Nick Wilson

Despite interest rate hikes and a drop off in consumer spending, there is still building activity in the retail property market.

According to Grinaker-LTA's building business unit, the retail boom shows no sign of abating, particularly in KwaZulu-Natal.

Neil Cloete, MD of the unit, said on Wednesday that it was busy with shopping centre contracts in the provinces, totalling more than R1 billion.

Cloete said Grinaker-LTA Building, which is part of the JSE-listed Aveng Group, had recently won the R73 million contract to build a shopping centre in Umlazi.

The centre will be called Philani Valley Shopping Centre.

This project is scheduled for completion in January next year.

Another development on the cards is a R163 million contract to extend the Gateway Theatre of Shopping, in Umhlanga, on behalf of Old Mutual.

The Pavilion shopping centre in Westville is also being extended by Grinaker-LTA Building.

This will be a joint venture with Sivukile Contractors, 2C Contractors and C&R Contractors. The contract is worth R143 million.

Cloete said the unit was also busy with a R390 million greenfields development in Westville, called Westwood Shopping Centre .

First National Bank property strategist John Loos said there was a significant amount of new retail development taking place nationally.

He said the market had seen a significant increase in the number of square metres of shopping space completed last year.

Last year, there was a 58% increase in the area of space completed, compared with 2005, said Loos.

"It is realistic that we may even have an increase in that this year."

But Loos said it was important to bear in mind there was a "significant lead time" between the planning phase of shopping centres and their completion.

"What we saw last year was a slight decline in square metres of plans passed and I think that suggests that, by around next year, we could see a decline in completions," he said.

Loos said that, in the future, he expected consumer demand growth and retail sales growth to slow because of higher consumer indebtedness.

A lack of personal tax relief this year and an expected slowdown in economic growth.

He said he expected retail property returns to decline further this year and next because of a combination of slow retail growth and the strong rate of completion of new retail space.

Business Day