The new Investment Property Databank (IPD) Retail Trading Density Index released last week shows that although gross rentals continued to grow nominally, the rate of growth appears to be subsiding after a solid period of real growth from 2008 to March last year.
IPD SA head of research Jess Cleland said rental growth was proving particularly difficult to achieve for smaller centres.
According to the index, the annual growth in gross rentals to September last year was 5.5% for super regionals such as Sandton City and Eastgate Mall, 4.1% for regionals such as The Glen and Rosebank Mall, and 3.4% for small regionals situated near transport hubs such as taxi ranks.
Community and neighbourhood centres actually saw a decline in rents, with figures of a negative 0.1% and 0.2% growth respectively.
"Analysing base rental growth trends provides fairly conclusive evidence that it has been the fixed recoveries portion that has tended to prop up gross rentals; and now that these fixed recoveries are not as easily transferable to tenants (as before), this explains the weakening gross rental position of late," Cleland said.
Stanlib head of property funds Keillen Ndlovu said listed property companies with bigger and dominant shopping centres, such as Resilient, Growthpoint, Hyprop and Sycom, continued to benefit from rental growth.
"Township or rural retail is likely to remain relatively more defensive than metropolitan or higher income areas. In townships and rural areas that is where the population is, and this is where the growth is, with social grants also playing a key role in these areas," Ndlovu said.
The index showed that a marginal improvement in vacancies was helping to stave off the eroding effects of property operating costs. But the movement had been slight - the overall vacancy rate for the third quarter was 2.7% compared to 3% in both the previous quarter and previous year.
Surprisingly, the index, sponsored by the South African Council of Shopping Centres, shows that growth in trading density at larger centres, which is measured as turnover per square metre, has been the most muted.
Source: Business Day
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