The big fish are jumping into a crowded pond

THE scramble for retail space in South Africa will intensify when Swedish company Hennes & Mauritz launches in the country next month.

H&M will lease a multilevel 4 700m² location at the V&A Waterfront in Cape Town, its first store in Africa.

Property developers are being forced to create more space to accommodate high demand from global brands.

The Victoria Wharf retail centre at the V&A Waterfront was designed to cater for international brands that require “visibility and footfall”, according to V&A Waterfront CEO David Green.

With more than 24 million visitors a year, Victoria Wharf is fast becoming the new playground for global brands.

“South African consumers are embracing these interna- tional brands after many years of being unable to obtain the real thing,” said Green.

H&M’s country manager, Pär Darj, said the decision to launch the brand in South Africa was driven by consumers’ general interest in fashion.

H&M, which describes itself as a “democratic fashion company”, will cater to customers who have high-end tastes on low-end budgets.

The brand intends to position itself in the South African market by opening more operations countrywide. “We don’t go in with a specific plan. We are discussing locations with all the different landlords, but we are not going to be small,” said Darj.

H&M South Africa was looking forward to healthy competition in the local retail market, he said, adding that the company’s stores on Fifth Avenue in New York and Oxford Street in London have competed with fashion’s biggest global brands and yielded good results.

Atterbury Property Group will be H&M’s Mall of Africa developer when H&M opens in Johannesburg later this year.

CEO Louis van der Watt said international retailers held only between 10% and 20% of South African retail leases.

Local food retailers are the retail-space anchors.

“I don’t think they [international companies] will have the volumes the South African guys do. Most of their stuff is on cash at the moment, and the South African retailers are on cash and credit,” he said.

But independent analyst Syd Vianello said the future of retail space would be dominated by leases from foreign players, meaning added pressure on local players as they find new strategies to develop their retail models.

“Some of them may well have to up their game. Some players who don’t have the capital may fall by the wayside,” he said.

One local player that may struggle to find its feet is The Platinum Group, which owns Jenni Button, Aca Joe, Urban, Vertigo and Hilton Weiner. It was placed under liquidation in July.

Vianello said the liquidation would allow shopping centres to create new spaces to “mix and match and move people around”.

He suspected that Edcon could lose its space in Sandton City. “I wouldn’t be surprised [if] they would be prepared to accept a cheque from an international player to vacate some space early.”

Atterbury Property Group’s Van der Watt said it was a challenge to lease to international brands as they did not understand his company’s business model and how its operations were run. “We need a fixed rental — we need it for a certain period, and we need our inflation at six or seven percentage escalations.”

Vianello said local retailers would continue to struggle to get space as big international players looked to dominate.

“History has told me, when your name is Hyprop Investments or Redefine Properties and you get a call from H&M and they say ‘I want 2 500m²’, the landlord jumps up and down and he configures and manufactures the space,” he said.

South African consumers are embracing these international brands