Octodec Investments, the largest single owner of properties in the Johannesburg and Tshwane CBDs, sees signs of improvement in the retail trading environment and increasing demand for space across its portfolio.
After easing due to the Covid-19 lockdown restrictions, with the return to the office by many companies, the fund’s CBD retail assets are experiencing renewed confidence from large national and independent small retailers.
“Our CBD retail assets are poised for growth in a post-Covid environment, and we expect these assets to perform better in the second half of the year,” Octodec MD Jeffrey Wapnick told Business Day.
Wapnick said prime CBD retail offers more growth opportunities, being conveniently located with high foot traffic, lower cost structures such as common area cleaning and security, which make them attractive to tenants.
Some of Octodec’s CBD retail assets are mixed-use with residential or offices at the top and retail at the bottom, such as Inner Court in Tshwane CBD. These assets benefit from foot traffic passing through and people working and living in the CBD. Other assets include Inner Court and Sharon’s Place in Tshwane.
The JSE-listed real estate investment trust (Reit) owns 254 residential, retail, office, industrial and specialised properties mostly located in the inner cities of Johannesburg and Tshwane valued at R11bn.
Wapnick said as one of the first investors to bring Shoprite supermarket into the CBD, Octodec is now seeing renewed confidence, with national retailers signing leases for larger pockets of space. Clicks is more aggressive with its store rollout in the CBDs than Dis-Chem, for example, he said.
In May, Octodec started upgrading the 4,000m2 Shoprite store in the Tshwane CBD for R55m. The project is expected to be completed in December 2022.
At the Inner Court building, national tenants Mr Price and OK Furniture took up space of 2,039m2 and 805m2 respectively, while Jet Home took occupation at the Royal Place building in the Johannesburg CBD.
Wapnick said national retail brands within their CBD retail assets include Shoprite, Clicks, Home Choice, Mr Price, The Foschini Group and Ackermans. Small and independent retailers range from restaurants and takeaway outlets to health and beauty stores, hair salons and tailors for example.
Local sneaker brand Bathu opened its first store with Octodec in the Tshwane CBD, and another local footwear brand, Drip, has also opened a store with Octodec in the CBD.
However, rental growth is under pressure resulting in negative rent reversions due to tenant affordability concerns. Before deducting Covid-19 rental discounts, rental income was reduced to R161m in February 2022 from R165m during the same period in 2021. Vacancies came down slightly from 19.7% to 18.5% in February 2022.
Kelly Ward, portfolio manager and head of research at Metope, told Business Day that in general CBDs had suffered disproportionately during lockdown restrictions. “More activity has since returned to the CBDs and we expect to see better footcount and retail sales turnover achieved per rentable square metre in CBD retail.”
Ward said once government office tenants are back full-time in the office along with other companies, CBD activity and performance will further improve.
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