Town­ship tra de: pumpin g or slumpin g?

Finweek English Edition - - Openers - JOAN MULLER

THE RE­CENT FORAY into South Africa’s pre­vi­ously un­tapped town­ships has cre­ated po­ten­tially lu­cra­tive new in­come streams for de­vel­op­ers, re­tail­ers and in­vestors. But town­ship shop­ping cen­tres haven’t been the one-way bet many ini­tially ex­pected. Mar­ket talk has been that the big­gest and swanki­est town­ship cen­tre to open its doors to date – Soweto’s 66 000sq m Maponya Mall – has had a luke­warm re­sponse from lo­cal res­i­dents.

“Not en­tirely true,” says Zen­prop di­rec­tor Adam Blow, who owns Maponya Mall with Soweto busi­ness­man Richard Maponya and In­vestec. “Is ev­ery ten­ant mak­ing enough money to buy a Fer­rari? No. But the cen­tre is turn­ing over close to R80m/month, which com­pares well with other re­gional malls in Jo­han­nes­burg.”

Man­age­ment’s gross turnover tar­get for the first year of op­er­a­tion was R960m. The cen­tre, which cel­e­brates its first an­niver­sary this week, ended its first year at around the R930m mark. Says Blow: “That’s 3% be­low our pro­jected turnover – which we’re not un­happy with, given the cur­rent macro-eco­nomic en­vi­ron­ment.”

Blow con­cedes there have been ten­ant fail­ures. Sports­mans Ware­house closed its 1 000sq m shop a month af­ter it opened its doors and Mr Price plans to cut back its Home store from 1 100sq m to 600sq m.

Blow says no­body ex­pected ev­ery one of Maponya’s 195 stores would do a roar­ing trade from day one. “We es­ti­mated that around 10% of our ten­ants would strug­gle in the first year. Cur­rently, 7% of stores are trad­ing be­low par – a level we’re comfortable with, par­tic­u­larly given that some of those ten­ants have never traded in a for­mal re­tail en­vi­ron­ment be­fore.”

Blow says it’s dif­fi­cult to gen­er­alise about what works best in town­ship malls. Up­mar­ket stores aren’t nec­es­sar­ily the ones in trou­ble. Blow says Fabiani hasn’t come close to tar­geted trad­ing den­sity, while Spitz has been a great suc­cess. “There’s no de­fin­i­tive an­swer to that. Per­haps it’s be­cause Spitz of­fers credit and Fabiani doesn’t. Sim­i­larly, the News Café at Maponya is one of the group’s top trad­ing stores in SA while Mugg & Bean is bat­tling. One con­clu­sion you can draw is that News Café has a liquor li­cence and Mugg & Bean doesn’t.”

But Zen­prop takes com­fort from the ex­pe­ri­ence with its first town­ship cen­tre, Van­gate Mall, which opened in Athlone, Cape Town, in Septem­ber 2005. Blow says back then some peo­ple thought they’d lost their mind

be­cause they’d spent a large sum of money on de­sign and up­mar­ket fin­ishes. No SA bank would back Zen­prop. Bar­clays plc, be­fore it took over Absa, even­tu­ally stepped in as fi­nancier.

Yet the 30 000sq m Van­gate Mall was a huge suc­cess story from day one and re­mains one of Zen­prop’s most prof­itable cen­tres. Blow says Van­gate is cur­rently sit­ting at an av­er­age trad­ing den­sity of R27 000/sq m/year, com­pared to the in­dus­try av­er­age of R20 000 to R22 000/sq m/year.

Other play­ers agree that al­though there’s enough dis­pos­able in­come in town­ships to jus­tify re­tail de­vel­op­ment, there are risks in­volved. “What works in one town­ship won’t nec­es­sar­ily work in an­other. Ten­ant mix, prod­uct of­fer­ings and size have to be very site spe­cific,” says SA Cor­po­rate Real Es­tate Fund CEO Craig Ewin.

SA Cor­po­rate, which has al­ready opened shop­ping cen­tres in five town­ships, with an­other be­ing built, has re­ported mixed trad­ing re­sults for those cen­tres. Its flag­ship town­ship mall – Um­lazi Mega City, south of dur­ban – ex­ceeded its turnover tar­gets from the out­set when it opened in April 2006. The 35 000sq m mall is cur­rently the top per­former in SA Cor­po­rate’s R5bn shop­ping cen­tre port­fo­lio in terms of turnover growth.

des de Beer, Md of the Re­silient prop­erty group, which has a stake in Soweto’s Jab­u­lani Mall, says town­ship shop­ping cen­tres are gen­er­ally weath­er­ing the cur­rent con­sumer down­turn bet­ter than their sub­ur­ban coun­ter­parts. “Black con­sumers have lit­tle debt, so higher in­ter­est rates don’t af­fect their spending.”

How­ever, de Beer notes cer­tain re­tail sec­tors are tak­ing strain. For ex­am­ple, at Jab­u­lani there’s stress among some take­away chains. Turnover at stores sell­ing non-es­sen­tial items, such as home­ware and fur­ni­ture, is also down.

de Beer doesn’t be­lieve that town­ships of­fer un­lim­ited po­ten­tial for re­tail de­vel­op­ment. Some ar­eas, such as Soweto, may al­ready be head­ing for over­sup­ply.

Not ev­ery ten­ant do­ing a roar­ing trade. Maponya Mall.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.