Despite decay in parts, well-located retail shops in the Johannesburg and Tshwane central business districts (CBDs) are in high demand, says Octodec Investments, the largest single owner of properties in the two city centres.
Low vacancies, quality and diversified retail offerings that match consumer needs, population density due to high-rise apartments, the government’s presence in the CBD as well as investments in the area help drive demand for space, said Octodec.
“We are seeing an increase from national retailers looking to expand or increase their footprint in the CBD,” said MD Jeffrey Wapnick.
New fashion and footwear retailers are opening shops in the CBD, he said. Within its portfolio, Octodec has established a creative precinct aimed at exposing new retailers to student and office shoppers as most of these assets are close to learning institutions and offices.
The JSE-listed real estate investment trust (Reit) owns a diversified portfolio of 246 residential, retail, office, industrial and specialised properties, including an equity joint venture valued at R11bn.
Some of its assets are mixed-use with residential or offices at the top and retail at the bottom, benefiting from foot traffic passing through — people working and living in the CBD. These include Inner Court and Sharon’s Place in Tshwane.
At end-August, its CBD retail portfolio of more than 305,000m2 continued to experience demand as it offers more growth opportunities than traditional shopping centres.
Wapnick said street shops are conveniently located where there is high foot traffic, while lower costs of maintaining common areas, cleaning and security is a drawcard for retailers.
“There is renewed confidence from national retailers to sign leases for larger pockets of space and willingness to test CBD markets with brands previously only found in malls,” he said.
In 2022 Octodec upgraded the landmark Shoprite building in the Tshwane CBD for R60m. This included a revamp of the 4,000m² Shoprite supermarket, including a new Shoprite Liquor store and new retail shops on the ground floor.
New retailers including Mr Price, OK Furniture, Jet Home and Pep stores took occupation in one of its Tshwane CBD buildings in 2022.
In the Johannesburg CBD, Olitzki Property Holdings (OPH), an unlisted and specialist commercial property company investing in Marshalltown, said demand for retail space is increasing with prime vacant space snapped up upon listing. Its portfolio is 99% occupied with 1% transitory vacancies.
OPH operates on the south side of the city and owns office and retail properties on Gandhi Square and the Fox and Main Street precincts.
“Banks which have been downscaling and closing branches in the suburbs are aggressively expanding in the inner city, and particularly in the Marshalltown area,” said Anton Jaffe, commercial director at OPH.
Jaffe said Capitec has eight branches in proximity to Gandhi Square, adding that Absa, Nedbank, FNB, Standard Bank, Old Mutual and Access Bank are well represented in the precinct. “The increasing residential population and substantial population of office workers who shop and bank in the area contribute to rising demand for retail space.”
Other retailers include the Adidas concept store at Gandhi Square, Pep, cellular providers including MTN, Telkom and Vodacom, Woolworths food, Spar, Dis-Chem and fast food outlets McDonald’s, Steers, Nando’s, Roman’s Pizza, Pizza Hut and Mochachos.
Jaffe said after the July 2021 riots and looting, the Spar at Gandhi Square reported a substantial increase in purchases with this trend becoming permanent. The street-facing Woolworths food store is now open seven days a week.
Afhco Property Management, a leading rental property manager in the Johannesburg inner city and surrounds, said cross-border trade remains one of the largest drawcards for small retailers.
Though negatively affected by the Covid-19 pandemic, the cross-border market is expected to improve in 2023. Retail offerings, especially pharmaceutical, fast food, value apparel, homeware and fitness continue to see the value of the growing residential market, said MD Kevin van den Heever.
National grocers find the CBD attractive due to its high trading densities of R3,000/m²-R5,000/m². Trading density refers to the sales turnover achieved per rentable square metre each month in a particular store or shopping centre.
“We remain optimistic about the inner-city retail trading environment on the strong residential metrics, despite ongoing economic challenges,” said Van den Heever.
Its properties in and around Small Street have remained fully occupied with renewal periods of three to five years on lease expiry. Rentals range from R125/m2 with select prime areas achieving more than R1,000/m2.
Jaffe said north of the CBD, space costs R500/m2-R800/m2. Within the OPH portfolio, rentals mainly depend on locality and range from R120/m2-R400/m2.
“It is encouraging to see an uptick in enquiries, and uptake of CBD retail space resulting in stable rental collections,” said Wapnick.
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