A growing township economy is said to offer commercial property investors sound returns. Here’s why you should consider expanding your portfolio into top-performing shopping zones.
Previously untapped shopping development areas are booming as consumers in townships seek centres that are in close proximity to their residence. They want greater choice and convenience, as well as facilities that rival those of the best malls in more upmarket areas.
“The township mall shopper is discerning with high expectations for their shopping experience. They want centres that reflect the latest world-class designs, brands and retail mixes. If a centre looks and feels dated, it will quickly fall out of favour.”– Ina Lopion, executive director: asset management, Vukile Property Fund
Vukile Property Fund’s Ina Lopion, and other commercial property experts, have found that the upward swing in township retail is creating a higher demand for more and better retail space in these attractive markets.
Related: How to start small and succeed in commercial real estate
Here’s how you can invest in the type of mall that will attract a new generation of township consumers, and generate long-term income for you:
1. Location, location, location
Popular Masingita Mall in Limpopo is situated on the north side of Giyani, near a transport hub. Its immediacy to the area’s main taxi routes makes the centre accessible to consumers travelling into Giyani from the surrounding rural area and townships.
“The level of surrounding formal retail, the proximity to a regional centre, transport nodes and the offering within a township centre can all influence the return currently being experienced, even if the macro environment is not supportive,” says Antoinette Coetzee, retail analyst at Redefine.
2. Strive for a diverse tenant mix
Shoppers don’t only want their malls to be conveniently located, but also to house the retailers they need. Coetzee notes that because of South Africa’s relatively shallow tenant pool, township malls are usually anchored by one or two food retailers.
She says every area has different requirements: “For example, the tenant mix at Maponya Mall in Soweto is vastly different to the tenant mix at Turfloop Plaza in Limpopo.”
A centre’s financial viability depends on its ability to attract a mix of tenants, so it’s important to consider having as much variety as possible, including fast food retail, value fashion retail and services such as banks and cellular stores – subject to the size of your centre and its community.
3. Collaborate with the community
When Pan Africa Shopping Centre opened in Alexandra in 2009, the developer relocated the local traders operating on the site before construction, and ensured they were the first to be considered as tenants for the new property. Today 20% of the mall is occupied by regional and local stores.
“Township centres are also becoming more entrenched in their communities and collaborating more, integrating local entrepreneurs and business people among their retailers,” confirms Lopion. “Centres in townships are becoming more cooperative in getting to know their shoppers better.”
Because not all township communities are alike, it’s vital for you to find fresh, innovative ways to appeal to and engage customers. Partnership is key, along with keeping customers’ demands top of mind.
Related: Trends to consider as a commercial real estate investor
4. Implement competitive facilities
“South African consumers are pretty savvy and they all want a great shopping experience,” says Coetzee. “Even if they are only spending a few hundred rand, they have worked incredibly hard to earn their money and they want to be offered the best possible facilities, retailers and product offerings when they spend.”
Avoid making the mistake of assuming that a humble mall in a busy township with big-name tenants will earn you customers. As consumers’ expectations for added value grow, consider the importance of free Wi-Fi, entertainment areas and pleasant places to pause while shopping. After all, even established shopping centres are under continuous improvement so that they can maintain dominance and relevance.
As township shopping centres continue to outperform their suburban counterparts, investment in these areas of progressive growth is a wise addition to your property portfolio.