Social grants paid by the state are helping retailers in township shopping centres weather tough economic conditions.
Shopping centres in small and medium-sized towns in rural areas are becoming more formalised, providing growth opportunities for retailers, franchisees and independent store owners.
Two Shoprite stores owned by Futuregrowth’s community property fund, Diepsloot Mall and the other in Tembisa, enjoyed the highest turnover per square metre of any Shoprite outlet in SA over the past two years.
Futuregrowth portfolio manager James Howard said this week that the fund’s shopping centres in Diepsloot and Tembisa were consistently productive despite “harsh” economic conditions, thanks largely to the social grant money that was being spent by the two communities.
“The centres improved turnover even during the credit crunch as not many members of the community were geared to borrow. So spending increased, and grant monies that may have been used by some community members kept track with inflation,” Mr Howard said.
He said Shoprite had a long history of investing in township and rural property even before returns looked promising. “Shoprite has backed rural development for the past 15 years, before these areas were seen as investment hotspots. We have seen land in places that are considered ‘no-go areas’ develop into attractive … stores.”
Diepsloot and Tembisa were not the only township areas that were experiencing property investment, he said, pointing to investors’ confidence in townships and high-density areas.
“It is specifically retail that creates the base of a new development node that other initiatives can then benefit from, including Bridge City in the KwaMashu area in KwaZulu-Natal, which was built over a commuter railway station and has a new magistrate’s court recently completed and a hospital being built.”
Mr Howard attributed the success of Diepsloot Mall and similar properties to greater co-operation with the community in developing the projects. Working with the communities from the conceptual stage often guaranteed “support and (that) it won’t be a white elephant”, he said.
Debra Kemp, assistant property consultant at restaurant chain Brazen Head, said investor confidence in rental commercial property was on the decline in certain areas. But she said commercial township properties presented new and attractive growth opportunities as they offered sufficient volumes for businesses to thrive, provided a product was competitively priced.
“Because it’s a fairly new market, one might go (in) with caution. But there are different ideas and developments in township areas that are not happening anywhere else,” Ms Kemp said.
“The Soweto Theatre is a good example of a development that will bring in tourism.”