Township and rural retail developments are growing. In fact, according to the South African Council of Shopping Centres (SACSC) and MSCI Real Estate, 1.8 million square metres of retail space in township and rural areas has been built since 2000 from 405 000 square metres in the 1990s.
A factor that has led to the increase in demand is increased household expenditure as a result of increased economic growth. More people are looking for convenient places to do their shopping and more people have more disposable income as a result of improved economic conditions.
The appetite for credit has also grown, leading to a higher consumption-led growth in the economy. Research has shown that some of the non-metropolitan areas are showing high growth.
Elaine Wilson, Broll Property Group’s divisional director of research, told Moneyweb that rural shopping centres must be diversified.
Wilson says that in order to lure people, retail centres should not only offer retail amenities, but also social grant and pension collection points.
Potential challenges faced by rural shopping centres:
People living in rural areas are vulnerable to economic disruptions such as job losses. This may cause a drop in expenditure, potentially leading to significant losses by retailers.
Securing land may present a challenge in the form of getting it from tribal authorities or municipalities. Building rural shopping centres may mean having to secure land from local authorities, such as from tribal leaders. If these leaders are unwilling to sell the land or if they view the shopping centres negatively, developers are likely to face a difficult time.
Certain areas of the market are starting to reach saturation, although this is not as extreme as in metropolitan areas. Increased demand has mostly been met by shopping centre developers, leaving very little room for any more construction.