In the face of consternation about the future of retail and as a result, retail real estate, the retail market holds huge potentials for investors. This is because retail properties are strong investment performers through periods of economic fluctuation because many retailers continue to perform well in the tougher times. One of the key attractions for investors is the rise of Africa’s middle class, which is leading to more disposable income. And, with increased access to international trends, spending patterns are changing. African consumers are demanding better products, a greater variety of brands and better service. Gone are the days of substandard offerings.
It is believed that the African youth is an important market of eager and aspirant consumers since Africa is characterised by a young population, with about 62% under the age of 25. This guarantees a considerable consumer base for the future.
Demand Drivers for the retail market.
Consumer spending is the largest underlying demand driver for retail real estate, which in turn, fuels retail sales and strategic expansion. So, it is no surprise that the retail sector thrives when the economy is doing well, unemployment is low and consumer confidence is high. Other factors asides from consumer spending level that drives demand include;
Traffic Count: The life force for retail stores is traffic, whether that is pedestrian foot traffic in urban areas or vehicle traffic passing by a location each day. Both the tenants and landlords give full cognizant to the amount of foot and/or car traffic in front of their property. For the landlord, the more traffic, the higher the rents and the more valuable the property.
Traffic counts vary greatly depending upon the density of the location but are often over 30,000 vehicles per day (VPD) in most viable suburban retail corridors across the country.
Population Density: Many retailers and developers “follow the rooftops” in select locations. This means that a location needs to have adequate population density within a designated area. The grocery segment of retail certainly follows this approach.
Accessibility: One factor that majority of consumers demand in common is a convenience, which includes access and adequate parking. People like an easy in and out to retail shops, restaurants and shopping centres. As a result, they pay attention to traffic patterns.
Tenant mix: Retail is about synergy and critical mass. On their own, retailers fail to attract as much traffic as they do when they cluster together or locate adjacent to a group of anchor tenants. This is due to consumers’ desire for an optimal mix of merchandise in one location. Within the industry, this concept is referred to as, “adjacencies”. The importance of tenant mix means that, not only do retailers need to choose their neighbours wisely, landlords also need to understand how leasing to one tenant instead of another can affect the profitability of the entire centre.
E-COMMERCE & RETAIL REAL ESTATE SECTOR
There seem to be a consensus emerging within the retail industry that e-commerce will decrease the overall demand for retail space, but will not come anywhere close to replacing it. As retailers evolve, it has been observed that a strong synergy exists between the internet and the store, with the store playing a strong role in customer purchases, even for those made online. Both retailers and Landlords are investing extensively in technology to better understand core customers to further drive sales. Particularly in the mall and lifestyle sub-sectors, a belief is emerging that high-quality malls will continue to increase in value.
In conclusion, if there is one critical takeaway when it comes to retail real estate, it’s that the success of this asset class is utterly dependent on the experience it offers because, more retail stores will be transformed into places that sell experiences, rather than goods.
As a firm that bridges the gap within the Real Estate sector, 3invest is hosting the 6th Edition of the annual flagship program; Real Estate Unite on the 17th and 18th of October 2017. This event would gather key players within the industry with a wealth of experience to share on how to fully plug into the trend if the retail market. Other focus areas are;
- Groundbreaking technologies built for Africa
- An Overview of the Hospitality, Tourism and Leisure (HTL) sector in Africa
- Sub-Saharan Africa(SSA) future cities and infrastructure,
- Capital trends,
- Annual market and economic updates,
- and other issues relevant to the growth and advancement of the Real Estate sector.
Successful retailers in the coming years will be those that have mastered the art of incorporating ambience, design and sense of place into the overall consumer experience.
To register for Real Estate Unite 2017, CLICK HERE or visit www.realestateunite.com