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So says MD of niche property consultancy Alchemy Corporate Property Advisors, Michael Schirnig.

“The current boom in consumer retail sales and related corporate profitability is a heady ingredient that could lead less-experienced retailers to expand at rates that could be defined, uncomfortably, as ‘over-extension’”. He makes this statement while leafing through a database from the year 2002 that lists more than 700 surplus shops to let and sub-let.

“It’s only 3 or 4 years ago that small towns were realing from the liquidation of Fashaf, RAG, CNA, John Orr’s and Saambou in fairly quick succession.  Retail landlords suffered the double blow of large chains like Edgars, Pep and JD Group (digesting its take-over of Profurn) rationalising their portfolios and winnowing out under-performing stores at more-or-less the same time, adding to the vacancy factor.”

As any contrarian worth his salt will tell you, it is exactly at the most optimistic moment – and who can deny the rampant optimism in South Africa’s retail sector over the last 2 years – when one must be most critical and cautious. By this definition, there are likely to be many retailers who will be left holding any number of unprofitable shop leases when the rampant retail spending adjusts to more ‘normal’ levels over the coming year(s). Though what exactly constitutes ‘normal’ consumer spending has been re-defined more than once in the current boom.

“I feel a bit like the sober bloke at a New Year’s Eve party talking about the evils of alcohol, by sounding a cautious note in the current retail euphoria. In the current environment nothing, apparently, can go wrong, because ‘it’s different this time’. But to remain competitive beyond the current boom – remember that a rising tide lifts all ships, but then also recedes -  I believe that retailers need to have a specific, well-thought-out, strategic property plan that goes beyond pouncing opportunistically on arguably marginal sites. What is required is a direct link between overall business goals, trends that impact on your business segment and the underlying property required to make those objectives a reality. A strategic plan meets financial and operational objectives and at the same time reflects the companies’ management style and unique corporate culture.”
 Behaving in a disciplined and strategic manner, Schirnig indicates, is what will separate the winners from the losers in the aftermath of the current race to open new stores.

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Alchemy Corporate Property Advisors is a niche consultancy that helps occupiers maximise their ROI on leased and owned premises. They look at property from the tenant’s point of view, only representing occupiers of space, not landlords, in a bid to help tenants make the most of their property dealings.
CONTACT:
Michael Schirnig   083 448 2502        This email address is being protected from spambots. You need JavaScript enabled to view it.