Most of the PUTs with retail exposure have indicated that they are watching township property developments with interest, but few have plans to invest in them in the near to medium term.

The SA Corporate Real Estate Fund (SA Corp) has the highest level of such projects, as a result of the takeover of SA Retail Properties. SA Corp has five such mall developments:

-         Hubyeni Shopping Centre (Elim, Limpopo)

-         Dube Village Shopping Centre (Kwa Mashu, KZN)

-         Umlazi Mega City (Umlazi, KZN)

-         Philani Valley Shopping Centre (Umlazi, KZN)

-         Renbro Shopping Centre (Hammanskraal, Gauteng)

As Craig Ewin, CEO of SA Corp, says, “One of our fund objectives is to provide retail amenities in under-serviced areas, provided they are commercially viable with favourable rental growth prospects.”

Current township developments are almost exclusively retail. “At this stage there seems to be little demand for office space in the townships and industrial land is not readily available (nor suitable) for such developments,” explains Craig Hallowes, spokesperson for the Association of Property Unit Trusts (APUT).

The Oasis Property Equity Fund does have a shopping centre in Chatsworth which is around two years old, but the fund is looking to bed down existing investments before expanding further. There is a very limited supply of retail properties and future development is more likely to be in the industrial sector. “We like the industrial fundamentals,” notes Michael Swingler of Oasis, “and we would like to increase the portfolio exposure to this sector over time.”

Emira Property Fund owns fifteen retail properties in what are considered rural areas, which were acquired by the Fund when it purchased property loan stock company Freestone Property Holdings earlier this year. These are valued at R264m, equivalent to 3.6% of the fund’s total value, and are located in towns such as Kokstad, Matatiele, Flagstaff and Bizana. “Although there are several sound commercial reasons for investing in these properties, which include the high percentage of national tenants, extremely high footfalls in the centres, as well as the relatively high yields that these properties are valued at, such an investment is not part of the Emira’s mandate since listing,” comments James Templeton, CEO of Emira. “We are watching the township and rural markets with great interest, but we don’t have plans to expand into them in the near term. It seems likely that Emira will retain its focus on office, retail and industrial space in the major metropolitan areas.”

John Rainier, MD of Fountainhead Property Trust holds a similar view. “At this stage we are investing in industrial and office space. There is little demand for offices in the townships and that is also not the place for industrial land,” he states. Both Capital Property Fund and Sycom Property Fund agree with Fountainhead.

While the residential property market in the townships is booming – Lightstone Risk Management analysis shows 39% p.a. house price growth this year – the PUTs will closely monitor the areas for future development, although this is likely to be only in the medium term and beyond.

As township infrastructure has been upgraded, the regions have become more normalised, moving away from the “dormitory town” status previously. However, this is a process and mixed use establishments may not be developed rapidly.

“Township evolution increased traveling times, and general urban trends for mixed use should lead to demand for small scale office space’, says Hallowes. That should, in turn, lead to larger scale demand and so on, but this does not seem to be imminent. Of all the townships, Soweto is probably the furthest down this path. For example, a four-star hotel has just to opened in Kliptown, while the R1bn upgrading of the Orlando power station to create shops, offices, conference and recreation facilities and a waterfront, has been mooted for some time.