ALTHOUGH the retail property market in general has suffered somewhat from a decline in the demand for floor space as more and more retailers cut back on stores as margins are squeezed, there is still no end in sight to new neighbourhood centres popping up in our surburbs.

These smaller centres (typically 5000 sq m or less) continue to offer investors better returns than bigger retail developments. Latest Sapix figures show that in 2000 the returns on smaller centres (up to 2500 sq m) increased to 15% (from 11% in 1999). At the same time, total returns on regional centres halved to about 10% (from about 20% in 1999).

Figures for last year are not yet available. But Francois Viruly, property economist from Viruly Consulting, expects returns on smaller retail developments will continue to outperform those on regional shopping centres for the next 12 months.

He says with consumption expenditure remaining under pressure – especially in the lower income groups – it would seem reasonable to suggest that the retail developers will attempt to service carefully selected and profitable markets. This could result in a focus on smaller neighbourhood centres.

Viruly also reckons that in 2002 the market will carefully focus on the performance of the new Gateway shopping centre in Durban, and Canal Walk in Cape Town. Both these projects – currently the two biggest shopping centres in SA – are still battling to fill all its available floor space.
Publisher: Finance Week
Source: Finance Week