Rural and township mall investor Exemplar REITail is confident about this sector of the market that remains largely untapped, giving it first-mover advantage.
The leading developer, owner and manager of rural and township malls was born from McCormick Property Development, a company that pioneered retail developments in this sector more than four decades ago.
Exemplar, SA’s only property fund focusing on providing convenient and essential retail offerings to rural areas and townships, listed on the JSE in 2018. It owns 23 retail properties in five provinces including the Mall of Thembisa, which was opened at the height of the Covid-19 pandemic in 2020.
In its interim results early this month, Exemplar reported increasing rental income across its portfolio with strong property fundamentals underpinning the fund.
Exemplar opened new malls this year and plans to grow its portfolio through acquisitions and new developments enabling better returns for its investors.
Before the end of this year, Exemplar will open the second phase of Edendale Mall in Pietermaritzburg, KwaZulu-Natal, as well as Bizana Walk in the Eastern Cape. This is on the back of the opening of Mamelodi Square in Gauteng in a 50% joint venture with Putprop and KwaBhaca Mall in Mount Frere in the Eastern Cape at the end of October.
In Limpopo, Tshakhuma Corner in Thohoyandou will open during the fourth quarter of 2023. The company anticipates breaking ground on more than 100,000m2 of new retail developments across four provinces throughout 2023.
With years of experience in its geographies, the company’s main objective is to create positive change through investments in the local microeconomies and communities where it operates. This is done through sustainable skills development, as well as bringing a new breed of local retailers into the formal retail space.
In early November, Exemplar and some of its local tenants and stakeholders held an inaugural township retail conference to attract investment into the market and stimulate conversations among investors.
Business Day sat down with CEO Jason McCormick to unpack the buoyant rural and township retail market.
What makes rural and township retail markets unique?
It is no secret that the space is one of the strongest in the retail property sector currently. These malls weathered the effects of the Covid-19 pandemic, including the hard lockdown restrictions of 2020 better than urban shopping centres because they offer convenient and essential shopping.
Even with the July 2021 riots, these centres continued to report growth in trading densities — which we highlighted in our interim results recently. We expect this trend to continue well into 2023 and beyond. The rural and township space is one of the few sectors that have not been saturated and there is definitely still a strong capacity for growth.
You are extremely bullish about this segment of the sector, why is this?
We have an inherent knowledge of the rural and township markets. We have been focusing on this sector for the past four decades and have seen the results first-hand. The sector holds immense potential for further growth and investment.
Is there growing appetite for retail in these markets?
Definitely, there is immense market appetite. The number of mall openings in this sector alone in October is testament to investor appetite wanting a share of the pie.
Unlike urban malls, where you would have a specific mall size in any given location, in these markets, there is no ideal size. This sector cannot be led by cookie-cutter, copy-and-paste models. Each location, each community and each offering needs to be carefully analysed to ensure it is right-sized and appropriately developed to speak to the very specific market and community needs of that area.
What are the drivers behind strong rural and township retail markets performance?
The communities within which they are developed. Besides the well-known mantra in real estate about finding the right location — the people within these markets drive demand and determine what will ensure strong and well-supported retail.
What is the biggest challenge?
High and ever-increasing municipal and administrative costs remain a major challenge. Excessive rates and taxes in areas that have limited or no services leave developers and the malls themselves being targeted as a solution for municipal budget constraints. The construction mafia also remains a hurdle that these markets need to deal with.
What about investment opportunities?
Undoubtedly, the biggest and most exciting opportunity in these markets is the potential that they pose to drive positive change. Skills development, entrepreneurial incubation, employment opportunities and community upliftment allow us the privilege of being actively able to drive new economic development within the microeconomies where they are developed, and for the country as a whole.
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