Property experts weary of oversaturated retail market

Posted On Friday, 01 April 2016 12:16 Published by
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While developers are quick to build new shopping centres, some property experts are concerned that the domestic market may be oversaturated.

 FG_Co_founders_Chairmen_Peter_Gerard_Patrick_Flanagan

While developers are quick to build new shopping centres, some property experts are concerned that the domestic market may be oversaturated.

This is especially true of smaller convenience centres that struggle to hold on to small tenants, says Patrick Flanagan, head of development company Flanagan & Gerard.

“I think developers need to be careful. There are many shopping centres that have been announced which just won’t be sustainable in certain areas. Quite a few smaller centres are difficult to tenant in a slow growth economy.

“We are also not a nation of shop owners like in the UK. We tend to rather shop at large retailers, so bringing more convenience centres to market can be risky,” Mr Flanagan said.

While many smaller centres are struggling, large centres sized about 90,000m² and more are performing well. Planning for these centres was usually better, said Mr Flanagan.

“Some large malls are needed in certain areas and developers do a lot of work making certain they should be successful before starting on these projects. Lead times can last six to 10 years on these projects. This does not mean they cannot fail, but it mitigates risk.

“While I appreciate some large retail developers are being careful when they launch projects, at the same time, I think we need more caution when bringing shopping centres to SA as the retail market has become quite mature,” Mr Flanagan said.

There are about 40 shopping centres sized 20,000m² or more that have been announced or are in production in SA, according to the Southern African Shopping Centre Directory of 2015.

But Mr Flanagan said he thought it unlikely that all of these malls would be built, given poor economic conditions.

He would rather see developers spend more time and money refurbishing their existing shopping centres and improving retail experiences.

Recently, Growthpoint Properties CEO Norbert Sasse said he was concerned that too many malls were coming online when economic conditions were not supporting them.

“We are not seeing enough growth in consumer spending to justify so much new retail space. We are actually seeing offshore retailers competing with domestic ones for a consumer who is facing some pain,” he said.

Source: BD

Last modified on Friday, 01 April 2016 12:46

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