Eastern Cape’s development boom

23 May 2008

Riding on the back of major economic growth, the Eastern Cape is reaping the rewards of investor confidence, with billions of rands being pumped into sprawling retail and commercial developments, residential establishments and golfing estates.

Almost anywhere you go, especially in the larger centres, land is being cleared for development, roads are being widened and huge retail and commercial centres are springing up.

Go to Eastern Cape Madiba Action Analysts say one of the primary reasons for the current boom is that the Eastern Cape has benefited significantly from South Africa’s export, tourism, industrial and infrastructure boom.

Investec Bank regional head Andy Vogel said investor confidence in the province had been supported by four years of excellent equity returns and gross domestic product (GDP) growth in excess of 5%, a massive property boom, low interest rates and a strong stable currency.

“This together with the region playing catch-up and the anticipation of growth driven by the Coega Industrial Development Zone (IDZ) initiatives has resulted in massive investor confidence,” said Vogel.

The Coega IDZ and adjacent deepwater port within the Nelson Mandela Bay Metro is set to generate investment of R24-billion, with spin-off demand for retail and residential property in and around the area.

“Capital investment in the region by the automotive industry, as well as growth in automotive sales has also supported local growth. We forecast satisfactory GDP growth in excess of 4% per annum to 2010,” said Vogel. “And the full impact of the Coega IDZ has yet to be felt in the region. In addition, the government’s R400-billion plus infrastructure programme is set to take centre stage for the next few years.”

Quest for convenience

The current surge in shopping complex developments can be attributed to strong competition between major national retailers that all want a slice of the convenience shopping market, say analysts. Shopping has never been more competitive – offering great opportunities for investors.

Bureau for Economic Research economist Hugo Pienaar said part of the competition was due to changes in shopping behaviour.

“Convenience shopping has become much more complex because of time pressures, more working families and changes in lifestyles,” he said.

Boost for the Bay

Rode & Associates property economist Erwin Rode said Nelson Mandela Bay was beginning to reap the rewards of investor confidence as the area repositioned itself as a growth node both in terms of industry and tourism.

Economist Dr Neal Bruton agreed the property boom signified “buoyant economic circumstances”, linked to the growth of the motor industry and increased business interest in the Bay – particularly Coega.

Some of the Bay’s major new developments include the R300-million King’s Court complex on Buffelsfontein Road, which combines retail and office space, hi-tech mini storage and accommodation.

The R325-million, 25 000m² Moffett on Main complex in Walmer, will house the city’s first lifestyle centre, concentrating on interior decor and food. Other centres include the adjacent 10 000m² 17th Quarter shopping complex, 3 000m² extension of Sunridge Village, and, planned new centres of R150-million and R100-million for Wells Estate and New Brighton townships respectively.

Other developments include golf estates in Walmer, Fairview and Greenbushes, while a R350-million, nine-storey Radisson hotel in Summerstrand will offer guests panoramic views over Algoa Bay.

ERA South Africa property group CEO Gerhard Kotze said property in North End, traditionally a commercial area, had grown as a direct result of the 2010 World Cup stadium, which is being built there at a cost of more than R1-billion.

In addition, the old showgrounds in the area are to be converted into an industrial node – in a landmark industrial property deal, JSE-listed property group Pangbourne bought the largest privately owned industrial development in the city, the Greenbushes Industrial Park, for R140-million, and will spend R600-million on developing it over the next three to five years.

The latest Rode Report, containing quarterly property market analyses, reveals 28% growth for Port Elizabeth – by far the highest in South Africa.

Growthpoint industrial division director Tyrone Govender said this demand had been the driving force behind the 2 800m², R40-million Pickering Square development in Newton Park, which the company, South Africa’s largest listed property firm, was currently building.

Billions for Buffalo City

Buffalo City, the province’s second largest centre has boasted an economic growth rate of 5.7% over the past few years.

Billion Group executive chairperson Sisa Ngebulana said the group’s R2.3-billion, 70 000m² Hemingways and R500-million Mdantsane malls were among the largest private sector construction projects taking place in East London.

Construction of the Hemingways Super Regional Mall, to be the largest in the province, is well underway with the launch date set for October 2009, while the recently opened 30 000m² Mdantsane Shopping Mall has attracted major groups and banks as tenants.

Billion’s latest development, the R2-billion Gqunube Golf Estate, was given the green light by the provincial economic development and environmental affairs department in December 2007.

Ngebulana said his vision was to see East London develop into a golf tourism destination, with the 420-hectare estate featuring a five-star hotel and spa, conference facilities, 789 houses and a golf lodge.

East London’s planned R2-billion Triple Point multi-use retail, commercial and residential precinct will be modelled on Johannesburg’s Melrose Arch. The developers, Novate Property Investments, said the 25-hectare Beacon Bay project would be rolled out in phases, and the initial 12 hectares completed by 2010 and the remainder by 2015.

‘Sleepy corridor’ to awake

Property analysts predict that the sleepy corridor between the provincial capital Bhisho and King William’s Town could merge within the next three years, following the area’s first construction boom in decades. The 6 600m² upmarket Stone Towers shopping centre opened in King William’s Town last year, while Novate is set to build the R20-million Kwantu Shopping Centre in nearby Alice.

Malls for Mthatha

Mthatha, the gateway to the Wild Coast, has also seen an increase in retail and commercial developments, including the Mthatha Plaza. Plans to build a new 30 000m² mall is expected to further boost the economy.

The upgrading of roads linking small rural settlements to Mthatha, Queenstown and the coastal areas has also brought new economic growth to towns such as Cala, Elliot, Ngcobo, Dutwya and Lady Frere.

Kouga cashes in

Demand for property in the Kouga municipality is also on the up.

Jeffreys Bay, which services not just its 20 000 permanent residents but those from neighbouring towns and villages such as Hankey, Patensie, Kareedouw and Joubertina in addition to up to 120 000 holiday makers a year, is one of the fastest growing towns in South Africa.

Fountain Estates local developer Oswald Buchner, who heads the Buchner Propvest Group, said Jeffreys Bay boasted a recorded 10% growth rate per year.

Construction of the R3.5-billion Fountain Estates development has commenced and will comprise a 40 000m² mall – due to open in October 2008 – an industrial park and an equestrian estate. Also being developed adjacent to the mall is a Jack Nicklaus designed golf course, the Jubilee Golf Estate.

A limited supply of light industrial space in Jeffreys Bay has seen a huge demand for space in the Loodspark Industrial Park development, and a 32-unit development is planned for the main business centre of the town.

Pam Golding properties regional area principal Keimpe Weistra said investors were buying on the back of a three-year, 30% annual growth in rental rates of commercial and industrial properties in the area.

This article was first published in Eastern Cape Madiba Action, winter 2008 edition. Republished here with kind permission.