Retailers in markets such as Soweto are expected to be more cautious this year because of the weaker retail environment.

In the past three years there has been an explosion in the amount of retail space coming on stream in Soweto. This has largely been driven by retailer demand, which is now, however, expected to drop off.

This means the market is not going to see such a large amount of space, particularly large retail centres, being constructed in the short to medium term.

Yet there could be construction of smaller centres in Soweto during the next two years.

Rodney Weinstein, joint CEO of Zenprop, which developed the Maponya Mall along with Sowetan businessman Richard Maponya, says the tenant base is “going to be a lot more cautious going forward”. “That drives the pace of development — if you don’t have retail demand, you can’t put up shopping centres,” Weinstein says.

As far as Soweto is concerned, he says about 120000m² of retail space has come on stream in the past two years.

“That needs to settle. We don’t see demand for retail space continuing at that pace.” Weinstein says there will be an opportunity in the next few years for neighbourhood shopping centres in Soweto. Property economist Francois Viruly, of Viruly Consulting, also believes there is still scope for smaller neighbourhood shopping centres in Soweto.

“There are now regional malls, but I think the next step would be to move down the retail hierarchy and introduce neighbourhood shopping centres,” Viruly says.

As far as the effect of higher interest rates and a slowing retail environment on Soweto is concerned, he says people in the low end of the market are probably not “particularly sensitive to interest rates” because they do not borrow.

Viruly believes that retailing that is largely driven by credit will start being negatively affected by the interest rate environments.

Source: Business Day