Gauteng Retail Sector 2000

Posted On Friday, 15 February 2002 15:57 Published by
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The Retail Sector

As a national context, it is important to note that private consumption dropped from 2% in 1997 to 1,1% in 1998 and is not expected to grow more than 0,5% to 1% in 1999. The split of private consumption expenditure in 1998 indicates that demand for durable goods, such as appliances, dropped by almost 5,5%.

The Retail Sector

As a national context, it is important to note that private consumption dropped from 2% in 1997 to 1,1% in 1998 and is not expected to grow more than 0,5% to 1% in 1999. The split of private consumption expenditure in 1998 indicates that demand for durable goods, such as appliances, dropped by almost 5,5%. Semi-durables such as clothing and footwear saw half the growth of 1997, at 1,5%. Non-durable demand, such as foodstuffs, dropped from 2,3% in 1997 to 1,1% in 1998. Importantly, demand for services rose to 3,2% in 1998 - the only sector to show a positive growth.

In current terms, retail sales in the Gauteng province for 1998 amounted to some R53 billion, with Johannesburg and Pretoria each contributing R18 billion and R12billion, respectively. January 1999 saw retail sales in Johannesburg amounting to R1,4 billion and in Pretoria, R917 million. The following graph provides a provincial breakdown which shows the relative importance of Gauteng as a retail province:

Latest Statistics SA data show that new retail buildings completed in Gauteng during 1997 amounted to 225,839m2. The node which saw the greatest area of new retail space coming on-stream during that year was, in fact, Pretoria (87,620m2) followed by Johannesburg (43,255m2). Randburg saw some 15,315m2 of retail property completed in 1997.

In a bid to gain insight into the real retail market in the Johannesburg CBD, JHI recently undertook a consumer and a retailer survey, aimed at probing attitudes and opinions about this node, especially in the light of city-wide concern that the CBD is sinking into urban decay.

The consumer survey found that 65% of the shoppers interviewed reported a gross monthly income of less than R3,999, while 52% indicated their race group as black. This underpins the move towards goods aimed at lower-income and black shoppers, and a growing preference for cash-based retail businesses. The node listed as the most popular shopping destination for consumers is that bounded by Sauer, Jeppe, Smal and Commissioner: an area which includes the Eloff Street shopping node, the Smal Street Mall, the recently pedestrianised Kerk Street Mall. From a transport perspective, the node is in close proximity to Park Station, the Noord Street taxi rank and the Eloff Street/Van der Bijl Square bus terminus.

The retailer survey found that while crime was a primary concern for many shop-owners, some 42% of those interviewed are optimistic about their future in the city centre - and several of these retailers indicated their intention to expand within the central city, rather than re-locate. Key advantages offered by the CBD included proximity to transport facilities, and the ongoing benefit of City Improvement Districts. The same node as discussed above shows the highest level of retailer satisfaction, with 62% of retailers surveyed wanting to stay in the area - not least because of the presence of the Retail Improvement District.

Central business districts throughout the province are adjusting to changing consumer markets - and the resulting change in the demand for goods and services. Retailers which are typically emerging in city and town centres include cash lenders, furniture and white goods outlets targeting the lower-income markets and discount fashion chains.

There are a number of issues which retail brokers raise with regards to the retail market in Gauteng.

For the past few years, and particularly as the macro-economy has slowed, developers and investors have tended to show a preference for convenience centres. There are concerns that the market in general is becoming saturated with this type of development and that catchment areas are becoming smaller as a result of the number of new centres being opened. Fast food outlets and drive-throughs are included in this concern and the potential for compromising turnover potential - even for other outlets in the same chain - should be considered.

Another issue is that when large food chains are brought into these centres as an anchor, they can negatively affect the smaller, specialty line stores - such as florists, butchers or pharmacies. If legislation is amended to allow supermarkets to sell liquor, this could also affect bottle stores.

The perception is, that as a result of the abovementioned crowding out effect, vacancies are starting to grow in the convenience centre market. The turnover of tenants has also reportedly increased in certain centres.

On the East Rand, the node surrounding the East Rand Mall and along North Rand Road has evolved into a retail node with a wide variety of options: from the value centre, to retail warehouses, to the mall itself. It is understood that many of the outlets in this node are achieving excellent turnovers, despite the general slowdown in consumer spending. Part of the reason for this may be the node’s proximity to residential suburbs, its wide choice of destinations and its accessibility.

East Rand gross rentals for small premises in regional centres are around the R185/m2 mark, while in convenience centres, depending on the node and the tenant, gross rentals can start from around R30/m2.

The newly-opened Lakeside Mall in Benoni appears to be quite successful and is the first regional mall to be developed in the node. The mall may also provide a focal point for additional commercial development to occur close by.

On the West Rand, the focus of development attention continues to be the Ontdekkers Road strip and there is talk of additional retail development to the west of Westgate Shopping Centre, which has traditionally marked the farthest point of Roodepoort’s retail sector. Along this arterial, gross retail rentals start at around R55/m2 in convenience centres and tenants tend to be owner-operated businesses - like small pharmacies, home industry shops or dry cleaners. The question is whether or not this node is now developed as far as demand allows.

Additional commercial development towards Krugersdorp is expected to occur on a strongly demand-led basis, with the emergence of home offices sparking demand for the provision of retail and other services.

In the Florida CBD, demand for smaller space exists but much of the available supply is of large premises and brokers report that landlords will have to downscale rental expectations if they want to attract tenants. A major problem is reportedly lack of parking space. Home offices are in evidence along Goldman Street, with tenants arguing that security and parking facilities being key attractions of locating to this type of premises.

Not unexpectedly, the primary constraint to new retail development appears to be the availability of finance. At the same time, perhaps because of concerns about over-supply, there seems to be a move towards a tenant mix that offers something between convenience and regional centres: a strong focus on convenience anchors, combined with a select group of destination shops. The benefit of this type of centre is that it avoids the congestion of a larger shopping centre, but offers a similar - if less extensive - range of outlets, which goes beyond pure convenience.

The regional malls like Sandton City, Cresta and Eastgate continue to do well and suffer few vacancies, not least because many of these malls are recognised as a destination in their own right.

Some property experts are expressing the view that the north, west and east retail nodes are saturated for the time being and that the south-western nodes are likely to receive some development attention. The performance of existing facilities include The Glen, Comaro Crossing and Southgate Mall combined with the growth of middle-income residential suburbs in the region will be key factors in future retail development decisions.

There is also a view emerging that while there are deals to be done, the focus will be away from the traditional retail nodes. Potential in outlying areas like Rustenburg, Witbank and other towns may prove to be worthwhile, especially if signs of retail saturation in central Gauteng prompt retailers to look farther afield. Some retailers are eyeing the African markets beyond South Africa’s boundaries with interest, and JHI Research has been involved with projects in West, East and Central Africa during the past year.

Finally, there is a preference for 'village', streetfront shopping which is becoming evident and it is closely linked with a cafe society type of entertainment component. The two major examples are to be found in the northern suburbs of Johannesburg: Parkhurst, which has developed as a vibrant, restaurant and antiques node; and Melville, which is known for its galleries and decor shops, as much as for its sometimes off-beat restaurants and cafes.

In Pretoria CBD, a retail trend is emerging which is similar to that in the Johannesburg city centre. There seems to be a perception amongst tenants that crime levels are stabilizing. Shopping centres such as the Tram Shed and Sammy Marks Square are enjoying high occupancy levels and there is even the possibility of a hotel being developed at the latter centre. Smaller line stores in CBD shopping centres are achieving gross rentals in the region of R150/m2, while similar shops in prime decentralised malls are likely to achieve closer to R250/m2.

Decentralised malls in the eastern nodes continue to perform well, with key examples being Brooklyn Square and Brooklyn Shopping Centre. There is still a tendency towards convenience retail, but judging by the situation in Johannesburg this trend may begin to slow in the coming year. Menlyn Park Shopping Centre has been refurbished and expanded in recent months, which is in line with country-wide trends.

The north and north eastern suburbs are also enjoying some retail activity, with the Kolonnade Shopping Centre in Montana being one example. Interestingly, this centre also offers shoppers a strong entertainment component, with an ice rink and games arcades included as part of the tenant mix. Continuing with the entertainment theme is the Zambezi Waterfront which is located close to the Kolonnade and is additional evidence of the growing demand for entertainment facilities as part of retail projects.

In Centurion, there are plans for retail development in the Wierda Park area, particularly as the surrounding residential suburbs continue to expand. Generally, the view is that it is a landlord’s market when it comes to prime, high-quality retail space, whereas in the market for lower-grade retail space, tenants are ruling the day.

However, the west appears to be very quiet with little activity in evidence. This region should however benefit from the proposed Mabopane-Centurion Development Corridor, which will enhance access and infrastructure along the western side of the greater Pretoria region.

Publisher: JHI
Source: JHI

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