Retail property still a good bet despite depreciating rand and weakened SA economy
ALTHOUGH South Africa faces ongoing economic challenges and inflation keeps creeping up, shops are decked in festive decorations in the lead-up to the holiday season, and the retail property sector seems to have weathered the effects of the subdued economy better than one may have thought, says Norman Raad, chief executive of Broll Auctions and Sales.
“Outlying urban shopping centres are popping up and new developments are under construction throughout the country. Demonstrating their resilience, it seems that retailers are reinventing themselves to survive in this difficult period. Enterprising new businesses are replacing older ones and landlords who tend to look solely at the bottom line may be compromising themselves in the short term by accepting non-national retailers to take up space in their centres.
“We have seen stress on the landlords through a direct consequence of the fallout from Ellerines and African Bank. While this stress has obviously been passed on to the landlords, there has been a quick move to replace tenants if a rental reversion agreement – with a downwards revision in rental rate – cannot be negotiated and reached.”
Raad says although it would appear that there are more retailers who may falter, in all likelihood the market will produce new businesses to adapt to these tough economic times. However, having experienced huge growth and escalations over the years, the retail sector has slowed and is not anticipated to enjoy similar growth over the next few years.
“The depreciating rand has had a significant effect on SA consumers, who are feeling the pinch. While retailers have to pass on the cost, in relative terms consumer spend has contracted by about 40 percent. Without indication of short and mediumterm economic growth, together with unemployment and inflation, the fundamentals indicate a tough retailer environment.”
Bradley Stephens, managing director of Broll Auctions and Sales, says in the current market knowledgeable investors are seizing opportunities to acquire strategically well-positioned retail and other commercial properties with a view to the future.
“At our auction on November 24 of 22 prime commercial properties situated around the country, several properties in key locations stand out. These include Victoria Mall in Hout Bay with a gross lettable area (GLA) of 1 323m² with 53 parking bays on one of the key routes through the suburb.”
A retail property in a busy trading area opposite a taxi rank in Pretoria CBD is tenanted by KFC on a 10- year lease. The 1 774m² property is on a corner site with very high traffic volumes and visibility.
Other properties to go on auction include a 2 052m² development site in Oxford Road, Parkwood in Johannesburg – in a growing node close to Rosebank Gautrain Station, Rosebank Mall and Rosebank commercial hub. With the suburbs of Melrose, Rosebank, Saxonwold and Parkview in the immediate vicinity, Stephens says this site would be ideal for the development of medical suites or professionals’ consulting rooms.
In the Pinetown CBD in KwaZulu-Natal, a five-storey office building with a GLA of 7 292m² is close to all amenities including banks and Knowles Superspar Centre, with easy access to the M13.
Further properties to be auctioned include two industrial properties in Midrand, Gauteng, 1 504m² of warehousing with offices in Jet Park, Johannesburg, and in Pretoria, retail properties of 530m² and 1 949m² plus three mixed-use retail and residential properties and a 3 690m² development site.
The balance of properties include a 4 811m² eight-storey building in Durban CBD, a four-storey 3 453m² office building in Ermelo in Mpumalanga, a two- storey, 3 280m ² office building in Ormonde and a prime 2 853m² office building on a corner in Fountainbleau, Johannesburg, and 900m² of fully let retail and flats in Odendaalsrus in the Free State.
Call Stephens on 087 700 8269 or 082 443 7731 or e- mail email@example.com.
GOING: Victoria Mall in Hout Bay is one of several retail centres up for auction on Tuesday.