annual report 2009
Group Property
The Group Property division is responsible for administering the group’s leases of space for all its stores, which numbered 1 539 at the year-end (as against 1 393 in 2008) and for administering three properties which the group has historically owned and from which it still trades. The division’s tasks include assessing space requirements and matching them with suitable properties, negotiating leases and extensions of leases with landlords, and maintaining relationships with landlords over the periods of leases that sometimes extend for as long as ten years.
Property rental payments make up the second-largest item of expenditure for the group, and it is accordingly vital to optimise the benefits to be gained from rentals.
The group’s policy is to rent rather than to own since, for a retailer, the role of a tenant as against that of an owner provides greater flexibility and makes it possible for impartial decisions to be taken about all matters affecting properties.
The group’s three owned properties are located in the central business districts of Cape Town, Johannesburg and Durban respectively, and have been in its possession for several decades.
STORE OPENINGS AND SPACE ACQUISITION
The ambitious programme of space acquisition foreshadowed in the 2008 annual report has been successfully carried out, taking the group further towards its goal of being well represented wherever it is necessary and feasible to serve its customers adequately.
In total, 154 new stores were opened across the group’s 14 trading units. The net trading area grew by approximately 57 000 square metres, an increase of 13,9% on the previous year. At the year-end the group’s 1 539 stores occupied a total of 467 420 square metres of space.
The Sports division opened the greatest number of new stores. For its individual chains the figures were 25 Totalsports, 15 sportscene and six Due South stores, or 46 in total.
The Foschini division opened the greatest area of new space with an increase of slightly more than 18 000 square metres allocated between the Foschini, donna-claire, fashíonexpress and Luella chains. Of this area, approximately 14 000 square metres related to 34 new stores and the remaining 4 000 square metres represented enlargements within existing locations, or relocations of existing stores.
The @home division opened 11 new stores, three of which were in the @homelivingspace format, which includes furniture. The larger footprint of the @homelivingspace stores translated into approximately 11 000 square metres of additional space.
The Markham division opened 18 new full-line stores and four Relay stores (selling casualwear only), representing a total of 6 591 square metres of new space.
The Jewellery division opened 26 new stores across the American Swiss, Sterns and Matrix chains.
The exact! division traded in 16 new stores with a combined additional area of almost 6 000 square metres.
Across the group, 20 stores were enlarged in key locations to relieve the pressure of excessive trading densities, while the trading area in two over-sized stores was reduced.
A further 36 stores were relocated to superior trading positions and ‘right-sized’ in the process. Six under-performing stores were closed.
NEW CENTRES
New centres that opened during the course of the year and in which the group is represented were:
- Zevenwacht (Kuilsriver)
- Mooiriver Mall (Potchefstroom)
- Mdantsane (East London)
- Richards Bay
- Setsing
- Westwood (Westville)
- Heidedal (Bloemfontein)
- City Mall (Klerksdorp)
- Wonderboom (Pretoria)
- Fountains Mall (Jeffreys Bay)
- Bloed Street (Pretoria)
- Hartebeespoort
- Kathu
- Tsakane Mall (Germiston)
- Robertson
- Oshikati (Namibia)
- Rosehill Mall (Port Alfred)
- West Coast Mall (Vredenburg)
- Melrose Arch (Johannesburg)
In addition, the division was able to secure space in certain shopping malls where the group had either not been present at all or was under-represented. Notable amongst these were:
- Highveld Mall (Witbank)
- Mountain Mill (Worcester)
- Sunny Park (Pretoria)
It is pleasing to report that no significant power failures were experienced in the group’s stores. This is a great improvement on the position which prevailed in the 2008 year, and Eskom is to be congratulated on managing its affairs to avoid systematic power failures. Reduced national demand for mains power during the year no doubt aided Eskom in this process.
PROGRAMME FOR 2010
There will again be a substantial space acquisition drive, although on a somewhat lesser scale than in the past year (approximately 11% as against the 13,9% mentioned above). The demand for new space is widely felt among the group’s trading divisions and particularly in the Sports, Markham and fashíonexpress chains.
A significant development is that space for new stores is being acquired in Zambia, a country where the group has not traded before. A total area of approximately 4 000 to 5 000 square metres is envisaged in two malls in the Lusaka area and one in Kitwe. The space will be allocated among several of the group’s main chains. Their stores are expected to open in the 2011 year.
Advantage will be taken of the fact that retail space is more readily available in southern Africa than in the past few years, this being one of the consequences of the current economic slowdown and the declining pace of property development which has set in. Developers have become very cautious about taking on new projects, although those on which a start had been made by late 2008 are still largely being built. They alone will ensure that a sizeable part of the group’s needs for space can be satisfied.
Landlords are proving to be more amenable to negotiation than in the past and this will allow the group to secure additional benefits in some of the leases it concludes or renews.
The Group has made firm commitments to opening stores in the 2010 year in the following new malls (among others):
- Amanzimtoti
- Nelspruit
- Gugulethu
- Hemmingways (East London)
- Bridge City (KwaZulu-Natal)
- Mafikeng Mall
- The Grove (Pretoria)
- Pan Africa Junction (Alexandria)
SIGNIFICANT TRENDS IN PROPERTY DEVELOPMENT FOR RETAILERS
It was mentioned in the 2008 annual report that low-rise ‘open’ shopping centres with sizeable ground-level parking areas were becoming more common. While this design concept may in some circumstances be successful, it has been shown in the past year that it is not the optimum model for the trading units of the Foschini group, except perhaps for isolated stores, and generally the viability of the concept locally is questionable.
While in its infancy in South Africa, there is a move internationally towards the design and construction of shopping centres that place greater emphasis on sustainable use of natural resources. Locally, landlords are beginning to assess the impact of ‘greening’ their new and existing buildings. The revised design model will rely on features such as eco-friendly building materials, natural lighting, solar power and heating, and rain water capture. At the same time landlords are considering the introduction of ‘green’ leases for tenants.
External verification of the adopted eco-friendly measures may result in graded buildings achieving ‘green star’ certification. In the current economic climate, the concern of incremental costs to landlords and tenants may well result in the delayed implementation of this initiative.
