PROPERTY: Retail Property In Hesitant Recovery
Recent Western Cape Business News
After a solid start to 2011, consumer spending has slowed noticeably in recent months, but on the property front, the retail sector continues to move through the recovery phase of the property clock, allowing for cautious optimism about the future. This is according to research recently released Broll Property Group, part of the CB Richard Ellis Affiliate Network.
Sanett Uys, GM of research and marketing at Broll Property Group in Cape Town says, “Traditionally demand for retail space starts to increase in the recovery phase of the property clock (a simple way of representing the cycles the property market goes through over time). In the process, the oversupply of space is reduced and there is virtually no new supply coming online. As the excess space is absorbed, the vacancy rate starts to decline, income starts to increase or move sideways and capitalisation rates remain stable or start to decline.”
“In South Africa we are seeing a slight decrease in retail vacancy levels, with new supplies of stock coming online, having increased by 4.33% in the first quarter of 2011 and 29% in the second quarter year-on-year. This is, however, from a low base,” Uys explains.
KZN saw 101 242m² of retail space coming online in Q2 of 2011, followed by Gauteng with 99 846m² for the same period. Gross street-front rentals for prime space in the major metropolitan cities have remained stable since Q1 2010. However, prime street-front space remains limited in the major CBDs in South Africa. Economists anticipate consumer spending to grow by only 4.4% in 2011, followed by 3.7% in 2012. However, there is good news for existing shopping centres.
“Shopping centre building plans that have been passed by councils across South Africa have followed an upward trend since March 2011. However, if we compare Q2 of 2011 with the same period in 2010, the total plans passed are down by about 17%. This indicates that the supply scheduled to come online going forward will be limited, giving current shopping centres an opportunity to decrease their vacancies even further.”
Centres under Broll management showed strong nominal retail sales growth for Q2 of 2011, with a growth rate of 8.37%. Top-performing merchandise categories were electronics, car services and repairs, travel stores, gyms and pet stores.
“There continues to be a gap for unique independent retailers that can enhance the tenant mix of centres,” Uys says.
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