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Township Malls: Room for Growth?

Township Malls: Room for Growth?

Are there still opportunities for South African property investors in retail?
Statistics shows that while the expenditure per person on retail has increased in South Africa, expenditure per square meter in shopping centres has declined.

Township malls are bucking the trend, however, Fairvest Property Holdings, which owns 42 retails sites mainly targeting the lower income shopper, reported a dividend increase of 7.9% in the first half of 2019. Vukile, which has been aggressively acquiring properties in all retail sectors, indicated significant grown in the lower income sector.

Regional malls are also showing a small growth after a decline in the previous year, with lower vacancy rates recently. They are more friendly and community-oriented which means that landlords have a closer interaction with the community and understand consumer needs as opposed to large fairly cold mall environments.

This type of mall is more open to informal traders and also tends to have longer shopping hours.
Spaza shops stay open to 10pm which is convenient for the local community who often rely on public transport for their daily commutes.

Retail experts in Vukile have recently been quoted indicating that there is a sameness in large malls. Shopping centres need to be right-sized for the community and provide retail opportunities that suit the local market. In Vukile’s portfolio, grocery stores comprise about 34% of their township retail space as opposed to 27% on commuter routes.

Fund managers warn that when developing a retail centre, a lot of research needs to be undertaken to ensure that the offering is relevant to the needs of the local community and consideration is given to informal traders to allow for retail space. Some Reits companies, are suggesting that it makes more sense to focus on redevelopment, modernizing existing sites rather than developing new ones.

At Commercial Exchange, we would advise investors to do their homework thoroughly before making any acquisition. We are always happy to act as a sounding board for you. Contact us on 011 467 7870 or [email protected]

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