Smaller stores closer to home now show the most potential

REGIONAL shopping centres no longer offer viable development opportunities and future growth in the retail property sector is expected by refurbishing existing ones and the development of convenience centres.

Richard O'Sullivan, Domayne Leasing Consultants' national leasing executive, says retail turnovers have been adversely affected by the cost of private education and cellphones, and by gambling establishments, which has taken a chunk out of consumers' disposable income.

Retailers are tightening their belts and many are not renewing their leases or are negotiating lower rental fees.

Landlords are under pressure, are shareholders and other investors, which clouds the possibilities for new developments.

'Developers need to consider retail trends and stop building new developments. The regional shopping-centre market is saturated and cannot sustain new 100000m² developments such as Century City's Canal Walk in Cape Town and Gateway in Umhlanga,' O'Sullivan says.

Retailers' strategies are changing. In the past, they pursued market growth by expanding and increasing turnover, but there has been a move towards profit-driven businesses and retailers are assessing the cost of servicing smaller stores in outlying areas.

'The retail focus is shifting towards smaller stores to a more convenient closer to home' concept,' says a spokesman for Woolworths' real estate division.

The JHI Real Estate SA property report 2001 says over the past year increased industry competitiveness, coupled with relatively poor consumer confidence and spending, as well as changing retail spending patterns, have left many centres struggling for survival.

However, shopping-centre real estate has continued to post the best investment results in the property industry.

Total returns over the past five years have been highest in KwaZulu-Natal (19%), followed by Gauteng (16,9%) and the Western Cape (15,8%), it says.

The market is moving towards a more focused leisure and ecommerce environment that could see a different demand for retail space occurring in the next few years, says Les Weil, executive chairman of JHI Real Estate.

The development in the casino and hotel sector has had a strong effect on the market, providing stimulation for growth in private-sector capital formation.

' The supply of leisure amenities is likely to compete with recreation-focused shopping centres,' says Weil.

Liberty Properties MD Jim McLean says the retail property industry is going through attitude adjustments as it struggles to adapt to changes in consumer demand and spending.

having on it,' says McLean. Retail outlets are springing up at service stations and small neighbourhood centres, all of which divert shopping from the majority of retailers and regional shopping malls. 'This has had a direct effect on the viability of new retail developments.'