SA mushrooming new shopping centres

SA is experiencing a wave of new shopping-centre development across the country, supported by retail expansion and backing from banks and creating intense competition among shopping centres.

In a normal year, one or maybe two major shopping centres break ground in SA, says the head of Stanlib property funds, Keillen Ndlovu. This year, however, is proving to be extraordinary with several large developments planned.

Despite some developers having given up on shopping centre developments in the country citing municipalities’ inefficiencies and corruption, new developments worth billions of rands are planned in the next three years.

Large shopping centres are likely to be built in Port Elizabeth, Midrand, Krugersdorp, Secunda, Cape Town and Pretoria West.

The main reasons for the development of new shopping centres appear to be a strong emerging middle class that is beginning to shop, and retailers wanting to capture this market.

But the new shopping centres are likely to cannibalise older shopping centres, which will need to do refurbishments and reposition themselves to stay in the game.

Mr Ndlovu, who has been to the sites where shopping centres are being planned or have opened, says local authorities have made the land available, though in most instances, developers face rezoning challenges and delays.

He says conditions are different from places such as the UK and Australia, where it is difficult to build a new shopping centre. That is because of council restrictions, largely driven by land scarcity.

Most developers in SA also face power-supply problems, Mr Ndlovu says. For example, Nicolway Bryanston Shopping Centre could not start because power could not be supplied for about six years.

“Retailers and banks have been supportive. Some developers are taking advantage of existing malls which have been neglected — not refurbished or expanded when there was a need to — or can’t be expanded and in some cases have designs that can’t work efficiently in the modern environment.”

Some of the malls that have opened this year include the R500m 23000m² Nicolway Bryanston Shopping Centre owned by the Rodrigues Group and developed by Flanagan & Gerard; the R500m 43000m² Middelburg Mall in Mpumalanga developed by Moolman Group and Flanagan & Gerard; and the 38000m² Newcastle Mall in KwaZulu-Natal developed by Zenprop for R400m.

Shopping centres planned are a 100000m² ² centre in Midrand’s Waterfall City by Atterbury Group, and the 75000m² Cradlestone Mall in Krugersdorp to be developed by Sasol and Retail Africa.

There is also a planned 40000m² Burgersfort Mall, bordering Limpopo and Mpumalanga, by Resilient Property Income Fund, and the Atlantic Mall in Cape Town, expected to be 78000m², to be developed by Flanagan & Gerard and Intaprop.

However, Resilient CEO Des de Beer has said that the company plans to stop developing shopping centres in SA as a result of inefficient bureaucracy and red tape, and instead is choosing to undertake developments in Nigeria.

Also taking place is the redevelopment of The Mall of Rosebank by Hyprop. The mall will be extended from about 37000m² to 62000m², and the cost of extensions and refurbishment is expected to be about R920m.

Other new developments include the 68000m² Forest Hill City Mall in Pretoria West, which is expected to cost about R1,45bn to build, and the 88000m² Bay West City in Port Elizabeth at a cost R1,75bn, to be developed by the Billion Group. The Billion Group is also planning a big shopping centre in Mthatha in the Eastern Cape.

There is also the planned 45000m² Secunda Mall in Mpumalanga, which is expected to cost R700m. It will be owned by Sasol Pension Fund and Resilient.

Alternative Real Estate fund manager, Maurice Shapiro, says there is scope for more large shopping centres in SA, specifically the Waterfall City development in Midrand where residential growth in the area has driven the need for further retail offerings.

“Road traffic capacity limits and access limitations around existing shopping centres, as well as lack of ability to expand some existing shopping centres, justifies the need for further developments, provided each development is driven by demand,” Mr Shapiro says.

But there are plenty of opportunities and some risks, chief among them high operating costs, and manufacturers and retailers feeling the effects of higher property taxes and electricity tariffs, Mr Shapiro says.

Marc Edwards, MD of Spire Property Management, says at least 160 retail centres had been developed nationally in township and rural areas between 1962 and 2009, covering about 2-million square metres of retail space and generating about R34bn in sales, while having added about 54300 permanent jobs to the national economy since the 1980s.