Re­tail sec­tor has been hottest prop­erty for decades

Cape Times - - NEWS - ROY COKAYNE roy.cokayne@inl.co.za

THE RE­TAIL prop­erty sec­tor ap­pears to have out­per­formed the other ma­jor prop­erty sec­tors over the past two to three decades, ac­cord­ing to FNB.

John Loos, a prop­erty sec­tor strate­gist at FNB Com­mer­cial Prop­erty Fi­nance, said al­though es­ti­mates of aver­age house price growth were not ex­actly com­pa­ra­ble be­cause they were done on a per unit in­stead of on a per square me­tre ba­sis, it ap­peared re­tail prop­erty had even out­per­formed res­i­den­tial prop­erty over the past two decades.

Loos added that Mor­gan Stan­ley Cap­i­tal In­ter­na­tional data for the per­for­mance of the re­tail sec­tor for the en­tire 22-year pe­riod from 1996 to last year in­di­cated it ap­peared to have run far stronger over this pe­riod than other ma­jor prop­erty sec­tors.

He said the aver­age cap­i­tal value per square me­tre for re­tail prop­erty ap­peared to have risen by a mas­sive 877.4 per­cent be­tween 1996 and last year.

Loos said fur­ther that FNB’s longterm house price in­dex had in­flated by 670 per­cent, with the res­i­den­tial mar­ket hav­ing run “neck and neck” with re­tail cap­i­tal growth up to 2008 but “un­der­per­form­ing” there­after.

By com­par­i­son, the cu­mu­la­tive in­crease by the in­dus­trial and ware­house sec­tor was a more mod­est 544.8 per­cent and of­fice space 523.0 per­cent in the same pe­riod, he said.

Loos added that af­ter ad­just­ment to take into ac­count the im­pact of in­fla­tion, the in­crease in the aver­age cap­i­tal value per square me­tre for re­tail prop­erty was “an im­pres­sive” 117.3 per­cent be­tween 1996 and last year, res­i­den­tial 71.4 per­cent, in­dus­trial prop­erty 43.3 per­cent and of­fice space 38.5 per­cent.

He said re­tail prop­erty also ex­pe­ri­enced a cu­mu­la­tive cap­i­tal growth net of cap­i­tal ex­pen­di­ture of 342.5 per­cent be­tween 1996 and last year com­pared with 149.8 per­cent for in­dus­trial prop­erty and 78.1 per­cent for of­fice space.

Loos added that the af­ford­abil­ity of re­tail prop­erty had de­te­ri­o­rated sig­nif­i­cantly com­pared with the other two ma­jor com­mer­cial prop­erty classes, with the op­er­at­ing cost a square me­tre for re­tail prop­erty ris­ing cu­mu­la­tively by 908.1 per­cent in this pe­riod com­pared to 696.8 per­cent for in­dus­trial prop­erty and 400.8 per­cent for of­fices.

He said this cu­mu­la­tive op­er­at­ing cost in­fla­tion had far out­paced econ­omy-wide in­fla­tion be­cause of sharp mu­nic­i­pal rates and elec­tric­ity tar­iff hikes. Re­tail op­er­at­ing costs a square me­tre in real terms was last year a mas­sive 124.14 per­cent higher than in 1995 while in­dus­trial had in­creased by a more mod­est 77.17 per­cent and of­fice space by a mar­ginal 11.34 per­cent.

Loos said the strong cap­i­tal ex­pen­di­ture and op­er­at­ing cost growth could be sus­tained over the pe­riod be­cause of the high level of “pric­ing power” of shop­ping cen­tres. This was re­flected in the cu­mu­la­tive in­fla­tion rate in re­tail base rentals of 720.9 per­cent over the 22-year pe­riod com­pared with 348.2 per­cent for in­dus­trial prop­erty and 317.1 per­cent for of­fice space.

“The cu­mu­la­tive re­sult of this strength in re­tail prop­erty ‘pric­ing power’ over the past 22 years was that it had the top aver­age per an­num to­tal re­turn of all the com­mer­cial prop­erty sec­tors over the 1996 to 2017 pe­riod, mea­sur­ing an aver­age an­nual 16.2 per­cent to­tal re­turn, fol­lowed by in­dus­trial prop­erty’s 15.4 per­cent and of­fice prop­erty’s 12.7 per­cent.” ZIM­BAB­WEAN-BORN en­tre­pre­neur Lethukuthula Tsha­bangu’s ex­po­sure to craft beer led him to es­tab­lish his own brew­ery, Ukhamba Beer­worx.

Tsha­bangu says his faith and heart kept his dream of do­ing some­thing spe­cial to cap­ture the spirit and per­son­al­ity of Africa in a beer.

He says he de­cided on craft beer as cus­tomers, par­tic­u­larly tourists, loved the taste and of­ten en­quired about it.

“I de­cided that I would like to make my own beer and told my friends, and they asked me what I would call it. I re­mem­ber my grand­fa­ther used to call beer Ukhamba be­cause of the cal­abash pot,” he said.

Tsha­bangu moved to Cape Town in 2012 to start a new life.

His ini­tial tar­get was to do events man­age­ment, which was what he did in Jo­han­nes­burg, but a stint as a bar­man at the V&A stall changed all that.

He says he de­cided on Ukhamba af­ter ex­per­i­ment­ing with dif­fer­ent fu­sions at home, learn­ing more about craft beers and tak­ing thou­sands of sips along the way.

“Even­tu­ally, I got a chance to buy a share in the Brew­ers Co-op in Lower Main Street (Wood­stock), a small brew­ery owned by 16 guys who all give each other turns to brew,” he says. “It’s so amaz­ing be­cause you ex­change ideas.”

Tsha­bangu says he took his sam­ple to brew­eries such as Riot Beer, where the owner even­tu­ally of­fered to sell and he changed the name to Ukhamba Beer­worx.

He says the process of brew­ing craft beer is not very labour-in­ten­sive as one or two good peo­ple are able to do it, adding that his pas­sion made him per­se­vere with chal­lenges such as get­ting a firm grip on fi­nances.

“I’m not a num­bers per­son. When we started with this busi­ness, we did bun­gle a lot of fi­nances. Xero has changed my life as it makes my life eas­ier be­cause the whole set-up is easy. It makes an or­di­nary guy like me look like an ac­coun­tant.”

He says his dream now is to part­ner with a big­ger brew­ery with bet­ter equip­ment to achieve fur­ther growth for big­ger vol­umes, bet­ter qual­ity, bet­ter pack­ag­ing and start dis­tribut­ing na­tion­ally.

“I would like one day to take a plane to Zam­bia and drop off some­thing and go to Botswana and drink Ukhamba beer and then come back,” he says.

DATA shows the com­mer­cial prop­erty sec­tor has run far stronger than other ma­jor prop­erty sec­tors for the 22-year pe­riod from 1996 to last year. | BONILE BAM

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