RETAIL PROPERTY: Dominance is the Key to Success for SA Property and Retail in 2015
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He adds this is true for all categories of commercial property.
“For office and industrial property, a prime location in a dominant business node will reinforce a quality, defensive asset,” notes Muller.
Offices have had a tough run with weak fundamentals at play in recent years. “The office market is likely to continue to take a beating in 2015,” remarks Muller. “There are still new office developments coming to market, although this is expected to be tempered by SA’s electricity crisis. So, if a development isn’t tenant-driven, in needs to be a top quality building in a prime location with competitive occupation costs, if it has any chance of attracting good tenants in the current market. That’s a tall order.”
For retail property, Muller stresses dominance is essential, whether it be on a neighbourhood, local, regional or super-regional basis.
“Shoppers aren’t prepared to buy in the same way they did previously. In this market, you want a shopping centre that is the first choice with customers, and can stand up strongly against any competition, or new market entrants,” explains Muller.
In achieving this, it isn’t only the size and location of the shopping centre that plays a big role, but how well a mall’s tenant mix meets its shoppers’ ever-changing needs.
Muller foresees the entry by, and dominance of, international retail brands playing an even larger role on the SA retail landscape in 2015.
“Unfortunately South African retailers do not seem able to react fast enough to the competitiveness of these new market entrants,” says Muller. “While we have some of the most mature and experienced retailers in the world, it would seem their historic lack of competitors of substance has left them exposed in the current environment, and not able to dominate in their local market.”
Muller points to Edcon as being the big elephant in the room. “There is some concern around this retailer, which is carrying enormous debt at huge interest rates, squeezing its bottom line. It also seems to be challenged around merchandising and in-store experience. But, Edcon certainly isn’t alone in trying to deliver a meaningful shopping experience that appeals to today’s shoppers.”
He adds: “Sadly, we will see landlords having to exit some of the more traditional SA retail brands in favour of the better performing international brands.”
This transformation is also being driven by SA’s consumers, who remain under pressure on the economic front, so are spending less.”
“After the global financial crisis in 2008, South Africans bounced back with a lot of unsecured lending, but this was artificial and unsustainable. The household debt service risk has now started reducing. So, it gives us more confidence that our retail figures are a reliable reflection based on solid, sustainable growth. This is good for the market. It’s a sign of an economy and industry that is now growing on better principles.”
With more conservative spending being the name of the game in 2015, consumers are not only looking for great value from the products they buy, but to benefit from an enjoyable experience while they are buying them. “This means retailers must provide exceptional in-store experiences,” points out Muller.
“When people shop, they’re not only seeking the products they want, but also to be delighted, whether by an effortless shopping experience with great customer service, or by a more entertaining experience. Creating this will be one of the big challenges for retailers in 2015, and an important factor in achieving market dominance.”
Pareto owns an unmatched portfolio of regional and super-regional shopping centres. Besides being the full owner of Cresta Shopping Centre, Southgate Mall and Value Market, and Westgate Regional Shopping Centre, all in Johannesburg; and Menlyn Park Shopping Centre in the East of Pretoria. It also wholly owns The Pavilion in Durban; and Mimosa Mall and Brandwag Shopping Centre in Bloemfontein. In Cape Town, Pareto co-owns Tyger Valley Shopping Centre.
Pareto also holds 25% of Sandton City and its surrounding assets including the Sandton Convention Centre and three hotels: The Sandton Sun, The InterContinental Johannesburg Sandton Towers and Sandton Garden Court.
Business News Sector Tags: Property|