Developers unfazed

SHARE   |   Tuesday, 18 April 2017   |   By Kabelo Adamson
Developers unfazed

While some insist that the property market is saturated, players have not held back. They have fine-tuned their game plan to continue their surge by diversifying offerings and project locations. KABELO ADAMSON reports. 

Botswana’s property companies are jostling for a piece of cake in the highly lucrative sector, leaving no segment or place out. Botswana Stock Exchange (BSE) alone is home to six property companies with diversified portfolios that range from residential, retail and industrial products. There is a growing penchant among these companies to invest mainly on the retail space with several of them owning major shopping centres around Gaborone and other centres.

Turnstar

Probably the biggest local property company with its flagship development being Game City Mall, the company with a market capitalisation of about P1.8 billion owns more property in Tanzania. Turnstar has just completed refurbishing and expanding Game City Mall to include another wing and has also done the same at Mlimani City, a Tanzanian-based shopping complex. In the company’s latest annual report published in December, Turnstar Managing Director Gulaam Abdoola said the industrial sector tends to perform better than other segments. He said the commercial office space has been the most challenged with a high number of commercial properties being introduced to the market, especially in the CBD during the past few years and raised his concerns on the drop in demand for residential housing. With more retail malls in the pipeline, Abdoola said it will be a challenge for the existing malls and the new entrants to share the same pie.

New Africa Properties (NAP)

Another big player in the industry measured on market capitalisation which stands well above P1.8 billion just like Turnstar is NAP. Unlike most of its peers on the BSE, NAP’s core focus is the retail market which takes up to 99 percent of the total portfolio while industrial accounts for just one (1) percent. Its major development in Gaborone is the Riverwalk mall and also owns several other shopping complexes around the capital city. It has 57 properties in Botswana.

PrimeTime

PrimeTime portfolio is mainly centred on retail and office in Gaborone, Francistown and Serowe. It has announced that more shopping malls are still in the pipeline. The company has under its portfolio Sebele Centre, a shopping mall just along the A1 highway as one leaves the city and also Southring mall. PrimeTime owns a several office blocks around the capital city, including G4S headquarters and Letshego Place. In a joint statement on their annual report, Petronella Matumo and Sandy Kelly – Chairperson and Managing Director respectively – admitted that growth in the local market will prove to be challenging as time goes by. PrimeTime recently opened another shopping mall in Pilane amid a standoff with government over licensing issues relating to tenants. The management, however, believes the mall will prove to be a tremendous addition to the group portfolio in the long-term.

Letlole La Rona (LLR)

This company’s portfolio is largely taken by residential segment standing at 45 percent of the whole portfolio as at 2016 financial year. The asset register includes properties in leisure, office and retail. Office space only stands at 7 percent of the total portfolio. In his assessment of the domestic property market, LLR CEO, Paul More said in the short to medium term, the property’s resilience to weakening economic conditions is always challenged and therefore Botswana market has not been spared, adding that almost all sectors of the industry are affected.

RDC Properties

RDCP with most of investments skewed towards hospitality sees the recent developments in the market as a vote of confidence in the market by developers. Its flagship development is the Masa Square Centre in the new Gaborone CBD. This company just like its counterparts boasts of a diversified portfolio which includes residential, retail, and industrial. Residential space makes only two percent of the portfolio. RDCP Chief Executive, Jacopo Pari, says demand for residential properties remains positive with industry stakeholders entering or increasing their presence in this sector. His view is that Medium to Low End Developments seems currently to be the preferred choice while the quality of the development and its location is becoming more and more a deciding factor. Pari says the industrial sector is still not showing any signs of decline in demands with various opportunities of outright purchase and rental still being observed in the market. According to him, the retail sector is now being decentralised to other areas outside the capital city of Gaborone considering the market saturation. Pari believes in overall the property market is in good standing and is yielding at a premium in respect of other investments.

Far Property

A newcomer in the stock market, Far Property – co-founded by Ramachandran Ottapathu and Farouk Ismail – has already made inroads in the domestic market since listing in 2016. The company says it boasts of a balanced portfolio which ranges from commercial, industrial and residential. Ottapathu wrote in the company’s annual report that the Botswana property market, in general, is under pressure from the current economic conditions. He said the Land Bank at the disposal of their company will provide huge opportunity for growth in Botswana in addition to the current ongoing projects.

Case of Palapye

SEE ALSO:

While the township is known mostly for failed projects such as the Fengyue Glass Project and Morupule B Power Station, one that makes Palapye stand out is the unprecedented emergence of retail malls. The township already boasts of modern shopping malls in addition to the old ones. One is greeted by a new mall development just opposite Lotsane Senior Secondary School, which will be ready for occupancy later this year.  Further drive along the along the road as one enters the town, there is another development taking place which will supposedly serve as a shopping complex once complete. Palapye itself has been regarded as one of the investments hubs in the country with vast opportunities in energy, wildlife and tourism, agriculture and other sectors such as education with potential to boost other supporting services such as transport. Projects that have been earmarked to turn around the town into a Central District economic hub such as the controversial glass project have failed to take off while the education sector is still yet to blossom as the Science and Technology University built years is yet to operate at full capacity. Residents as well say they are bemused by these developments as they wonder which retail shops will be accommodated by the new malls as they are already saturated. More retail shopping malls are being developed as one leaves Palapye heading to the north. While one is almost complete, another is still at the preliminary stages. Industry watchers say it should be taken into consideration that with the strategic location of the town, its population is believed to have doubled since the 1990s. “However, the elasticity of supply for retail space with respect to retail sales is always inelastic in the short-run and elastic in the long-run, only if the space does not obtain enough demand factors such as improving household consumption (demographics, household needs, the population, as well as the purchasing power),” said Loyd Sungirirai, Chief Investment Officer at Vantage Properties. The developments of these shopping malls might add to the aesthetic view of the town which is home to the only operational coal mine in Botswana, Morupule, but experts warn that this may have dire effects on the developers. Sungirirai said if the economic diversification and decentralisation projected in Palapye stays on course, the retail sector in Palapye will be sustained by a good tertiary trade area from where customers are drawn as well as the purchasing power of such customers. “Currently Palapye boasts of a number of multi-million Pula development projects, among them the Morupule B power station, Botswana International University of Science and Technology (BIUST), a steel factory, a new police station and BHC houses,” he said. Reacting to if the sprawling of such developments does not pose a threat to high vacancies in the town, Sungirirai said vacancy rate is not dependent on the presence of certain brands but it is a question of supply, if there is an oversupply vacancy rates are likely. “The retail sector has two target groups: retailers and shoppers. So the shoppers may still need retail services,” he said.



Experience Africa