Since the early days of bartering to the modern era of mega malls, shopping has been an essential part of life — and investors in retail real estate reap the benefits.
Despite our era being the one in which the popularity of online shopping has exploded, the retail real estate market thrives, with many shoppers still preferring to see, touch and try before they buy. As a result, retail property can be a money-maker for investors.
Why invest in retail?
There are a number of great reasons to invest in retail space as part of your long-term investment strategy. For starters, it will diversify your investment portfolio, thereby spreading your risk across a wider array of sectors. The earning potential on commercial properties is significantly higher than on residential properties, and since tenants in retail space have a business mindset, they are likely to take great care of your investment. As a landlord, you’ll have the peace of mind of knowing that since your tenant will go home after business hours, there is less chance of a late-night emergency.
Over and above this, the length of leases on retail property (or any type of commercial property for that matter) will be significantly longer than the average residential lease. This means greater stability and less administration for property owners.
Despite economic challenges, retail investments can offer long-term growth potential, especially in strategic locations where there is high demand.
Everything investors should know about the hybrid shopping model
In recent years, and especially since the pandemic, the hybrid model of shopping has grown prominent worldwide. According to research carried out by IBM and cited by Ventureburn, 27% of consumers and 36% of Generation Z prefer hybrid shopping. Hybrid shopping means that both in-store shopping and online purchases remain popular. Concerns over the effectiveness of online shopping are among the factors still driving people to shopping malls, where coffee shops and other socialising opportunities continue to draw foot traffic.
Many customers are taking advantage of the “click-and-collect” shopping model to maximise convenience while saving on delivery costs. The shopping experience is now centred around convenience, and this means making as many options as possible available to consumers — including in-store shopping, online shopping and hybrid shopping. This keeps retail space relevant in every industry and means that properties like this music store for sale in Robertson remain sound investments.
Recent boom in luxury shopping
Another great reason to make retail property your next investment is that in the midst of economic hardship, South Africa’s luxury brand retailers are thriving. As reported by BizCommunity, Africa is home to a large middle class, whose members have high aspirations. For many, acquiring items from a luxury brand becomes a status symbol and an indicator of success. This trend is further driven by online influencers, vloggers and reality TV shows. Owning retail space can allow you to capitalise on the ever-growing demand for luxury goods.
Top tips for those wishing to invest in retail property
1. Choose the right location
The location of retail property — as with any commercial property — is critical to its success. Look for areas with high foot traffic, good visibility, accessibility and proximity to residential areas, offices or transportation hubs.
2. Look carefully at the tenant mix
Pay attention to the tenant mix within the retail property. Aim for a mix of anchor tenants, popular brands and niche businesses that complement each other.
3. Inspect the property carefully before you sign on the dotted line
As is the case in any property investment, you need to assess the condition of the property carefully. This includes structural integrity, maintenance history and compliance with building codes and regulations. You’ll also need to factor in any potential renovation or improvement costs.
4. Review the lease agreements carefully
Look at the lease agreements that are already in place and consider factors such as rental rates, lease terms, escalation clauses and tenant responsibilities. Long-term leases with reputable tenants make for an outstanding investment.
In a world where much is changing, some things stay the same and people’s desire to visit malls is not waning. If you’re interested in investing in retail property in South Africa, get in touch with one of Seeff’s widely experienced property practitioners today.
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