Upswing in demand for retail space.

Posted On Friday, 25 July 2003 02:00 Published by
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There has in recent weeks been a noticeable increase in the demand for retail space throughout South Africa, says Stuart Chait,
There has in recent weeks been a noticeable increase in the demand for
retail space throughout South Africa, says Stuart Chait, Chief Executive of
Property Partners, the new Cape headquartered property mezzanine finance and
private equity house.
"One of the advantages of being a "portal" for new property deals in that we
can spot trends ahead of the market. It is now clear that almost all the
major retailers as well as many of the smaller chains are looking to expand
over the next twelve months," said Chait.
"Most big retailers have achieved significant upswings in their turnovers in
the last half-year and this, coupled in some cases to a pull-back from the
provision of too-easy credit, has resulted in some of the best bottom line
figures we have seen in the retail sector for a long time.
"Here at Property Partners we now have over a dozen new retail projects
coming up, most of which are at least 20% over-subscribed. There is not one
with significant empty space, an indication that the take up rates on retail
are now definitely more positive than we have seen since 1999."
Asked how much floor area the projects he is considering actually represent,
Chait said that most are between 10 000m2 and 12 000m2, which means that
within the next six to twelve months over 100 000m2 will be coming onto the
South African market. Requests for funding, he said, have come from centres
as widely separated as Atlantis and Paarl in the Western Cape and
Bedfordview and Morningside in Johannesburg, Knysna and the Free State.
Property Partners, said Chait, should benefit more than most from the retail
upswing because they can often provide a dual service, assisting the
developer first with mezzanine finance and then with the "exit mechanism",
on-selling the project to one or more members of its investor client base.
"The sale of Canal Walk for a satisfactory sum will not, I believe, prove to
be an isolated case. There is a clear trend now among the major institutions
towards investing again in retail and in my view this makes sense because,
with interest rates coming down, it should be possible for new retail
developments to get a return of 12,5% (satisfactory by any standards) and
annual rent escalations of nine to ten percent.
"The problem could be the SA construction companies which, although now
befitting from the firmer rand, are not passing on the savings on imported
materials to their clients but experience has shown that in most cases these
price increases can be partially controlled."
In the industrial sector, said Chait, the oversupply situation has been
alleviated by ongoing buys from property loanstock companies and by improved
demand from local manufacturers/exporters, many of whom have benefited from
the United State's stimulatory export packages.
Property Partners' "remarkable" instant growth, stems, said Chait, from the
frustration felt by many developers whose deals had had to be curtailed
through lack of mezzanine finance and, equally important, from the fact that
Property Partner's small-team, hands-on management style enables them to
give quick decisions and to come up with flexible innovative packages,
individually tailored to meet clients' needs.
"All the market really needed was a capital partner with plenty of cash
willing to take calculated property risks - we have managed to achieve this
requirement, and have delivered it to the industry."

Publisher: Business Day
Source: Business Day

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