19 Nov 2004 :
Retailers have responded by introducing lifestyle elements to their businesses, a natural compliment to growth into the outdoor market.

The retail property sector is preparing itself for an expected expansion of existing retail space and is actively seeking ways to develop additional space cost effectively, as retailers demand more room to meet the requirements of an ongoing growth spurt over the next two to three years.

Broll regional leasing director Hilton Dukes says this growth period is characterised by a low interest rate cycle with consumers having more money to spend. “Government’s macro economic policies have resulted in the emergence of a new middle class, which is spending more on areas such as residential property and retail. As a consequence of this, the retail property market is benefiting from an expansion of these residential areas and a proliferation of convenience centres. As a further response to this demand various regional centres are currently on the cards. This includes five centres in Gauteng as well as centres in nodes such as George, Kimberley and Shelley Beach on the KwaZulu Natal south coast.

“Consumer spending patterns have shifted to a focus on living environments and lifestyles as a result of lower interest rates. Healthy living and outdoor recreational pursuits such as hiking and camping are becoming more popular, particularly for city dwellers. Foschini has introduced its Due South concept to tap into this new outdoor market and more and more shopping centres are introducing outdoor stores such as Cape Union Mart into an overall retail mix,” says Dukes.

He says retailers are continually reinventing their images, space, designs and concepts to keep up with changing consumer trends. “One such trend is a preference for natural colours, earth tones, packed stone and tiles used to create a back-to-nature feel. Restaurants are being built around piazzas to create an outdoor effect,” says Dukes.

Marketers have identified a “cocooning” mentality weaving itself into the social fabric of South African consumers, especially as they pursue more secure living environments. Many South Africans have become accustomed to residing in built up residential areas which they are now endeavouring to make as liveable as possible. Retailers have responded by introducing lifestyle elements to their businesses, a natural compliment to growth into the outdoor market.

 “Woolworths has developed a new home interior concept store to be launched next year, the Foschini Group has @Home outlets, Mr Price has the Mr Price Home chain, Mica has expanded its DIY range to incorporate outdoor elements such as furniture and nursery and home stores such as Livingstone’s, Loads of Living and Home etc are springing up,” he says.

Dukes says further development in the retail market is a natural consequence of modern lifestyles and an increasing dependency on shopping. “This is a clear sign that the retail sector is adapting to the needs of its customers,” he says.

He says clients are not scared of spending money but want Broll’s input on how to most effectively produce solid returns on these investments. “Landlords are looking to Broll for creative ways to fill space and ideas on how to reengineer existing areas to keep up with the latest trends,” he says.

Lower inflation is also driving up rentals. “A lower inflationary market drives rentals up, so while retailers attempt to push escalations down, they are also aware that they cannot continue to expand if they are not willing to pay for new space,” says Dukes.

In recent years, retail properties have provided an attractive investment for property companies because of higher returns, lower vacancies and lower risk levels. “Over the last year alone, retail property across the spectrum (from super regional centres to specialty centres) averaged returns ahead of the remainder of the property sector,” he says.

Further development plans will only be justified by further residential growth and high levels of feasibility for retailers to target various markets because of a need to increase turnover and market share. This is sustainable for so long as the residential market continues to grow.

“The continuing retail growth phase is prompting retailers to look to the rest of Africa for development opportunities. They are considering creative alternatives such as franchising to reduce the potential challenges associated with moving into other countries,” says Dukes.