Factors that are unique to township retail developments mean Soweto should remain largely unaffected by the expected slowdown in total returns for retail property.

A downturn in total returns for retail property is expected over the next two years.

Although this will generally affect retail centres in all other geographic areas, centres coming on stream in Soweto and other townships should not be negatively effected in the long term.

Having never had proper retail centres, the introduction of centres in these areas is expected to result in structural changes that will attract consumer spend over the long term.

According to an index released by Investment Property Databank (IPD) and commercial property association Sapoa recently, total returns for retail property dropped from 32,6% in 2005 to 27,4%.

John Loos, First National Bank property strategist, says he expects retail property market returns to weaken only for the next two years.

“When you have an economy growing at 5% , it means there is steady growth in household income and consumer demand. Any mild oversupply of shopping centres which may be created in certain areas would be taken up by the growing demand,” says Loos.

He is “not overly concerned” about the increase in retail centres in townships in a less buoyant retail environment.

“The short-term downturn in retail property total returns will affect by and large all areas.”

But he says that because of long-term economic growth prospects in SA, the downturn in the fortunes of retail will have a limited duration.

He says the shopping centres coming on stream in Soweto and other townships create a “longer-term structural change” which will attract more purchasing power to the townships.

But Loos says the small neighbourhood and community shopping centres (below 35000m²) may “see a slightly bigger deterioration” than regional (from 35000m² to 65000m²) and super regional shopping centres (above 65000m²).

“In terms of a slowdown, I think you find that super regionals and regionals (shopping centres) are very popular.

“Generally, even in weaker times, there is very strong demand for the biggest and best shopping centres.”

Stan Garrun, MD of IPD South Africa, says the “potential and draw” of shopping centres in townships “is there”.

“There are lot of good fundamental reasons to put them there. I wouldn’t tarnish them with the total retail brush and say they are not going to perform. I don’t see anything having changed dramatically there,” says Garrun.

He says the larger shopping centres have “dropped a little” in terms of total return. “Most of the downturn is at the larger shopping centres. I think all the factors behind the shopping centres being developed in townships in the first place are still there.”

Rodney Weinstein, CEO of unlisted property fund Zenprop, which is developing Maponya Mall in Soweto with Soweto businessman Richard Maponya, says that the recently opened Jabulani Mall in Soweto was “trading exceptionally well from what we gather”.

Weinstein says Zenprop is optimistic about Maponya Mall, which is set to open in September, achieving its expectations,albeit there are signs of a slowdown in retail spending. “We are certainly not concerned about it at all. Township markets are pretty unique.”

He says Maponya Mall will be “the dominant centre in Soweto”.

“The demand for space from top-end retailers has been phenomenal,” says Weinstein.

He says other retail markets may be affected in the tighter retail environment.

“You put a big centre like Maponya into Soweto and it is going to have an impact on retail facilities in peripheral areas where the shopper was historically shopping. It could have an impact on the Johannesburg CBD,” he says.