SA's biggest and most profitable shopping centres

More than a million square metres of new shopping space is currently planned or under construction in the country and half of it is in Gauteng. The conditions driving this boom in shopping centres and making others extremely lucrative are set to continue.

According to the latest statistics from the South African Council of Shopping Centres (SACSC), 24 shopping centres with a total area of 553 000m² are being developed in Gauteng.

In addition, the SACSC states that South Africa currently has shopping space of 0,3m² per capita, compared with about 2m² per capita in the US, Britain and countries in Europe.

"This indicates that South Africa still has huge potential for the further expansion of shopping space," said Absa's senior economist, Jacques du Toit in the bank's latest residential property perspective.

Judging from sales growth, it appears interest rate hikes in 2006 had little effect on some of SA's biggest shopping centres.

Shopping malls in Old Mutual Property Group's (OMPG) retail portfolio reported an increase in sales of more than 30% for the year.

Two of SA's largest shopping centres, Menlyn Park in Pretoria and Gateway in Umhlanga, were the top performers for the group, helping grow overall turnover by 16% to R9,4bn.

Gateway showed turnover growth of 29% for December 2006 and 25% for the full 2006 year, to R2,03bn, said Colin Young, head of institutional investments for OMPG.

The next best growth for December turnover was Menlyn, where sales increased 19% for the month, followed by 18% for Cavendish Square in Cape Town and 17% for Riverside Mall in Nelspruit.

Spend per head at Menlyn in December increased 31%, and increased to R98,25 at the top eight centres in the portfolio.

"The buoyant trading conditions have again been supported by a stable economic environment, as well as continued growth in the middle class," said Belinda Clur, head of research for OMPG.

She expects the trends to continue, at least, over the next few years. "This bodes well for the retail sector," she added.

Foot count across the portfolio grew by 4% in the last year. Clur said more than three million people visited Gateway in December, which was the highest foot count for the month.

Shopping centres included in blue-chip listed property loan stock company, Hyprop's portfolio include Canal Walk at Century City in Cape Town, Hyde Park and Rosebank in Johannesburg and The Southcoast Mall in KwaZulu-Natal.

Average retail spend for the portfolio increased 13% in December and sales grew 11% for the full year.

According to the group's results for the six months ended June 2006, revenue for Canal Walk was R141m.

The mega mall, of the country's biggest, contributed more than half of the total net income (R188m) of the six shopping centres owned by Hyprop.

According to the centre management, the average spend per shopper is around R120.

In late 2003, Hyprop bought 80% of Canal Walk for R1,16bn. It is currently valued at over R2,8bn.

According to the Investment Property Databank (IPD), the total return on retail property increased from 13,2% in 2001 to 33% in 2005 and the annualised total return on retail property averaged 19,8% over this five-year period.

Du Toit pointed out that there appears to be a close correlation between the residential property boom and the expansion of the commercial property sector, especially that of retail property, in recent years.

"The rapid construction of higher-density housing, specifically in the major urban areas, has increased the demand for and investment in shopping space close to new residential areas," he added.

Most of the retail properties in South Africa are owned by large investors such as listed property funds, pension funds and insurers.

It is nearly impossible for an individual to own a large shopping centre so the best way for an investor to share in the great returns is to buy into a listed property company or invest in p