The South African property market is not immune to the worldwide structural trend of consumers increasingly choosing to shop online instead of at their local mall. What are the implications of this trend for the South African listed real estate sector and for investors who hold this sector in their investment portfolio?
South Africans have seen the rapid rise of online retailers such as Yuppiechef and Takealot, among others. These online stores offer a convenient and safe shopping experience with better choice than is available at the local mall at times. Traditional sit-down and quick service restaurants face similar headwinds to conventional retailers — fewer feet walking through malls mean fewer hungry mouths to feed at shopping centre food courts.
Retailers need to adapt to incorporate the online user experience
Suppliers and distributors that service these establishments are finding that their customers require less frequent or fewer deliveries. Daniel Gerdis, equity analyst at Foord Asset Management says the challenge these retailers face is how to earn a reasonable return on capital invested in inventory and fitting out and refurbishing stores that are frequented by fewer customers.
“Traditional retailers are having to adapt their offerings to incorporate aspects of the online user experience into physical stores. One such initiative is Click and Collect — the process by which an online order is collected at a physical store. It offers the convenience of online shopping with faster availability and flexible collection times, while driving footfall into the store to facilitate cross-selling opportunities. The downside for mall owners is that retailers require less store space.
Restaurants and food retailers are also making changes to their business models. The new trend is dark stores — restaurants distributing entirely via food delivery apps with no shop front.”
“For mall owners, digitalisation is an added headache that did not exist just a decade ago,” says Gerdis. “Malls must now compete to remain a relevant and attractive destination for shoppers. One approach taken internationally is to create a differentiated shopping environment for the customer by introducing new concepts such as pop-up stores, free wi-fi and unique haptic retail experiences that cannot easily be copied by online retailers. This comes with added cost and risk.”
According to Gerdis, in the office segment, space has steadily expanded at an average pace of one percent per quarter for the past 15 years. But digitalisation now offers workers increasing mobility and flexibility in how and where they work. Corporates are adapting to this changing environment innovatively, with shared workspaces, hot-desking or by allowing employees to work from home. “This implies divergence in the size and type of office space demanded by prospective tenants from what landlords have traditionally supplied.”
Changing consumption patterns mean changing investment patterns
“These changing consumption patterns are headwinds to the South African listed retail and office property sector and investors should take a pragmatic investment approach in the sector — by choosing property counters that sidestep the retail and office segment risks and instead benefit from the long-term themes of urbanisation, digitalisation and densification. Segments that fit these criteria are warehousing, logistics and self-storage” concludes Gerdis.
Emira launches V2.0 of South Africa’s only commercial property leasing app for brokers
Emira Property Fund has launched V2.0 of its innovative app – the first and only one of its kind in South Africa that provides real-time information about properties to make it easier for brokers to conclude leasing deals successfully.
Geoff Jennett, CEO of Emira, says: “We believe this app is a competitive advantage for brokers, and thus for Emira too. The response from commercial real estate brokers to the earlier version of the app was very positive. Now the refreshed, rebranded app is keeping with rapidly evolving technology. We believe it will ease the leasing process for brokers even further by putting the information they need and value the most at their fingertips. The updated app will ensure that doing business with Emira continues to be a rewarding experience for brokers.”
One of the most popular functions of the app has proven to be the access to Emira’s vacancy schedule. This function shares up-to-the-minute information with brokers about the availability of its properties, giving them immediate updates with changes. For space to let in the Emira portfolio, the app lists premises and their rental rates. These are searchable and filterable by size, region and property type.
Another top feature of the app has proven to be its downloadable resources. This enables brokers to provide their clients with an information pack that gives them a full picture of the property.
Now the app also highlights Emira’s innovative leasing initiative aimed at selected properties for the office market, The Intelligent Relocation, which offers tenants eight months of their total first year’s rental in incentives on a three-year lease, or 14 months rental in incentives on a five-year lease. It is made up of a rent-free period for fit-out and settling in, and a tenant installation allowance for layout configurations and customisation.
The Emira app is available for Android & IOs operating systems, with tablet and smartphone versions for both platforms. It is free to download from the Android and IOs App Stores – simply search “Emira”.