PROPERTY: Broll Forecasts Sustained Recovery for SA Retail Property
Recent Gauteng Business News
The outlook for retail properties remains optimistic according to Broll
GM Group Research and Marketing Sanett Uys who is confident of the
continued growth and performance of the sector.
“Vacancies are declining, retail rentals are holding stable and global
retailers continue to expand into South Africa,” says Uys.
The Broll Retail Barometer Review Q4:2010 highlights growth in nominal
retail sales of 11.73% in December 2010 and 14.87% for Q4 year-on-year.
“Consumption is expected to outperform GDP in 2011 and 2012, with a
growth rate of 4.8% and 4.3% respectively,” notes Uys.
Part of the CB Richard Ellis Network – recently named the “Best
International Property Consultancy” of 2010 at the International
Property Awards – Broll provides South African investors with unique,
relevant and authoritative insight into local and international retail
property research and trends.
“CPI inflation remained low in December at 3.5%, and the South African
Reserve Bank (SARB) maintained the repo rate at 5.5%. With economists
expressing consensus that the rate will remain stable until the
second-half of the year, this bodes well for boosted consumer confidence
in the short term,” explains Uys.
She describes global retailers as ‘vigilantly confident’ about the year ahead.
A combined study conducted by Broll and CBRE indicates an increase in
international clothing and shoe brands opening in prime SA shopping
centres, confirming international retailer confidence and substantiating
the anticipated sustained recovery of the retail market.
This trend is underpinned by the strong position of well-established
shopping centres which continue to lead performance with growth in
retail sales reported at levels higher than predicted. “Newer centres
which opened during the recession continue to struggle with lower growth
rates,” explains Uys.
Gross high street rentals for prime retail space in South Africa’s CBDs
remained stable during Q4:2010. Likewise the gross rental for a prime
line shop of 80sqm in shopping centre, near the anchor tenant, also
remained firm. Johannesburg was the only exception, with evidence of a
Broll Research shows that, on average, gross rentals for shopping
centres larger than 20,000sqm increased by some 9% from January 2010 to
January 2011 – consistent with the average escalation rates for leases
in recent years. “Concurrently, vacancies decreased from 6.7% to 5.8%
for the same period, indicating continued improvement, albeit at a
sluggish pace,” says Uys.
Capitalisation rates for shopping centres currently span 7% to 8% for
super-regional shopping centres at the bottom end to 8.5% to 11.5% for
convenience centres at the top end. “The excess demand and limited
supply of prime institutional properties in all categories is driving
the compression of capitalisation rates,” explains Uys. “Investors are
realising that stock of this quality is not regularly for sale. When it
does come to market, a long-term investment horizon is required.”
With the shortage of investment quality retail property stock, property
owners continue to turn to refurbishments, expansions and upgrades to
unlock potential for retail property assets.
“The global overview indicates the slow recovery of the labour market
will have a negative effect on spending, so retailers are keeping an eye
on unemployment figures and consumer confidence,” she points out.
“However, while consumers repair their household balance sheets, which
will ultimately increase their disposable spending, the demand for prime
retail space continues. Secondary locations are still taking strain and
vacancies for these locations remain high.”
Uys believes this holds true in the South African context.
Broll is a multi-disciplinary property services company with over 35 years in the property industry. Broll’s services include property, shopping centre and facilities management as well as sales, leasing, valuations, retail consultancy, corporate real estate and investment services to the retail, commercial, industrial and investment markets.
Business News Sector Tags: Property|