Sunday, December 16

Niche markets are new focus​

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Developers are putting their money into the country's growing needs for mixed-use lifestyles and retirement accommodation in safe environments?

The South African economy may be in a downturn, but this has not stopped property developers from seeing major development potential in the local market.

From schools and student accommodation to brownfield redevelopments and gated residential estates, developers are focusing on their niche areas and eyeing development opportunities across Gauteng and the country.

“The property industry is so diversified and full of opportunities,” says John Chapman, a director of the Rabie Property Group.

“All developers see different opportunities in different markets and most tend to focus on opportunities in their niche markets.”

Although Rabie’s focus is generally on mixed-use development, such as its flagship Century City Project in Cape Town, Chapman says a number of factors are currently influencing the national property market. These include affordability, security, schooling and retirement.

“Affordability at the various levels is a big issue. South Africa is in recession and jobs are not being created. Things are worse than they were a year ago and will get worse before they get better.”

Crime is also problematic. To counter this, Chapman says there has been a “big move” towards gated communities and/or secure estates. Schooling is also a big issue and this is why private schools are proliferating.

The demand for retirement accommodation has prompted the development of new apartments like those at Evergreen Lifestyles Broadacres. Picture: Amdec Property

Another fast-growing market is for retirement accommodation. There are market opportunities for developers across all affordability levels in this sector, Chapman says.

“Many of the same principles driving mixed-use developments, such as security and easy access to lifestyle amenities, pertain to this sector as well.”

With at least 50% of the global population currently living in urban areas, and analysts projecting a 1.5 times rise to six billion city-dwellers by 2045, Nicholas Stopforth, head of development at Amdec Property, says investing in sustainable modern and thoughtful urban lifestyle residential developments is important.

“Designing the kind of urban spaces that will, essentially, improve the quality of life for South Africans is crucial. Because of increased urbanisation, developers will continue to have to look at mixed-use developments where people can live, work, go to restaurants and so on in safe and sustainable community-focused environments.”

Precincts like Melrose Arch offer all lifestyle benefits with shops, restaurants, banks, medical suites, hotels, offices, parks and open spaces and gyms all on your doorstep. Picture: Amdec Property

Mixed-use 

Stopforth says a prime example a of highly successful mixed-use development is Melrose Arch as it is safe, walkable, has retail outlets, offices, hotels and residential space. Furthermore, it is well-placed in Joburg’s northern suburbs.

“If you look at global trends, these sorts of developments are on the rise and South Africa will be no exception.

“Mixed-use developments are a priority for most developers across the world. Take for example the densely populated City of London and you’ll see a raft of new mixed-use developments.”

Using Amdec’s developments as examples, Stopforth says the One on Whitely development in Melrose Arch offers “all the hallmarks of a great new urban environment”. These include convenience, sustainability and eco-efficiency, safety and security, accessibility, central location, pedestrian friendly and offering a sense of community.

“Precincts like Melrose Arch offer all the lifestyle benefits with shops, restaurants, banks, medical suites, hotels, offices, parks and open spaces and gyms all on your doorstep.”

Echoing Chapman, he says significant opportunities for developers also arise in the retirement accommodation market.

The One on Whiteley development at Melrose Arch in Joburg is said to offer all the hallmarks of a great new urban environment. Picture: Amdec Property

Affordable housing

Because provision of affordable housing is a major problem throughout the country, this sector of the market also holds great potential for development. This opportunity is highlighted by the recent announcement that around 9 000 quality affordable rental apartments will be constructed in key Gauteng nodes over the next six years.

The project will be undertaken by Balwin Properties and Transcend Residential Property Fund and is estimated to be worth R6.4 million.

“This will see us deliver up to 8 900 premium apartments expertly designed to offer quality finishes not yet seen in the affordable rental market,” says Balwin Properties chief executive, Steve Brookes.

Subject to the requisite approvals, Green Park, comprising around 1 200 apartments, is the first development earmarked for this alliance. Located in Boksburg, the first apartments are expected to be delivered to Transcend in early 2018. The development, among other lifestyle facilities, will use solar energy solutions and provide high-speed fibre connectivity.

Rob Wesselo, chief executive of Transcend, says: “This alliance is perfectly in line with our strategy to focus on a defensive asset class that delivers affordable housing rentals to a heavily under-serviced portion of the real estate market outside of conventional inner-city residential rental housing.

“Rents are expected to range from R4 000 to R8 000, currently the sweet spot for a growing middle-class in our urban centres.”

But although development opportunities are plentiful, so too are the challenges facing many of the development markets in the country, Chapman says, adding that affordability is a “major challenge” exacerbated by the fact that getting bonds is becoming increasingly difficult.

“This is not limited to low-income earners. We are seeing it across the board. Even some of our investor clients with strong balance sheets are finding it harder to get bond finance and in some instances have been turned down.

“Affordability is also impacting on the sizes of houses and apartments developers can viably bring to the market. There is no doubt living spaces are going to get smaller as we become more in line with European trends.”

Stopforth says availability of space in major hubs is “always a challenge”.

“However, a challenge gives our architects the chance to innovate when working with the space. It’s important for us to create the right balance of life, work and play in these new developments.”

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