,” says Uys.
 
The Broll Retail Barometer Review Q4:2010 highlights growth in nominal retail sales of 11.73% in December 2010 and 14.87% for Q4 year-on-year. “Consumption is expected to outperform GDP in 2011 and 2012, with a growth rate of 4.8% and 4.3% respectively,” notes Uys.
 
Part of the CB Richard Ellis Network – recently named the “Best International Property Consultancy” of 2010 at the International Property Awards – Broll provides South African investors with unique, relevant and authoritative insight into local and international retail property research and trends.
 
“CPI inflation remained low in December at 3.5%, and the South African Reserve Bank (SARB) maintained the repo rate at 5.5%. With economists expressing consensus that the rate will remain stable until the second-half of the year, this bodes well for boosted consumer confidence in the short term,” explains Uys.
 
She describes global retailers as ‘vigilantly confident’ about the year ahead.
 
A combined study conducted by Broll and CBRE indicates an increase in international clothing and shoe brands opening in prime SA shopping centres, confirming international retailer confidence and substantiating the anticipated sustained recovery of the retail market.
 
This trend is underpinned by the strong position of well-established shopping centres which continue to lead performance with growth in retail sales reported at levels higher than predicted. “Newer centres which opened during the recession continue to struggle with lower growth rates,” explains Uys.
 
Gross high street rentals for prime retail space in South Africa’s CBDs remained stable during Q4:2010. Likewise the gross rental for a prime line shop of 80sqm in shopping centre, near the anchor tenant, also remained firm. Johannesburg was the only exception, with evidence of a slight uptake.
 
Broll Research shows that, on average, gross rentals for shopping centres larger than 20,000sqm increased by some 9% from January 2010 to January 2011 – consistent with the average escalation rates for leases in recent years. “Concurrently, vacancies decreased from 6.7% to 5.8% for the same period, indicating continued improvement, albeit at a sluggish pace,” says Uys.
 
Capitalisation rates for shopping centres currently span 7% to 8% for super-regional shopping centres at the bottom end to 8.5% to 11.5% for convenience centres at the top end. “The excess demand and limited supply of prime institutional properties in all categories is driving the compression of capitalisation rates,” explains Uys. “Investors are realising that stock of this quality is not regularly for sale. When it does come to market, a long-term investment horizon is required.”
 
With the shortage of investment quality retail property stock, property owners continue to turn to refurbishments, expansions and upgrades to unlock potential for retail property assets. 
 
“The global overview indicates the slow recovery of the labour market will have a negative effect on spending, so retailers are keeping an eye on unemployment figures and consumer confidence,” she points out. “However, while consumers repair their household balance sheets, which will ultimately increase their disposable spending, the demand for prime retail space continues. Secondary locations are still taking strain and vacancies for these locations remain high.”
 
Uys believes this holds true in the South African context.
Publisher: eProp
Source: BPG