The source of development booms

06-09-2006

Shopping centres still seem to be shooting up all over the place with seemingly no end in sight. Yet, a glance at the statistics on the number of new building plans passed, indicates a consistent decline in retail building plans passed over the past year.

With consumer confidence remaining at record high levels, boosted over the past few years by low and stable inflation and interest rates, as well as skyrocketing house prices, the steep decline in national figures on retail building plans passed (in m²) for new retail floor space, seems at first to be somewhat of an anomaly.

“This decline is definitely not demand related, because although interest rates are moving north, the prospects for the economy are still good. Inflation and interest rates are still very much under control, and the consensus is that economic growth will still average around 4-5% in the foreseeable future” says John Lottering, editor of Rode’s Retail Report.

“The deceleration in new retail developments planned can probably be ascribed to the fact that a number of regional shopping centre plans were included in the figures over the last few years.”

Lottering explains that there are indications that the large-shopping-centre market is currently saturated, which probably implies that most new retail plans passed are for smaller community and neighourhood shopping centres.

“That would explain why the total square meterage of building plans passed is showing a steep decline, while consumer demand remains very high.”

Looking at the plans passed in the major provinces (refer graph) one notices that especially the Cape Peninsula and KwaZulu-Natal have taken a knock, while Gauteng, although also on the down, is holding up best.