Many institutional investors favour the township retail sector which continues to show opportunities amid a slow economic growth environment.
Investors and financiers believe the trading metrics coming out of township malls such as increasing footfall, positive reversions and increased basket sizes point to a stable sector.
“We like retail — and so we will be overweight with listed companies with exposure to township, commuter-type and CBD retail,” Nesi Chetty, Stanlib head of listed property, told Business Day.
He said there was growth in this market and coming out of the Covid-19 pandemic, net operating income had held up well.
Reversions are positive in these markets compared to large malls, while vacancies are low. The affordability of rentals makes it sustainable to attract and retain tenants.
“These shopping centres have a higher dependence on food anchor tenants and essential services — many of these traded throughout the hard lockdown restrictions in 2020,” said Chetty.
He said township malls close to taxi ranks tend to generate greater footfall which results in increased basket sizes. Stanlib likes real estate investment trusts (Reits) with exposure to these markets such as Exemplar REITail, Resilient Reit and Vukile Property Fund.
“Compared to offices, the retail sector is in a better space and property values have stabilised,” said Chetty.
Chetty was one of the panellists at the inaugural Township Retail Investment Summit held at Imbizo Shisanyama at Mall of Thembisa in Gauteng on November 2.
Exemplar REITail CEO Jason McCormick said since inception, the company has stuck to its purpose to deliver positive change in areas that need it through delivering products and services.
“We remain positive about the township retail sector. We continue to see growing demand from retailers looking for space within our malls and trading is good,” McCormick said.
With consumers under pressure due to rising interest rates, however, there was still more to be had from these investments, he said. “Within our malls, consumers are still spending, and we are seeing growth in trading densities.”
Trading density is the sales turnover achieved per rentable square metre in a particular store or mall.
Last month, Exemplar in a 50% joint venture with Putprop, opened the 16,500m2 Mamelodi Square in Gauteng.
The mall includes a tenant mix that speaks to the market needs of essential and convenient retail while still addressing the aspirational desires of the community.
It is anchored by Shoprite and Clicks with other tenants including Capitec, FNB, Shoprite Liquor, Pick n Pay Clothing, JAM, PQ, Jumbo, Power Fashion and KFC.
Mamelodi Mall also offers local township design entrepreneurs the opportunity to trade in the Kasi COLLAB space, rent-free. First opened at the Mall of Thembisa, the COLLAB is a retail incubator that provides local township retail entrepreneurs access to market and capital.
McCormick said the summit was to provide a platform and facilitate township retail investment conversations between local retailers, landlords, developers and financiers.
Rita Zwane, who founded Imbizo Shisanyama in 1997, says getting into the formal retail space was not easy even though she had years of experience in providing a unique braai experience.
“Back in the day, iShisanyama was not really a concept in the townships — taverns and shebeens were what people knew and trying to sell this concept to financiers was hard,” said Zwane.
She first opened a formal restaurant in 2019 in Midrand where she traded for five months before the Covid-19 pandemic hit in 2020. That same year, she opened a bigger restaurant at Mall of Thembisa.
Zwane said the retail summit provided a platform for investors and developers to get a better understanding of the township retail sector and opportunities to meet businesses looking for retail space to formalise and expand their operations.
Drip Footwear founder Lekau Sehoana said growing up in the township there were no opportunities or access to markets to sell sneakers beyond family and friends.
The business, which pivoted during the pandemic, has quickly grown from opening its first two stores in June 2020 at Newtown Junction in Johannesburg and Pretoria CBD to 22 stores in eight provinces.
“Malls have been supportive of our growth through providing access to markets and enabling us to create jobs. Drip is eyeing introducing other products, entering other African and global markets,” he said.
While most property groups struggled during the early part of the pandemic, many are showing signs of recovery.
Since the start of 2020 when the pandemic struck, Dipula has recovered all of its losses while Vukile still has 29% to go. They are both well ahead of upmarket developer Attacq which is still to recover 47%.
Vukile has gained almost 20% in the past year, while Dipula’s share price has quadrupled over the past two years.
Correction: November 4 2022
An earlier version of this article said that last month Exemplar opened the 16,500m2 Mamelodi Square in Gauteng. The project was, however, a 50% joint venture with Putprop.
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