Malls’ highest returns in a decade

Posted On Wednesday, 13 April 2005 02:00 Published by
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THE extent to which retail property investors are benefiting from consumers’ ongoing spending spree is highlighted by figures released last week by Investment Property Databank South Africa (IPD).

By Joan Muller

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THE extent to which retail property investors are benefiting from consumers’ ongoing spending spree is highlighted by figures released last week by Investment Property Databank South Africa (IPD).

Retail property delivered total returns of 26% in 2004, up from 17% in 2003. This was the highest return achieved by the retail sector in 10 years. Retail properties also outperformed the industrial and office sectors, which delivered total returns of respectively 24% (18% in 2003) and 17% (9% in 2003) last year.

IPD measures the investment performance of about 2 200 commercial properties in South Africa valued at R75bn.

IPD South Africa MD Stan Garrun says that the retail sector has also outperformed the industrial and office sectors over the longer term. Over the past 10 years retail returned 16%/year (annualised) while industrials and offices delivered only 12% and 10%/year respectively.

The attractive returns offered by retail property probably goes some way to explain why investors and developers continue to pour money into new shopping centres – despite the general perception that SA is already over-shopped.

Head of Investec Property Group’s leasing division Steve Grupel says that they secured leases for retail premises valued at R442m last year, representing nearly double the value of leases concluded during 2003.

It’s interesting to note that clothing retailers to a large extent drive the growth in demand for retail space. Analysts say that there’s been increased competition in this category, with fashion retailers such as Dunns and Hang Ten opening new outlets in shopping centres.

Retail property owners are also adding international fashion brands to their existing retail offering. For example, Hyprop – owners of Canal Walk at Century City in Cape Town – will soon add brands such as Lacoste, MetroSexual and a Nike Concept Store to their retail mix.

That’s apparently encouraged established fashion retailers to protect and grow their markets, resulting in larger space requirements.

At Grayprop and Sycom’s N1 City Mall (in Cape Town’s northern suburbs) Foschini, Truworths and Ackermans will be doubling their floor space in the coming months. Others have refreshed and repositioned their brands, such as Legit, Topic and the Foschini group’s Markham, further boosting take-up of retail floor space in SA’s expanding pool of shopping malls.


Publisher: Finance Week
Source: Finance Week

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