Property funds frantic to develop retail space

Posted On Thursday, 02 September 2004 02:00 Published by eProp Commercial Property News
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Tenants demand wider area to sell as SA's 22-year-low interest rates spur shopping frenzy

John RainierListed property funds with large exposures to retail property are busy expanding their shopping centres, as demand for extra space from tenants such as national retailers surges on the back of a booming retail market.

Colin Young, the fund manager of Old Mutual's South African-listed property funds, says interest rates at a 22-year-low are among the factors underpinning the retail boom.

"That has had a huge impact on disposable income and affordability. The consumer is king at the moment."

Young says this, together with a strong rand and the resulting cheap imports, is driving the retail sector even more.

"As a country, SA is not as indebted as the UK and we've got this huge black middle class coming through," he says.

Most retailers have huge expansion plans, and the market can expect more smaller shopping centres in the 15,000m² to 30,000m² range .

"I think that within the next 12 months there will continue to be a shortage of community and neighbourhood shopping centres," says Young.

He says building statistics from Statistics SA indicate that developers are focusing almost entirely on residential and retail developments.

The retail developments are likely to benefit the listed property sector , whose members are serious buyers of these products, says Young.

Listed property unit trust Allan Gray Property Trust (Grayprop) MD John Rainier says that all his fund's redevelopment plans are predominantly tenantdriven aimed at meeting the needs of retail tenants wanting to expand. About 70% of Grayprop's property portfolio consists of retail properties.

Rainier says the growth came from the recent need of national retailers to increase the size of their premises, or to take up new space for chain stores not represented in a shopping centre.

Rainier says Grayprop has two redevelopments under way an expansion to the Centurion Mall in Pretoria, and an expansion to the Brightwater Commons .

Grayprop recently completed a redevelopment at Blue Route Mall and the Kenilworth Centre, both in Cape Town.

Norbert Sasse, CEO of listed property loan stock Growthpoint Properties, says there is "very strong demand across the board" for more space in all of the company's prominent shopping centres, with demand mainly coming from national retailers.

When Growthpoint recently announced its 2004 annual results, it said it would expand its existing portfolio for between R150m and R250m.

Properties to be expanded include the Waterfall Mall in Rustenburg, Longbeach shopping centre in Cape Town, Walmer Park shopping centre in Port Elizabeth, Kolonnade Mall in Pretoria, River Square in Vereeniging and Beacon Bay Shopping Centre in East London. Work has begun on all but Walmer Park and River Square .

A new phenomenon has also emerged, with private developers, reluctant to sell the assets, creating their own funds, says Young. If they do sell they ask exorbitant prices because they know the value will grow in the short term.

"To some extent it's frustrating the buying efforts of listed property funds with large exposure to retail," Young says. The funds will have to develop properties themselves, he says.

But Sasse does not describe the demand for space as a "frenzy", and sees it as a healthy demand for expansion driven by the retail boom and low interestrate environment.

He says retailers are not only looking at more space in existing centres, but also at new retail centres coming to market.

Hyprop Investments recently completed R40-million of extensions at Hyde Park shopping centre in Johannesburg .

Hyprop MD Pieter Prinsloo says about 3,000m² of space has been added to the centre to cater for extensions at Woolworths, Stuttafords and Pick 'n Pay.

Acucap Properties is busy developing a new 40,000m² shopping centre in Kempton Park called the Festival Mall. The mall is being added to the Checkers Hyper that Acucap owns. Acucap is also expanding the Key West shopping centre to accommodate Edgars, which is coming in with about 3,500m² of space.

Last modified on Tuesday, 13 May 2014 12:41

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