February 6, 2023


The Joy Of Businnes

‘There’s definitely buoyancy back’ in retail property

On this latest episode of The Property Pod, we are talking retail property and shopping centres in the South African and the US markets and a little on the Mexican market. The South African Council of Shopping Centres (SACSC) recently concluded its international shopping-mall tour to the US and Mexico. This is the first such tour in a few years due to the Covid-19 hiatus.

Nkuli Bogopa, the chief operating officer of Broll Property Management, was part of the tour and she shares her insights on the trip and on current trends in the SA and US retail property arena.

Highlights of her interview appear below. You can also listen to the full podcast above or download it from iono, Spotify or Apple Podcasts.

Nkuli Bogopa, Broll Property Management, Broll Property Group, Shopping centres, SACSC

Nkuli Bogopa, COO of Broll Property Management. Image: Supplied

How long have you been in the property sector and in your current role at Broll?

“It’s more than several years. I think now we are counting two decades. So that’s quite a while. I’m feeling like I’ve been immersed in the sector for a very long time and it’s a very fulfilling career, if I may put it as that. It’s what I love doing.”

“My background is in architecture and I think very early on in my career I decided there should be more to the world of commercial real estate in South Africa, more than just being on the professional side and doing drawings. And that’s how I got to discover the real world of corporate real estate in South Africa and all the different segments that exist.”

“The office segment was the one I was most exposed to in the early years of my career, and with Broll that has grown from not just offices [but] to retail and industrial [property], and earlier in my career petrochemicals as well. So I think it’s been well rounded, the kind of experience that I’ve had, including a stint in residential.”

“It’s exciting. We manage [property] for the listed funds and unlisted funds … They all have different strategies and different focuses. It’s interesting to move from one client meeting to another, where you can see you have to keep up with where each client is at, and keep the Chinese walls quite separate [between them] as it were.”

“But all in all very, very insightful to be exposed to that world and just being able to see where they are going, the direction that the sector is [taking] and what drives them. I think the biggest driver for them is consistently and quite encouragingly investment in the country and the economy of the country.”

“It’s quite fulfilling to be a part of that. A day in the life of Nkuli can range from anything, discussing municipal queries and issues that they’re battling with. As we know, our municipalities are not really being run as efficiently as they could be or should be.”

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“I think the other big thing is just focusing on trends and where to go and how to best relate with tenants, and how to make the retailers’ experience far better and, obviously, by so doing, looking after the ultimate end-user, which is the customer on the ground, the ordinary South African whom we come across in all our shopping centres and who spends their hard-earned money; it’s how we can make that experience better for them and make sure that they get the most bang for their buck.”

“So my day ranges from that to also focusing inwardly in the business, growing the business, making sure that we are looking after our people – which is a bigger component across the business. The [Broll] property management division has been the largest division in the group for a very long time, and so the people aspect is critical.”

What were some of the interesting trends and key insights you and your team observed during your recent trip to the US and Mexico as part of the SACSC’s international tour?

“This was my first time and it’s been really, really great. It’s an eye opener. It’s very well-orchestrated. I think the curatorship of the shopping centres that we had to see was very impressive, and I’ve got to give kudos to the SACSC.”

“My experience there? Obviously the US is a vast market, so I’m going to just focus and home in on the part of the US that we were at. We visited the West Coast of California to be precise, and we were in LA for the greatest part of the trip. It was amazing to see the marriage between the indoors and the outdoors – how the bricks-and-mortar has been softened with nature, trees and plants and animals, so to speak.”

“We saw a lot of pets in a lot of the shopping centres that we went to. But just open-air malls is what we saw mainly – which was the big, big difference between us [SA] and that US market – open-air malls, where there’s a good link between the outdoors and the indoors, and not very closed.”

“Obviously we know we’ve got security issues in our country, and that’s what I suppose has led to the design being what it is, as we see and experience in our country.”

Experiential shopping 

“But there is also a lot of immersive experiential time that the consumers spend in the shopping centres. They go there to see art, they go there to sit in beautifully laid-out lounges across the shopping centres, across the common areas. You find a lot of really good investments in furniture just sitting around in the shopping centres to [attract] customers to come and just be at the shopping centres.”

“So a shopping centre is a ‘place to be’ rather than a ‘place to shop’. And of course, if you spend a long enough time, you will end up shopping.”

“I think it was very refreshing when they told us as well [that] post-Covid, they’ve seen greater usage of those spaces, especially because during Covid people were forced to work from home and be on their own and be isolated.”

“So [now] people come out to actually use the lounges at the shopping centres to do their work – work from home and work virtually.”

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“They’ve also seen a spike in people coming across with their pets because, if you recall, during Covid a lot of people were forced to be on their own. If you lived by yourself and didn’t have companionship, it was very difficult if you didn’t have a pet. I think even on the flights, I experienced pets quite a lot – a lot more than I’d ever seen before. So it was very refreshing.”

Green initiatives

“Among green initiatives that we also saw, just as a light touch – you go into the bathrooms and there’s brown paper throughout. We know the process of going through the forest and the trees in order for us to ultimately have white paper on the table. So [there were] just those subtle changes.”

“And [there was] a lot of water harvesting that they were doing, which is the same as what we are doing, [and] solar energy, which is what we are doing. And yes, I think there were areas that we could compare directly and see that we are on the right track.”

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“But there also were some areas where you can see there’s something for us to pick up on, like the small touch of just fresh water, fresh drinking water being made available by way of water fountains everywhere you go. We know that we are a drought-ridden country, in a drought region, and fresh drinking water is not always readily available to everybody across the country. I think that would be a nice touch of something that we could implement here.”

From your trip, where do you see the US excelling, and where is South Africa ahead, perhaps, in the shopping-mall space when you compare the two? 

“Obviously the economy speaks volumes in terms of the performance of the shopping centres and the retailers in the shopping centres. It was very clear when we were there that the [US] economy is well ahead. It’s a first-world economy, first of all, but it’s also an economy that is buoyant with employment. That was the stark difference between ourselves and the US, I think – the prevalence of real premium brands across different shopping centres, even at a radius of, say, 18 kilometres you were finding big brands, like premium brands, which is not common with us here at home.”

“Again, I think the manner in which they are able to interact with those premium brands seamlessly, using different platforms. Prop-tech platforms that are seamless for communication was something that I felt we could definitely pick up on and do better and improve at.”

“There is the point of having VIP lounges at a shopping centre, where a shopper can have their bags picked up from wherever they’ve decided to shop, and a service that tells you where you’re going to find what specials and promotions, and have a drink while you’re there, get valet parking and get your car washed while you’re there.”

“That was a nice touch that we saw at one of the high-end – very high-end – shopping centres that we visited there. I think there’s room for it in our country while we are still developing in many aspects and we do have a market that could be served by that kind of service.”

Incubator retail spaces

“Largely, I think where I found us excelling is [that] in the US there were not a lot of incubator spaces where you find up-and-coming new businesses – especially [among] those previously disadvantaged – being given a chance. We did see it at one of the malls and it was really done well. The landlord actually invested quite a lot in that space, and that was impressive.”

“I think we are doing more of that now in South Africa at a much larger and broader scale, and I think that is a trend that I would like to see developing further, especially considering where we are economically as a country. That’s one aspect that is very encouraging to see happening there …”

“Are we investing the same? I’m not sure if we are investing the same amount, but I’ve got no doubt that that’s a direction [in which] we will go.

“I think that where we could do better in South Africa is the availability of outlets, a lot [more] outlet malls in South Africa.”

“If I’m in Johannesburg, I have to think very hard – where am I going to find an outlet? And I can think of only one hub where you can find a number of outlet [stores]. But you have to drive, leaving wherever you are, to get to that one place, whereas in the US all around you are within reach [of] an outlet. I think that would be good for our South African market. People are hungry for that.”

“And then with respect to where we are doing better, when we go to these places and when we go on these tours, we largely wear the lens of where we can improve. So you are always wearing the lens that says ‘What can I take from people who have done this before me, and be able to do better [at] it?’

And what about the Mexican market?

“I think the Mexican market was pretty much closer to South Africa, in the sense that there are areas that are really high-end for really high-earning individuals, high-net-worth individuals. Then you walk away from that and you find the divide between incomes in the society, as it were.”

“The architecture was out of this world and breathtaking in one of the shopping centres that we visited – extremely, extremely high-end. And what was nice, I think, the difference was the street-trading, people just being able to operate informally as street vendors; maybe street vendors is not the word, but being able to operate informally in a very buoyant market at that, you know?”

Has the retail property sector recovered fully from what you’ve seen both in South Africa and now the US and Mexico? 

“There’s definitely a buoyancy in both markets – South African and the US, and we didn’t see vacancies at all in the US markets [visited]. Like you said earlier, we are anchored largely by grocery stores and we also have services – which is really good for consumers, because we struggled while we were in the US to just find a pharmacy, you visit five shopping centres in one day and you don’t find services that you require as a consumer. So I think that’s one big plus that I can add. We are doing [well] in South Africa.”

“I think we serve functionality more than just aesthetics in the South African market, and it shows in our design. We are designing for form and function, whereas [their designs are] more aspirational, and stuff like that.”

“So, yes, a buoyancy in the market; definitely both markets very buoyant. We’ve got some of our investor clients busy with big acquisitions and some of our investor clients busy with development.”

“Really, even after having been hit so hard by Covid and the riots, our investor landscape is still very optimistic about the retail sector and they want to continue developing further. We are seeing trends in township and rural investment still growing.”

“It’s encouraging to see that the market is picking up. Vacancies are very low on the retail side in the South African market as well. There are talks of some of the big retail groups wanting to scale down. But at the moment I think we’ve all seen what happened with Edcon – the buyout has helped a lot, and being able to maintain the Edgars footprint in terms of the offering. So we are not very worried about big movements at the moment.”

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