This is how much it costs to buy a shopping mall in South Africa
Despite the challenging economic environment, small and large retail centres in South Africa continue to sell – ranging in price from the tens of millions to the billions.
Following an Auction in the latter part of 2023, High Street Auctions was able to sell two local retail centres in South Africa.
Firstly, a Shoprite-anchored community retail centre in Florentia, Alberton was sold for R33 million.
“This busy centre in Pieter Uys Avenue in the heart of Florentia near the Alberton CBD in Johannesburg’s South owes its lively footfall to the long-term lease of a large Shoprite, as well as the adjoining Shoprite Liquor Store. The centre’s footprint is approximately 3,090sqm on a site of more than 8,000 sqm,” said High Street Auctions Director Greg Dart.
Secondly, a Buco-anchored retail centre in Witbank, Mpumalanga was sold for R18.5 million.
“This property offered myriad pros, including a triple net lease and tip-top maintenance, making it an attractive investment proposition both in terms of income and bricks-and-mortar returns,” Dart said.
The price starts to skyrocket for larger regional shopping centres (between 50,000 and 100,000 sqm of rentable space).
Last week, the Competition Commission approved the sales of Table Bay Mall in Cape Town and the Mall of the South in Johannesburg.
Hyprop said that it would acquire 100% of the commercial letting enterprise and the solar panel installation at Table Bay Mall for R1.625 billion.
The group said that the 67,500 sqm mall situated in Sunningdale is expected to see above-average growth due to major residential development partly driven by emigration to the Western Cape.
On the other hand, the sale of Mall of the South is not a traditional sale but instead a completion of terms between RMB Investment and Advisory (RMBIA) and Redefine following the outright purchase of the mall from Zenprop for R1.82 billion in 2020.
Under the transaction, Redefine will now buy RMBIA’s 80% stake in the mall – increasing its ownership from 20% to 100%.
Trading environment
Dart noted that the challenging macroeconomic environment has forced the pendulum to swing the way of buyers, with the strongest swing since the subprime crash 16 years ago.
“For months, buyers have been in a powerful position to dictate investment value. This isn’t necessarily aligned with current seller expectations, which haven’t been as quick to shift off the short-lived post-pandemic euphoria we saw when the Deeds Office reopened,” he said.
“The black-and-white synopsis is that neighbourhood retail, in particular, is robust. The sellers are there offering high-quality stock, and so are qualified buyers in sufficient numbers to keep this market buoyant and very interesting.”
However, transactions are seldom straightforward when the value of investments rises to double-digit millions.
Even if buyers and sellers agree on a price, the parties can often not agree on the sale conditions or finance structuring.
This happened with a neighbourhood retail centre in Johannesburg that closed at R38 million but fell through after both parties could not agree on the financing terms.
That said, he said that the challenging environment and challenges involved in sales are not enough to dissuade the group from going into the retail market.
“In terms of the sector’s outlook this year, High Street is actively pursuing retail properties for its auctions because while the market might be slightly misaligned, it remains resilient in the face of bearish economic factors, including unprecedented load shedding, high CPI and the business confidence hiatus that always comes in the months preceding an election.”
Read: What the average house price in South Africa gets you in Joburg, Durban and Cape Town
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