ALTHOUGH local retailers may think they are paying premium prices for retail property space, SA’s retail space ranks among the cheapest in the world.
But the fact that SA is relatively cheap in comparison with the rest of the world does not mean that the market is going to see a surge in rental prices as building costs and land values, which both inform rental levels, are also relatively inexpensive in SA.
David Green, MD of Pace Property Group, the associate office for international real estate group Cushman & Wakefield in SA, says that SA ranked as the fourth-cheapest retail location out of 44 countries in this year’s edition of Main Streets Across The World, the annual publication by Cushman & Wakefield. The publication tracks the world’s top 231 shopping locations.
According to Cushman & Wakefield, New York is the most expensive with its Fifth Avenue retail space fetching € 11983/m² this year. SA’s Sandton City in Johannesburg fetches € 650/m².
Green says SA is slightly cheaper than Thailand, but slightly more expensive than Mexico City , Buenos Aires and Manila .
“We have to understand that the dynamics for retail real estate in SA differ substantially from those which apply to prime retail real estate in New York. For one, the spending power is substantially less in SA, as is the foot traffic which is enjoyed by South African malls.”
He says he does not expect retail rentals in SA to increase significantly in the short term. “You will only pay higher rent if you are guaranteed a higher return from retail sales. Until that happens one would not see dramatic changes in retail rentals in SA.”
Green says SA’s building costs are among the lowest in the world. The same applies to the country’s land values. “Therefore, one would anticipate that our rentals charged would be in relation to these costs, coupled with the retailers’ turnover expectations.”
Green says these latest data also confirm that SA’s retail rentals are in line with other emerging economies around the globe.
“Although many retailers feel that prime retail rentals in SA are high, this is clearly not the case as they rank among the lowest in the world and are aligned with what one would expect to pay in other emerging economies.”
Pieter Prinsloo, MD of retail property-focused listed property loan stock company Hyprop Investments, agrees with Green, saying: “Even though our rentals are a lot more affordable compared to other parts of the world, especially the UK and US, we don’t have the same spending power per customer compared to these countries. ”
