Developers and Investors Target Niched Property Opportunities / Specialisation VS Diversification
Category Newsletter: 1 - Head Office
Developers and Investors Target Niched Property Opportunities / Specialisation versus Diversification in Commercial Property...a growing trend or business as usual?
Whilst niched property developments are nothing new, recent developments appear to indicate an acceleration of developments targeting specific business segments, tenant types or consumers looking for a specific product. The age old question of specialisation versus diversification has also played itself out in the South African listed property sector for years. Funds with retail, industrial, hospitality or other focuses have been fairly common with the advantages of focussing and developing competitive advantages in specific areas weighed against the risks associated of putting all ones eggs into one basket.
While many recent specialised developments are to some extent a sign of a more mature property industry with fewer gaps in the "traditional" market, the retail industry has from the first cities and towns had areas, districts or high streets that serviced specific products and consumers. Examples of these include garment or textile districts, watch or jewellery streets, medical streets, antiques districts and fish and fresh produce markets. A standout example of modern retail specialisation in South Africa is Johannesburg's Design Quarter that incorporates design and interior with focussed retailers and tenants in a one stop shop for consumers requiring these goods and services. Durban's Stamford Hiill Road factory clothing district is a well-known high street version of these targeted retail districts. New niched retail developments include those that deploy a specific type of architecture or construction materials that take root as is seen by the proliferation of "Box Parks" made out of shipping containers.
An extremely innovative and unique sector specific node is Durban's Professional Quarter, which utilises a mix of location, a differentiated product, supplementary services and positioning to target the legal profession. Its proximity to the supreme courts, with a shuttle service, premium office environment, mediation and arbitration facilities, members club and IT infrastructure, have attracted long term commitments from leading advocates and attorneys against fierce competition. A number of initiatives and nodes targeting call centres, student housing and education have also been developed across South Africa.
The industrial sector has seen zoning and health issues coupled to the desire to create synergies between businesses in the same sectors grouped together. Chemicals processing and manufacturing, automotive, technology and pharmaceutical areas are commonplace. The high tech world of modern logistics has seen the development of targeted logistics parks including Clairwood in Durban and Plumbago in Johannesburg.
Recent developments in the retail and listed property sectors have also driven a re-think regarding diversification in respect of individual companies versus exposure across multiple shares or even index trackers. The challenge becomes slightly more complicated when individual companies success and size means they come to dominate a sector.
Author: Frank Reardon