Commercial Property February 2020

ARTPCORMMOEPRCEIARL TY JANUARY 2020

MIXED-USE PRECINCTS

DRIVING NEW URBAN
DEVELOPMENT

› WAREHOUSING AND LOGISTICS
› INVESTMENT OPPORTUNITIES
› RETAIL TRENDS
› INDUSTRIAL DEVELOPMENT
› GREENER BUILDINGS

The Harri, Cape Town



FROM THE EDITOR

IT’S ALL ABOUT THE RETURNS GENERATED
A familiar line cropped up in a
prominent company’s annual report Green building is ever
recently: we remain committed to prominent as corporate
building long-term wealth for our tenants look for savings on
investors. Anybody making investment operational costs that also
decisions in commercial property at the start have environmental bene ts.
of 2020 is adopting a similar approach. A recent trend sees more
property owners refurbishing
Market research and the ability to go the existing buildings using green
distance is required to navigate South Africa’s technologies to attract new investment.
fragile economy.
And further a eld in sub-Saharan Africa,
ere are areas of commercial property we investigate where the specialised real estate
showing promise. In the logistics and development and growth opportunities lie and
warehousing feature, a leasing manager for look at what triggers commercial developers
JSE-listed Fortress backs logistics as the main to invest.
driver for the local economy.
Find all this, and more, inside this issue
We explore the pros and cons of getting of Commercial Property.
involved in student accommodation. While
the demand is there, is it a sound investment? Kim Maxwell

CONTENTS 13 RETAIL TRENDS

3 LOCAL INVESTMENT Modern retail designs and offerings are
undergoing transformation as retailers try to
Despite a weakening economy, stay attuned to consumers looking for more
investors and property owners are individualistic and experiential retail choices
finding new ways and trends to
maximise returns 16 CAPITAL GROWTH OPPORTUNITIES

4 INVESTMENT IN SUB-SAHARAN The student accommodation market
AFRICAN COUNTRIES offers great opportunities, but these do
Which sub-Saharan countries and come with certain challenges
sectors offer stable prospects?
19 MIXED-USED DEVELOPMENT
6 INDUSTRIAL DEVELOPMENT
The ability of mixed-use precincts to attract
As customers change the way they occupancy and utilise space effectively is
shop, the design of warehouses is driving development in this sector
evolving to satisfy their needs
20 SUSTAINABILITY

The greener the building, the easier it is
to attract new investment and occupancy

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COMMERCIAL PROPERTY 1



COMMERCIAL INVESTMENT

on the COMEBACK trail
An oversupply of office and retail space in South Africa means investors, owners and retailers are looking at new
strategies to maximise returns, as Debbie Hathway discovers

p ressure on the economy continues to Struisbaai s experiencing an artisanal revival with many buyers looking to invest.
increase, and investors and property
images: supplied owners are hard-pressed to find ways increases that have kept pace with inflation,” SMALL TOWN REVIVAL
to maintain commercial property says Investec Property Fund joint CEO
occupancy and drive sales. But it’s not Darryl Mayers. Small-town living is also making a comeback,
all bad news. Rental growth may be slowing in bringing with it a host of small industries and an
the office sector, but the oversupply of space has He says property owners who collaborate artisanal revival, according to Richard Pratt
prompted a normalisation of rental rates in some to upgrade a precinct and create contained from Seeff Struisbaai. “This revival is inspiring
regions. “Commercial property returns are environments where people can live, work, people to set up shop along the tourist routes.
highly correlated to gross domestic product shop and socialise within walking distance There are plenty of opportunities to serve local
(GDP) and are falling in line with trends in will create compelling offerings that will farming and town communities,” he says.
output,” says Klaus-Dieter Kaempfer, Absa’s head resonate with younger generations.
of commercial property finance and “Several commercial property buyers are
equity investments. PRIME PROPERTY AND DOWNSIZING looking to invest and start their own businesses
and it is fairly easy to find tenants since
“While there are parts of the commercial Cape Town, already renowned for small demand is high. Rental income is affordable,
property market that have experienced excess businesses and a host of services, is now which is great for an entrepreneur setting up
supply, there are still opportunities being taken recognised as Africa’s leading tech hub. shop,” Pratt explains.
up by shrewd developers and investors.” Prime properties in locations perceived
as safe and easily accessible are much Commercial property prices in this area
New offices are being built to meet evolving sought-after. Frances Gray-Mnukwana, a range from R2.5m to R5m. Rentals, depending
client requirements, while in the retail sector, commercial property specialist with Seeff on the location, vary between R4 500
developers are responding to increased tenant False Bay, says she is experiencing demand and R8 000/m2. ■
demand in spite of relatively weak consumer for smaller spaces. Many business owners are
footfall in the past three years. also looking to downsize. SMALL BUSINESSES
FOR SMALL TOWNS
However, much of the new supply of retail space The slow demand for retail space has seen
is in previously underserved rural and peri- some large shopping centres experiment According to property agents
urban areas. In comparison, Kaempfer says the with “pop-up shops” on short-term rentals. operating in the countryside and
industrial market remains resilient and may still Tenanted properties with long leases and small towns, the most popular small
attract investment in the short term. a good rate of return remain in demand. business investment opportunities
here, especially for those located
With the normalisation of rental prices driving Rental rates vary depending on the type along busy tourist routes, across
office migration away from decentralised  of property and area, but are in the range South Africa include:
offices and back into CBDs, Investec Property of R67–R75/m2 for industrial property in • motor vehicle repair and panelbeating
Fund joint CEO Andrew Wooler adds that “some Montague Gardens, R85/m2 for commercial • beer gardens and outdoor restaurants
businesses are now paying comparable rentals property in De Waterkant and R110–R175/ • cafés, bakeries, delis and coffee shops
for A-grade Sandton offices to those charged m2 for Century City and the CBD. You can • bric-a-brac and antique stores
for B-grade spaces in outlying areas such as expect to pay aboutR180/m2 for commercial • guest houses
Sunninghill, Rivonia, Bryanston and Fourways. property in Newlands, R190/m2 in Claremont
And with easier access via several public Upper and R220/m2 in Mouille Point.
transport routes, the issue of available parking
space in CBD areas has also become less of
a headache for tenants”.

COLLABORATIONS

Meanwhile, on-demand office space, ecommerce,
inner-city gentrification and worker mobility
trends have guided the commercial property
sector towards robust returns for institutional
investors over the past 15 years. “We’ve
realised phenomenal capital growth on the
back of strong asset appreciation and rental

commercial property 3

COMMERCIAL INVESTMENT

BEYOND OUR BORDERS
Kim Maxwell investigates some of the commercial investment

W ith South Africa’s deflated appeal opportunities in sub-Saharan Africa
to foreign investors and its lagging
economic progress, commercial Manda Hill in Lusaka, Zambia. The company MARGINS OF SAFETY
opportunities are increasingly being says Accra and Lusaka both display strong growth TO GUIDE INVESTMENT
explored in specialised real estate potential and opportunities to acquire strategic DECISIONS IN
assets at much lower prices and more sustainable SUB-SAHARAN AFRICA:
levels than in recent years.
development and growth outside our borders. Mauritius-based Grit Real Estate Income Group
• ability to transact in hard currency

Sub-Saharan Africa commodity and oil- is invested in Ghana and Zambia too. With a • proven track record of ability to

exporting countries haven’t had it easy in recent market capitalisation of R5.25-billion, the group repatriate funds

years. From a real estate perspective, property is also involved in Botswana, Kenya, Mauritius, • Stable macro-economic environment

prices came under pressure as rental levels fell, in Morocco, Mozambique and Senegal. and low political risk

some cases by 30 per cent or more.  Grit targets corporate accommodation, • ability to secure land tenure

Growthpoint Investec African Property hospitality, light industrial/logistics, corporate • ability to raise debt

Management MD Thomas Reilly now sees office and retail assets, underpinned by blue- • strong international tenants
a different picture. “The overheated tenant chip international tenants. CEO Bronwyn
markets with excessive rentals visible before Corbett says each African market is different. Many countries offer strong

the oil crash are no longer,” he says. “Instead, “In Ghana, we have a solid portfolio of corporate opportunities for specialised real estate

real estate markets have managed to re-base to office assets, based on their growing economy such as hospitals and education facilities.

more sustainable levels and, as a result, open up and regional relevance. In Mozambique, we’re In addition to margins of safety, a

to a broader market. From a real estate pricing expanding our corporate accommodation decision to invest is based on the right

perspective, this potentially bodes well for offering on the back of strong demand from tenant and the security of a lease.

new entrants.” resource companies. In Kenya, we’re expanding Source: Grit Real Estate Income Group

NEW ENTRY POINTS logistics due to the shortage of suitable warehouses.”  warehouses. This circumnavigation of legacy

Reilly believes entry points for new, long-term SUB-SAHARAN PROMISE challenges in Africa, such as congestion and

investors are compelling in markets such as Ghana Asked to flag promising sub-Saharan countries, lack of formal addresses, is set to disrupt the
and Nigeria. “Couple this with demographics. Corbett says one of Grit’s key risk mitigants is to sector,” says Corbett. She backs Mozambique as
They include some of the world’s highest levels hold about 50 per cent of its portfolio in investment- a stable source of income and growth, with
of urbanisation and middle-class growth, aside grade Africa (Mauritius, Morocco, Botswana) and demand for corporate accommodation and
from absolute population growth,” he says. “Key 50 per cent in higher-growth Africa (Mozambique, offices at an all-time high. “Grit is currently the
opportunities prevail in retail, office and logistics/ Ghana, Kenya and Zambia). largest landlord for A- and P-grade office space
industrial sectors, where quality assets remain in “We see Kenya logistics as a high-growth in Maputo.” One of Grit’s more recent 2019
short supply. We can secure strong international area. There are generations on the continent who property acquisitions was in Senegal. “Our
tenants and satisfy their local or regional presence.” have leapfrogged into the digital era, comfortable expansion into Senegal was as a result of a sale
Growthpoint Investec African Properties to transact on their mobile phones. and leaseback transaction with Club Med, the
recently secured prime retail assets in the Companies such as Amazon are capitalising country’s largest tour operator with a 40-year
Achimota Retail Centre in Accra, Ghana, and on this by creating large click-and-collect  track record in that country,” says Corbett.
This underscores Grit’s investment approach
of partnering with tenants to acquire and
expand assets under long leases.
The company has also acquired an increased
stake in Botswana Stock Exchange-listed
Letlole La Rona, helping Grit increase
its exposure to the Botswana property
market with sufficient scale and corporate
infrastructure. “It enables further exposure
to investment-grade Africa, an increased
weighting in the industrial sector, and a strong
platform for asset management opportunities images: Supplied
in an exciting, stable and growing region,”
The food court at Anfa Place Shopping Centre in Casablanca, Morocco — a family and lifestyle destination catering for Corbett concludes. ■
a wide range of people.

4 commercial property



BRIDGING Warehousingandindustrial

development design is evolving to

THE GAP meetcustomers’changingneeds,
reports Debbie Hathway

L ogistics and warehousing operations “Technology is disrupting all industries,” states S&J Industrial Estate in Germiston.
is the sector leader in commercial the Deloitte Global Powers of Luxury Goods
property, and a key growth area in 2019 report. “Its greatest impact on the luxury Ecommerce has been surging locally with
South Africa, partly because online market is the rise of ecommerce and, ultimately, online spend expected to exceed R60-billion
shopping is creating increased the need for brands to operate an omnichannel in 2020, 36 per cent up on 2018 numbers,
demand for logistics and distribution strategy — online and bricks and mortar.” according to Barloworld Logistics. While
warehousing infrastructure. consumers demand more convenience
Fortress REIT Limited, a JSE-listed property and faster delivery from online retailers,
As online sales rise — a trend that is expected development investment company, believes ecommerce sellers need to develop strategies
to continue gathering momentum — so does logistics is the main driver for the local to address demand.
the need for urban warehouses to augment the economy. The company remains committed to
traditional supply chain. And while demand for developing its logistics pipeline nationally in its MICRO-ORIGIN FUTURE
space might mean higher prices for industrial secure well-located logistics parks countrywide
real estate, it’s still a cheaper deal than retail. in coming years. One way to do that is through micro-origin
fulfilment centres, small-scale warehouse
“WE WORK VERY CLOSELY WITH OUR TENANTS TO UNDERSTAND THEIR facilities that are gaining popularity images: supplied
REQUIREMENTS, ENSURING THAT THE FACILITY WILL OPERATE AT ITS OPTIMUM internationally. Barloworld Logistics is
FUNCTIONALITY. BEING ABLE TO TAILOR-MAKE EACH WAREHOUSE TO THE backing microfulfilment centres as a viable
TENANT’S SPECIFICATION HAS PROVEN VERY SUCCESSFUL.” — GRANT SILVERMAN solution for industrial, residential, and
business office owners to work together
to improve delivery. Typically located in
convenient, accessible urban areas, near ›

6 commercial property

INDUS T Riiaal dee vellooppmeent

the end consumer, they provide businesses Clairwood Logistics Park offers state-of-the-art facilities and is strategically located to the harbour and major arterials.
with increased flexibility and better
opportunities to keep goods closer to customers Abland is looking at launching a new pipeline of approximately one million m2.
for speedy delivery. industrial offering in 2020, along the R21 Clairwood Logistics Park is 72ha in extent, with
corridor between Pretoria and OR Tambo
In New York City, large-scale properties are International Airport. “The new year is capacity for 358 000m2 of warehousing. “It’s the
being transformed into urban logistics centres, thus looking very positive for the industry. At last remaining flat portion of property in the South
creating a new sector in real estate. Innovo Property our S&J Industrial Estate, spanning 210ha in Durban Basin, other than the old Durban airport,”
Group CEO Andrew Chung said on Logistics Germiston, we cater for a variety of industrial says Fortress REIT national leasing manager
Management’s website that the urban warehouse and commercial uses. It is ideally located along Grant Lewington. “It’s strategically located, within
handles multiple functions, including traditional the southeastern corridor of Johannesburg, 11km of Durban harbour by road and almost the
fulfilment and last-mile deliveries. It can serve offering excellent visibility and access to and equivalent distance by rail.”
as a product showroom and act as an expanded from the N3, N12, N17, and M2 freeways,” says
backroom by handling more frequent store Silverman. “We have already secured two large The facility offers state-of-the-art logistics to
replenishment, reducing the amount of inventory users who will be breaking new ground in the facilitate the storage and distribution of goods
stores carry. first quarter.” within A-grade warehousing facilities coupled
with road, rail and sea transport, which completes
INCREASED DEMAND Abland’s Atlantic Hill in Cape Town, located the supply chain. “Its proximity to the port and
in the Durbanville area on the intersection of major arterials makes Clairwood Logistics Park
Grant Silverman, marketing and leasing director at the N7 and M12, is set to remain a very strong a very attractive option to local and international
Abland, says they have noticed increased demand industrial node. Cold storage, distribution businesses alike,” says Lewington.
for logistics and distribution warehousing as well as centres and data centres are some of the facilities
data centres for the storage of critical applications that have been installed there last year. Containerised cargo is a fundamental part
and data. “We are getting many more data centre of both imports and exports. So Fortress has
enquiries from both local and international Design criteria for facilities near transport earmarked a site, dedicated to container
tenants. There has also been an increase in owner- nodes have also evolved, with considerations handling, at Clairwood Logistics Park. It is in
occupier enquiries, and businesses exploring such as green building technologies and energy close proximity to a proposed rail siding, which
the ownership option that we offer,” he says. efficiency being important factors. “Urban design Fortress is in the process of finalising with
Warehouses built to client specs are particularly and management are crucial to the success of Transnet. “Rail will contribute to the alleviation
popular. “We work very closely with our tenants to industrial estates. We are moving away from of traffic on the roads as well as congestion at the
understand their requirements, ensuring that the the typically dirty industrial parks by adding port,” says Lewington. “This initiative supports
facility will operate at its optimum functionality. landscaped green areas to soften a generally the government’s commitment to reducing road
Being able to tailor-make each warehouse to the hard environment,” says Silverman. “We are also transportation, ultimately lowering carbon
tenant’s specification has proven very successful.” integrating cycle lanes and public transport hubs emissions, protecting road networks, and
to promote ease of access, and incorporating improving road safety.”
With research house Frost & Sullivan facilities such as a conference centre and retail
anticipating global urban supply chain spend options for added convenience.” The proposed container terminal will facilitate
to escalate to nearly R83-trillion by 2020, the storage and movement of containers for
customisation is crucial for forward-thinking LOGISTICS PIPELINE tenants at Clairwood Logistics Park, as well as
companies trying to get a grip on logistics suitable surrounding areas. The proposed siding offers a
for today’s consumer, whether from the shipping In KwaZulu-Natal, Fortress REIT is developing more efficient way of transporting containers to
or the receiving perspective. “The supply chain the R4.5-billion Clairwood Logistics Park, which and from the Durban port, as well as inland.
market is becoming more complex in a time- forms part of its extensive national logistics
constrained environment as speed of delivery and Logistics in South Africa is in a healthy space. ■
user experience emerge as critical factors,” notes
Frost & Sullivan Visionary Innovation Group “ITS PROXIMITY TO THE PORT AND MAJOR ARTERIALS MAKES CLAIRWOOD
senior research analyst Vijay Natarajan. “In fact, LOGISTICS PARK A VERY ATTRACTIVE OPTION TO LOCAL AND INTERNATIONAL
instant and same-day delivery solutions are BUSINESSES ALIKE.” — GRANT LEWINGTON
now key service differentiators. Firms must
rethink their strategies and devise more agile
models that leverage economies of scale and still
meet consumer demands.”

ENERGY-EFFICIENT DESIGN

Meanwhile, Silverman says designs have become
more energy-efficient. “The use of translucent
sheeting allows more natural light into the
warehouse, while the utilisation of greywater for
irrigation and solar-generated power all add to
making the facilities more cost-effective to run,”
he says.

commercial property 7

hFeaCsiovCemhmawnaegryecsde The growth of eCommerce, and the impact on
fulfilment, is altering the way companies plan and
PFlaancniliintgy design distribution facilities. There are far more
variables to be considered than ever before, here
+27 (0) 11 028 5900 [email protected] www.fortna.com are just a few:

Labour:

eCommerce and omnichannel fulfilment require
more labour-intensive unit picking, especially
during peaks. More labour is required for unit
picking and packing than for bulk (case or pallet)
movement. When selecting a site, the availability
of workers and the skills in the labour pool
must be considered. Can you quickly ramp up a
temporary labour force to support peaks? Is the
labour market deep enough to keep the facility
adequately staffed over time?

Automation and Speed:

eCommerce drives the need for faster fulfilment,
which is o en supported by automation. But,
the facility requirements for automation can be
very different from a traditional warehouse. For
example, you’ll need to support higher electrical
loads and you may need different kinds of dock
doors so that product can flow directly onto trucks
instead of being staged and loaded in pallets.

As you move towards faster fulfilment, with or more frequent deliveries to stores? What if your meet the needs of the business represents
without automation, the yard requirements may customers suddenly ask you to do more direct enough risk to be included in the business
change. Inbound and outbound scheduling of shipments? Can you accommodate store-ready case as well.
trucks must be designed for efficiency. The need to deliveries? Can your processes be adapted for
turn trucks faster may mean you need more dock same-day or same-hour fulfilment cycles for Summary:
doors and be er facility and yard management. competitive advantage? To plan and design a
distribution centre with the flexibility to adapt These are just a few of the ways that facility
Expansion: to change, you will need to look at detailed planning and design have changed due to
growth forecasts that consider changes in unit new eCommerce and omnichannel business
One of the biggest mistakes companies make versus case volume and quantity of weekly store requirements. But longer term, companies will
is not se ing up their buildings so that they can deliveries, as well as a number of other factors also need to look at requirements imposed
be easily expanded as the business changes. impacting order profiles. Consider all the ways by environmental regulation and customer
As eCommerce orders increase as a percentage the business might evolve over time. These expectations for greener supply chains. And the
of sales and order profiles change over time, represent potential changes in how a distribution maturation of newer technologies like goods-
companies must be ready to easily expand and centre operates and how you must plan and to-person automation and robotics need to be
retrofit their operations for growth. The areas design facilities. It all comes down to striking a considered as part of future distribution upgrades.
and processes that support unit fulfilment balance between investment and flexibility.
should be designed for expansion, with space to
seamlessly add resources without the need to tear Business Case:
out existing equipment. Elements such as floor
flatness specifications, clear heights, and building Justifying capital investments is no longer
firewalls need to be determined with growth and based solely on cost. The business case more
expansion in mind. o en includes things like supporting growth
and reducing inventory. And in a shrinking
Flexibility: labour market, automation investments are
sometimes justified by the lack of sufficient
Today’s distribution facilities require greater labour, especially during peak season. The
flexibility to adapt to changing requirements. possibility that distribution won’t be able to
Can the facility handle a shi toward smaller,



ADVERTORIAL

HOW TO STAND

OUT IN A CROWDED

(COMMERCIAL)

PROPERTY MARKET e commercial property industry is currently facing
numerous challenges mainly due to escalating water and
electricity costs. So, how can these be overcome?

Michael Franze, managing director increase in rates and electricity prices as one of Citiq Prepaid is South Africa’s most trusted
of Citiq Prepaid, says there are the top contributors to this dismal gure. prepaid utility solution. e meters are easy to
numerous ways to address these install and the company has a call centre for
challenges and stand out in Franze agrees and says water and electricity dedicated end-user support.
a crowded market. have become scarce resources. “We need to put
ECONOMIC COMPLEXITY the brakes on water and electricity consumption. Franze says tenants are pushing back as they
Consumer education is vital. Water and don’t want to share costs of other tenants in
Investing in business property for commercial electricity used to be included in your rent, but the same building.
purposes and renting it out to make money this is no longer a viable option for landlords
has become more di cult. Franze says there and tenants.” “Tenants are pretty happy to pay their
is currently a lack of consumer and business own way and don’t want to subsidise others.
con dence in the country. HOW TO STAND OUT IN A CROWDED MARKET Having sub-meters allows for the fair
allocation of costs. Another advantage of the
“A lot goes into making rental property work. Depending on their budget, tenants are spoiled metering system includes the automatic flow
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old days is no longer the case. Property prices commercial rental property. So, how does a We see ourselves very much as the referees
aren’t increasing at the same rate and one cannot landlord ensure they stand out in a crowded between tenants and landlords,” he says.
expect the same return on capital year on year. market? The answer is simple — sub-metering. Citiq Prepaid ensures hassle-free prepaid
Adding to the already cash-strapped market are management.
For a tenant, moving into a building that
increased water and electricity is already equipped with sub-metering and Citiq Prepaid also provides automated
rates. is is putting tremendous electricity billing is a bonus. There will be no reports that allow all parties to have access
pressure on lease escalations,” additional work for the tenant as the utility to payment and billing information. In doing
says Franze. side is already taken care of. Franze says this is so, data becomes available to the right people
a step in the right direction and will surely put to make sure their business expenses are
Michael Franze LOW TENANCY RATES your rental property at the very top of a potential managed e ciently. ■
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Rede ne, one of South Africa’s “ ere are some factors that greatly in uence 087 55 111 11
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largest property owners, a not. One such is sub-metering. is gives control Howick Gardens, Waterfall Park, Midrand
rental reversion of to both tenants and landlords. e tenant can www.citiqprepaid.co.za
-17.3 per cent has get immediate feedback on their electricity usage
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owners and managers.

C O M M E R C I A L P R O P E R T Y 11



ESSENTIAL RETAIL TRENDS

In 2019, Louis Vuitton transformed a
Chicago night club into a dayglow orange
Louis Vuitton pop-up store, showing key
pieces from its fall collection.

I’M BUYING WHAT SHE’S HAVING

To ensure sustainability in a changing retail sector, mall owners and tenants are redesigning

spaces to meet an experiential shopper’s aspirations, Kim Maxwell nds
F lexible, focused and changing fast,
modern retail is undergoing an e physical store remains an important Aggregated data also re ects how turnover and
exciting metamorphosis. At a recent element of researching and purchasing. But, customer entrance pro ling on, say, a weekday, is
South African Council of Shopping consumers are increasingly researching online, di erent to a Saturday. Data-driven decisions are
then making a nal purchase in-store. Stephens the clincher. “Landlords, tenants and marketing
Centre Congress of global retailers says consumers want great experiences. departments keep saying that the retail market
in Cape Town, trends pointed towards a His advice: is tough, but many are still making the same
global retail sector where connecting with • Create stories or experiences: an decisions and not changing how
a younger, modern shopper who craves an experienceless about products, more about they do things to meet an evolving consumer,”
experience makes all the difference. productions. Less about inventory, more says Maguire.
about inspiration. Less about commerce,
CUSTOMER-CENTRIC more about a community that re ects SHOPPER ENGAGEMENT

Customers expect to interact across all their values. John Ryan, stores editor at Retail Week, says
channels, on their terms. Embracing digital • Personalise: retailing and manufacturing shopper engagement is about taking the expected
transformation means retailers meeting their less focused on mass production, and rather and putting it into an unexpected retail context.
customers where they are at, with what they embracing the age of me. Take Nike’s hyper- “Louis Vuitton is probably the leader of doing retail
want. McorpCX president Michael Hinshaw says personalisation where customers can design in an alternative way,” he says. “At its New York
businesses should make decisions through their their own shoes. At Nike’s agship Nike pop-up store last July, everything was painted bright
customers’ eyes, yet 11 per cent of business NYC store, a customer scans a shoe barcode green from the brick exterior walls to a pavement
decisions are made without customer input.  via their phone camera to access what’s mailbox and bicycle leaning outside.”
Hinshaw’s retail research shows:  available in their size and preferred colour. Technology has created sta -free stores. Swedish
• 91 per cent of clients are more likely to shop if • Surprise: great brands engineer great company Wheelys launched a sta -free prototype
a retailer remembers them surprises. ey should be unusual. in Shanghai a few years ago, where doors open via a
• 79 per cent believe a retailer should actively • Repeatability: a store should be able to smartphone app. Tech start-up BingoBox partnered
show they understand them repeat an experience time and again. with French supermarket group Auchan to o er
• 70 per cent say understanding their needs something similar in China.
drives loyalty  BEHAVOURIAL INTELLIGENCE Amazon Go opened its rst cashless convenience

• 80 per cent are likely to buy if offered South African company Fatti uses use Wi-Fi store in Seattle in January 2018, where customers
personalised experiences.  to record and monitor behavioural insights scan an Amazon smartphone app to purchase
and real-time shopper intelligence in various items. Amazon’s 12th US Amazon Go opened
INTEGRATED SHOPPING shopping malls. CEO Adrian Maguire says last May at Brook eld Place in New York. ose

Retail futurist Doug Stephens says that from retail-smart malls use aggregated data to make shoppers had an additional cash option where an
online shopping to bricks and mortar, the concept informed decisions that better serve their employee performs a store checkout on a mobile
IMAGES: SUPPLIED of what a store is, how consumers shop inside, customers and improve the user experience. e device.
and what the economic revenue model is, is being challenge is that no two shopping centres have A traditional concept such as a bookstore might
profoundly reinvented. the same customer behaviour. just need a new approach. At Duoyun Books in

C O M M E R C I A L P R O P E R T Y 13

ESSENTIAL RETAIL TRENDS

The Nike NYC multi-level concept store on Fifth Avenue, New York, where technology and footwear connect. LOCAL MALLS DOING IT
DIFFERENTLY
Shanghai Tower, 60 000 books are available in MULTISPACES
2 229m2 of space, 52 oors above ground. Canal Walk: Hyprop Investments’
Proving that you can create new from old if you e way people work and live is changing. national property marketing executive
do it di erently. In retail, single-use spaces are obsolete. Camilla Lor says Canal Walk was selected
Modern consumers do di erent things to house the largest concept iStore in
MY EXPERIENCE simultaneously — checking emails or Africa last year. The newly imagined home
ordering food online while working. for all-things Apple takes experience to
Modern shopping is about: intention, social, Social spaces cannot be ignored by retail the next level in a lounge, product and
aspiration, entertainment, and discovery. developers and designers. “Make sure you’re accessory showcase area, training room,
creating retail spaces where people can come technical support and set-up desk. Aside
Lara Marrero is principal and strategy together and chat,” says Marrero. “Consumer from while-you-wait repairs, iStore Canal
director at Gensler, the world’s largest design in-between-time isn’t wasted time.” Walk offers inspirational events and
Tech also matters — in service to the workshops on music to illustration, coding
rm, responsible for incredible interiors in many customer journey, or to help people in sales or photography.
premier retail addresses. ese include six areas to connect better with their
international Starbucks Reserve Roastery customers — in the best path to Canal Walk’s LEGO store was a
stores, the Adidas New York City concept customer conversion. Western Cape first. Offering exclusive
store, and the redesign of Saks Fi h Avenue Ryan says modern shoppers product ranges, kids can also build
Flagship store in New York. want a reason to spend personalised LEGO figurines, use an
their money. Stephens interactive play area, and find an AR
Marrero says it’s about says digital is only an screen that will read box barcodes to
navigating and activation. avenue for growth: superimpose LEGO sets.
“We’re moving into the age of rather than making
belonging: consumers want to the sale, stores need to Sports brand VANS opened
be part of something bigger. It’s deliver an experience that a Canal Walk top-tier concept store
about partnership, connection Lara supports the brand. Marrero last November, the third of its kind
and bringing people together in Marrero globally. It includes a custom lab where
shared spaces.” customers can personalise their
concludes that modern retail is purchases and a photo booth for
Consumers benchmark their about workstyle meets lifestyle and selfies. A four-sided screen pillar shows
experiences via their phones. toggling between the two — developers skateboarding content.
“Remember that a consumer is a person. need to design urban environments to Fourways Mall: Accelerate Property
Today’s consumers take their best experience support how people act. “It is no longer: if Fund’s head of marketing Zoe van
of any situation and apply it as a benchmark you build it, they will come,” says Marrero. Onselen says a mall can’t only be a mall
for their next one. ey take to Instagram or “Now it is: if you constantly create ways of any more. The latest Foschini All Women
Facebook to express how they feel about retail. keeping interest, they will come.” ■ concept store in Fourways Mall is an
African first. It includes Candi & Co,
ey don’t even need words — emojis can do where hair and nails form part of a salon
the trick.” experience, inside a clothing store. It’s not
only clothing but beauty, jewellery and
“Make sure you’re creating retail spaces where people can come make-up too. IMAGES: SUPPLIED
together and chat. Consumer in-between-time isn’t wasted time.”
— Lara Marrero MRP has partnered with Foundation
Coffee. Customers can grab a coffee from
the in-store barista while they shop for
the latest fashion. The store also combines
click-and-collect lockers for online
purchases and self-checkout kiosks.

Fourways Edgars is light and airy,
and on a par with any international
department store. Phenomenal design
over two levels includes a striking tree-
lined central social space anchoring the
services. Sections are located within the
sleek layout and a stylish Mugg & Bean
sit-down space offers coffee and light
meals. There’s an Edgars Home, along
with a fashion and beauty section.

14 C O M M E R C I A L P R O P E R T Y



The JJP Group offers student accommodation
within walking distance of the University of
Pretoria’s medical campus.

STUDENT ACCOMMODATION:

A FOR ASSET CLASS?
“I t’s not about the bed,” says
Respublica Student Living CEO Capital growth opportunities are obtainable in the purpose-built student
Craig McMurray referring to accommodation market. But don’t imagine it’s business as usual, writes
the custom-designed student Nia Magoulianiti-McGregor
accommodation market. “Student
accommodation is not just business as usual are managed. “Happy students will mean the high-quality student housing market in South IMAGES: SUPPLIED
in the property game. It’s complex, intense facility is full the following year.” Africa is similar to the UK equivalent in the
and much tougher than it seems.” late 1990s. “ e sub-Saharan African student
ECONOMY OR UPGRADE? housing market is at an early stage of its
It’s not a high-yield, high-return game evolution into a bona de asset class that could
either, he says. Affordability is key, he says, but it’s match those in developed markets over time.”
complicated: every university is unique.
That buildings should be built cost- His research suggests that the private sector
effectively and run efficiently is a given. “Demographics are di erent at not only currently provides about 430 000 beds to
But, that’s just the start. “While you’re each university, but also each campus, and the public university market in South Africa
providing a physical product, this is not just this impacts levels of a ordability.” As with (his gures exclude private universities and
about bricks and mortar. You are building an airline that o ers di erent classes of travel, TVET colleges). Only about 50 000 of these are
a purposeful product that will include a developer has to assess if there may be provided by recognised large-scale providers.
multiple extras such as a computer centre, demand for “business class” accommodation,
recreation centre, 24/7 security and super- which translates to a higher level of privacy. is leaves nonspecialist providers to supply
fast Wi-Fi,” says McMurray. Or whether an economy ticket — shared up to 380 000 beds, a supply gap waiting to
facilities — will be the preferred mode to get be filled.
It is also about managing a community of the student to their destination.
students and creating support programmes INVESTOR RELUCTANCE
by providing social and sporting activities, McMurray believes student accommodation
mentoring, tutors and counselling services comes with higher operating costs than is Yet Sandri says institutional investors are
— many impoverished students are standard for commercial tenants. “Many o en reluctant to enter the market. He
catapulted into cities with a huge amount of costs are inclusive, so you have to manage believes they’re waiting to see how the asset
pressure on them — as well as laundry and these,” he explains. class fares through a full property cycle to
cleaning services. prove its resilience.
Pepler Sandri, associate director of capital
McMurray says success depends on markets at JLL commercial property and As McMurray points out, internationally,
how well the physical facility, student investment management services company, this was an alternative asset class that’s matured
administration and community management is optimistic. He believes the purpose-built, to the extent that “many major institutions

16 C O M M E R C I A L P R O P E R T Y

CAPITAL GROWTH OPPORTUNITIES

including pension and sovereign funds have put a Practical, yet comfortable — a typical room as provided by Respublica Student Living.
lot of capital into student accommodation”.
kept under control. “We have to create value, not doing market research — which was “quite
He adds that “as South Africa doesn’t have the an extravagant lifestyle. While there may be no a learning curve” according to Janse van
proportionate amount of international students gym or swimming pool, some extras — included Vuuren. He also sat with students talking
and possesses a low level of a ordability, private in the monthly rental — like top-notch security, about their priorities: a ordability, good, fast
developers have to work hard to make it work.” utilities and cleaning sta are non-negotiable.” Wi-Fi, good management and maintenance.
Despite this, the company has low bad debt, “You can’t just give them a key and forget them,”
thanks to tight collections processes. CHALLENGES AHEAD he says.

McMurray says the student population Yet, there are still challenges. “I believe there are
is stable and growing and immune to “Your properties will only be excellent opportunities in
macro-economic issues. leased for about 11 months this niche market,” he adds.
of the year, so there is no “While the South African
Sandri seconds that, saying that in the 2014 income for the last month. market lags about ve years
academic year, National Student Financial Aid NSFAS accreditation also behind global trends in
Scheme (NSFAS) grants totalled about R9-billion, means adhering to norms set student accommodation,
up from R5.6-billion in 2011. In 2018, about R21- by the Department of Higher there are opportunities
billion was disbursed. “An increasing number of Education, and the developer for investors, developers
students enrolling for tertiary education means must balance complying to and property managers in
there is room to grow.” any upgrading of standards student accommodation.
annually with rentals.” The risk comes with
BALANCING ACT a return.”
Also, the developer has
JJP Group’s CEO Hansie Prinsloo, who built to absorb any hitches and Eris is also hoping to
his rst student accommodation in 1994 at the risk. Prinsloo says the Fees Must Fall movement attract investors to the Momentum Student
University of Pretoria, agrees that it’s a risk- saw some investors cut back on their investment Accommodation Impact Fund to help deliver
sensitive market — and a balancing act. “It’s portfolio in this sector. quality student housing in South Africa. “It’s
an axis that includes an operational role, a a way for investors to realise a nancial
sound nancial structure, and strategic Eris Property Group has taken a leap of return while contributing to social solutions
qualitative issues.” faith in this market. Property development that will bene t South Africa’s youth as they
manager Johan Janse van Vuuren says student seek to attain an education,” Janse van
O cial gures by the Department of accommodation management is “an asset class Vuuren explains.
Education estimated bed shortage in 2010 at just on its own”.
less than 200 000. It’s now estimated at 250 000. McMurray says while it’s not likely to ever
e rst development under Eris’ Rise become “frothy” in a bull market, student
row TVET colleges into the mix and the gure Student Living brand, Units on Park, is aimed accommodation is nevertheless a “defensive
more than doubles. at University of Pretoria students. It opens for investment, which should outperform
business in January 2020. conventional real estate asset classes in a
“ e demand is obvious,” says Prinsloo. pressured economy”. It’s complicated,
“Students need safe lodging and at least Janse van Vuuren says while the market adds Sandri: “Student housing is a mix
some of the comforts of home to reach their is risky, he believes the risks are mitigated between a hotel and a rental apartment.” ■
full potential.” because economic downturns don’t typically
a ect this market. Eris spent three years
“About 80 per cent of the need is with NSFAS
students, where accommodation is funded by
student loans.” Prinsloo says this requires cost-
e ective building designs and operational costs

PROS OF STUDENT
ACCOMMODATION

Steady income and solid rental
growth: Typically the sector grows
ahead of inflation.
Resilience: The sector tends to perform
well in downturns when student
enrolments rise as students seek to
remain competitive by upskilling.
High occupancy: A strong demand is
reflected in high occupancy rates.
Source: JLL’s Student housing: a new
asset class in sub-Saharan Africa.
Pepler Sandri.

C O M M E R C I A L P R O P E R T Y 17



CAPITAL GROWTH OPPORTUNITIES

lLOaOMrINgGe
Mixed-use precincts are driving new
IMAGES: SUPPLIED urban development, Helen Grange SANDTON GATE IS UNPARALLELED AS The Harri in Cape Town is located close to
nds out more A MIXED-USE PRECINCT IN SANDTON.” entertainment and retail hubs.

A slew of mixed-use precincts have come — GRANT SILVERMAN marketing and leasing director for Abland, which
on stream in the past few years as the is a co-developer of the precinct with Tiber.
global trend gains momentum in major design rms in the area because of its proximity
South African cities. ese precincts to a fashionable entertainment and retail scene, “ e entire stretch of river adjoining the site is
are fuelled by an increased need for as well as how it’s merged micro-apartment living also being rehabilitated and upgraded. is will
corporate headquarter relocating or downsizing, with co-working o ce spaces to create a co-living draw cyclists and local residents to these open
for using space e ectively in highly-populated environment,” says CEO Je rey Kleu of Capital space and the other amenities here. It’s what
areas, as well as by increased demand for live/ Point Properties, the developers of e Harri. e modern city lifestyle is all about.”
work/play lifestyles that cut out tra c congestion. area also appeals to visitors a er a di erent inner-
city tourism and nightlife experience. MAIN TRANSPORT ARTERIES
Many projects follow on the success of
established, large-scale developments such as VALUE PROPOSITION Demand for mixed-use space is commensurate
Melrose Arch in Johannesburg, Menlyn Maine with the pace of the development, especially if on
in Pretoria, and the V&A Waterfront retail, hotel e ability of mixed-use precincts like these main transport arteries. Lo us Park is another
and residential development in Cape Town. to tap into a continual ow of human tra c Abland mixed-use development next to Lo us
makes them an unbeatable value proposition Versfeld Stadium in Pretoria that encompasses
INDUSTRIAL-COMMERCIAL REDESIGN for commercial developers. As Kleu observes, o ce space, a hotel and gym around a piazza,
parking is used cyclically — o ce workers during plus restaurants and retail o erings. It bene ts
In inner-city Cape Town, the focus is on the the day and residents at night — so less parking signi cantly from being adjacent to a Gautrain
vibey East City Precinct, now called Cape Town’s bays are required. “People use the same spaces at bus stop, allowing o ce workers and precinct
design district. Once an industrial-commercial di erent times, so operational costs come down. patrons to connect seamlessly.
precinct on the outskirts of the CBD, old
buildings have been rejuvenated and repurposed, is, in turn, means you can a ord a bigger In Cape Town, Amdec’s massive Harbour Arch
creating a thriving mixed-use district in the security/cleaning contingent, which makes the development is being built on a 5.8ha site in the
same vein as London’s Soho or Manhattan’s space, cleaner and safer.” CBD, strategically positioned at the convergence
Meatpacking District. of major access roads, with easy entry points
In Gauteng, the R3-billion Sandton Gate to and from the N1 and N2 highways adding
Adding value to this district is e Harri, an mixed-use precinct is taking shape along immeasurably to its value.
Art Deco building that is being redeveloped into William Nicol Drive. It’s a huge block of modern
39 studio and split-level penthouse apartments. apartments seamlessly connected to commercial And not least, new mixed-use developments
Opposite the residential site are co-working and and retail spaces via pedestrian walkways, with are setting the bar in green building standards.
co-living spaces, including lounges, TV rooms, new intersections between Mattie Avenue and Green Building Council South Africa
open-plan kitchenette/dining areas and a roo op Sandton Drive being introduced to deal with managing executive for market engagement
terrace. Gardens Shopping Centre, Virgin Active ingress and egress tra c. Grahame Cruickshanks points out that this
Wembley Square and various independent is just another way of adding to the o ering.
businesses are all within walking distance of “Sandton Gate is unparalleled as a mixed-use “Commercial property owners are seeing the
the development. precinct in Sandton,” says Grant Silverman, value in refurbishing existing buildings to a
green standard, to attract and retain tenants who
“ e Harri is appealing to many professionals are requesting space that meets green building
working for established creative, technology and standards,” he says. ■

C O M M E R C I A L P R O P E R T Y 19

SUSTAINABILITY

BGOUINIGLGDREOENR: The GBSCA’s offices in
REFURB? Observatory, Cape Town.

C ommercial building developers are In the push for greener buildings, increasingly property owners are also
pursuing the highest green building refurbishing existing assets to attract new investment, writes Helen Grange
standards — applied to new building
developments or in the refurbishment of is is due to the improving e ciencies being capital growth in certi ed buildings certainly
existing buildings — as it makes sound achieved in the available technologies, and the indicates that resale values will be positively
economic sense in terms of running costs and rapidly rising cost of grid-supplied electricity. impacted by energy- and water-e ciency
improved asset values. measures, as well as the saleability of
e investment case for solar PV is extremely those properties with green features,”
“Reduced operating costs, improved attractive for buildings with the appropriate roof says Cruickshank.
indoor environmental quality and improved space,” he adds.
environmental, social and governance (ESG) One of the most notable developers of green
performance, as well as investment and WATER INVESTMENT CASE buildings is Growthpoint Properties, which last
compliance criteria, are some of the drivers year increased its minimum target for green
behind the decision to refurbish existing Water pricing in South Africa has made the building certi cation in its o ce buildings from
buildings to a certi ed green standard,” says investment case for greywater, blackwater, a 4-Star to a 5-Star Green Star rating.
Grahame Cruickshanks, managing executive and rainwater harvesting less appealing to
for market engagement at the Green Building building owners. “Still, in some cases, building NEW VERSUS REFURBISHED
Council South Africa (GBCSA). owners are choosing to futureproof their assets
against higher water utility pricing and supply New developments, in the main, are quite
GBCSA has refurbished its o ces in Rosebank interruptions by ensuring that greywater di erent from refurbishments, in that they are
Corner on Jan Smuts Avenue, Johannesburg, and recycling and rainwater harvesting systems are o en larger and require more planning. “Part
in e Old Warehouse Building in Observatory, retro tted to their buildings,” says Cruickshanks. of our approach is to develop green buildings
Cape Town. Both were existing buildings now Market returns on certi ed green buildings using international sustainable best practices,
certi ed to a Green Star Existing Building — new or existing — are consistently better which ensures an optimal environment for the
Performance (EBP) standard. than those of noncerti ed green buildings, occupants and a building that operates e ciently,
according to research by the MSCI Real sustainably and with minimal impact on the
“In both cases, there are large solar PV Estate and Green Property Index (MSCI). environment,” says Growthpoint Properties head
installations on the roof. e energy- and It shows the total return on Green of asset management for o ces Paul Kollenberg.
water-e ciency installations have led to Star-certi ed P&A-grade commercial
better quality assets for the buildings’ o ce buildings was 10.3 per cent over With refurbishment or redevelopment, the goal
owner, Rede ne Properties,” the three years 2016–2018, as is to give a property asset a new life and a new
says Cruickshanks. opposed to 7.2 per cent for base to grow its earnings potential. “Refurbished
noncerti ed o ces of the redevelopments tap into the bene ts of existing
Very e cient buildings can same grade. infrastructure, o en taking less time to complete
cost-e ectively supplement their “ e improved returns than new developments,” says Kollenberg. “ ey IMAGES: SUPPLIED
energy and water needs with from green buildings is also present the ideal opportunity to introduce
renewable energy and recycled Paul signi cant, and improved e ciencies, which optimise the results of the
water technologies. “Roo op Kollenberg project and extend a building’s lifespan.” ■
solar PV systems are popular
additions to existing buildings.

20 C O M M E R C I A L P R O P E R T Y