One notable exception remaining strong amid the unfavourable economic conditions is retail property. Current and future activity involves the revamp of existing malls as well as the opening of new ones. Commercial property market participants have noticed two things consumers are increasingly looking for in the shopping experience, namely convenience or accessibility (provided by central business hubs); and entertainment, generally to be found in large centres having sufficient diversity to attract consistently high numbers of potential customers. The March 2014 IPD South Africa Annual Property Index report revealed retail space averaged an investment return of 16.8% – slightly below industrial property at 17.1% and above the office sub-sector at 13.6%.
As retail industry activity directly affects retail property performance, commercial property specialists have recommended a renewed focus on positioning South Africa as a key business hub, offering access to the numerically strong and increasingly affluent consumer base on the African continent. This would create an increased inflow of foreign retailers and in turn stimulate demand for retail premises. At a recent forum discussion on the trends and challenges facing commercial property stakeholders, panellists advised taking the highlighting of South Africa as a gateway to the continent, one step further by determining the country’s unique selling point. To keep up with African economic expansion (estimates put growth at about 5.5%), capitalising on South Africa’s current gateway status may no longer suffice.
The potential for new development would need to be demonstrated. To this end, advocated the property analysts, international partners in the form of investors and experienced professionals would need to be brought in – the latter due to an existing industry shortage of town planners, valuers and inspectors. Nevertheless, the solid foundation of the property industry – residential and commercial – in South Africa stands the country in good stead. One panellist stated: “The fundamentals of the property industry in South Africa are strong – it is an ethical and transparent sector with active participation, good returns on rentals and valuable property – how the story is framed becomes key.”