PROPERTY: Lower Income Shoppers Drive Listed Property Performance
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Brooks estimates it will take SAs property industry at least five years to catch up with todays demand for retail by lower income consumers.
He stresses that to unlock this compelling growth equally attractive to retailers and property investors sites in high-growth areas are vital for shopping centres serving lower LSM shoppers.
Synergy is a specialised retail property fund investing in midsized commuter centres of 10,000sqm to 25,000sqm in rural and township nodes, in operating partnership with leading convenience retailer Spar.
Synergy listed on the JSE in December 2011 and has aggressively grown its assets from R280 million to R1,7 billion. Its specialised investment strategy has earned it support from astute financial backers like Synergys founding investor Liberty Group and many of the prominent institutional property asset managers.
Keillen Ndlovu, head of Property Funds for Stanlib, says: When it comes to retail property investment, the lower income market is still the place to be. It is where the population is and where the growth is. This reflects in the listed property sector where almost all retail properties exposed to this market are doing especially well, some at staggering levels.
Within the sector, Synergy is in a strong position through its unique retailer partnership.
Synergy has access to Spar Groups research capabilities and development opportunities. Also, a typical Spar-anchored centre is an ideal match for prevailing market demand.
Ndlovu foresees limited opportunities for bigger, regional shopping centres serving these markets. In the last five years, developers erected larger malls in areas like KwaMashu, Umlazi, Gugulethu, Soweto and Mdantsane. But there are still opportunities for smaller retail centres with a convenience element, says Ndlovu.
Providing the right products from the right size shopping centre is also fundamental to ideal performance in this market. Spar is an undisputed master at achieving this.
For small town and township retail, Ndlovu says food and fashion are basic ingredients. Proximity to public transport is a further need. Banking facilities branches and ATMs also contribute given low Internet penetration and a preference to transactions in cash.
Brooks explains that at lower LSM shopping centres, spend per shopper is below urban and suburban markets. But when correctly located, these volume-driven centres show substantially higher foot-count a square metre.
Shopping centres in this subsector show a monthly shopping cycle. Pronounced spikes in shopping at month ends and early stages match payments of government social grants and salaries for the growing working middle-class.
These centres are also usually dominant in their nodes and less reliant on discretionary spend, providing more stable trading densities.
Well-located lower income commuter retail assets offer defensive qualities, solid lease covenants, good growth and robust trading densities, says Brooks. We will continue to grow our portfolio with value-enhancing lower LSM retail opportunities which give our investors a sustainable competitive advantage and appealing growth prospects.
Business News Sector Tags: Property|