Amidst the backdrop of a challenging economic landscape, both small and large retail centres in South Africa are demonstrating resilience, fetching significant prices ranging from millions to billions of Rands. Recent auctions and transactions highlight the buoyancy of the retail real estate sector in the country, showcasing both localized community hubs and expansive regional malls.
In a notable auction held in late 2023 by High Street Auctions, two prominent retail centres found new owners, underscoring investor interest in this sector. The first centre, located in Florentia, Alberton, and anchored by Shoprite, commanded a price tag of R33 million. This vibrant hub owes its bustling foot traffic to the presence of a long-term lease with Shoprite and the adjacent Shoprite Liquor Store, occupying a substantial footprint of approximately 3,090 square meters on a site spanning over 8,000 square meters. Director Greg Dart of High Street Auctions emphasized the attractiveness of this property due to its strategic location near the heart of Florentia.
Similarly, a Buco-anchored retail centre in Witbank, Mpumalanga, was sold for R18.5 million, boasting favorable features such as a triple net lease and impeccable maintenance standards. Dart highlighted the appeal of this property, citing its potential for robust income generation and solid returns on investment.
The retail real estate market witnesses a significant escalation in prices for larger regional shopping centres, typically ranging between 50,000 and 100,000 square meters of rentable space. Recent approvals by the Competition Commission for the sale of Table Bay Mall in Cape Town and the Mall of the South in Johannesburg exemplify this trend.
Hyprop’s acquisition of Table Bay Mall for R1.625 billion underscores the substantial investment appetite for premier retail destinations. Situated in Sunningdale, this 67,500 square meter mall is poised for above-average growth, fueled in part by significant residential development, particularly driven by migration to the Western Cape.
The sale of Mall of the South represents a culmination of terms between RMB Investment and Advisory (RMBIA) and Redefine, following the latter’s acquisition of the mall from Zenprop in 2020 for R1.82 billion. Redefine’s increased stake to 100% solidifies its commitment to this prime retail asset, signaling confidence in the sector’s long-term prospects.
Despite the prevailing macroeconomic challenges, characterized by unprecedented load shedding, elevated consumer price inflation, and pre-election uncertainties, the retail real estate sector remains resilient. Greg Dart observed a pronounced shift in favor of buyers, reminiscent of the market dynamics seen since the subprime crash 16 years ago. This shift empowers buyers to dictate investment values, albeit not necessarily aligning with sellers’ expectations.
While transactions in the double-digit million range pose complexities, particularly concerning sale conditions and financing structures, the appetite for retail properties persists. Dart reaffirmed High Street Auctions’ proactive approach towards retail properties, citing the sector’s resilience amidst adverse economic conditions.
In conclusion, the retail real estate landscape in South Africa demonstrates remarkable vibrancy and resilience despite economic headwinds. The successful transactions of both small community retail centres and large regional malls signify sustained investor interest and confidence in the sector’s long-term viability. As the market continues to evolve, stakeholders remain vigilant, navigating challenges and seizing opportunities in this dynamic industry.