Advice and Opinion

Stable growth in mixed-used hospitality developments


There has been a steady growth in mixed-use hospitality developments such as hotels or conference centres on a global scale and there’s no sign of this mixed-use hospitality momentum slowing down, according to local and international hospitality experts.

These urban developments blend office, commercial, hospitality, entertainment and residential space, offering people a “live, work, play” lifestyle. The concept has also brought about a broader accommodation mix and improved convenience for residents seeking to live closer to their work, leisure and shopping areas.

“Mixed-use developments are not a new concept or property trend in South Africa. In fact, the country wisely adopted this approach in the late 1990s and early 2000s, when Melrose Arch and Cape Town’s Century City made it onto our city maps” says Karen Miller, property specialist and co-founder of Quoin Online property trading portal.

“But what has been counting in the country’s favour is our consistent building on this trend, resulting in the creation of new business hubs and innovative property development solutions – due to massive capital investment”.

“All and all, mixed-use developments boost the economy, stimulate small business growth, create jobs and present a host of investment opportunities. They are also a sterling way of capitalizing on a more resourceful use of a denser space as well as meeting the country’s infrastructure needs” she says.

In South Africa there are a few either in progress or in the pipeline. The R1.2-billion Yacht Club mixed-use development in Cape Town’s Roggebaai Canal precinct will consist of A-grade commercial space as well as 170 residential units and a hotel.

Another newcomer is the 207-room Radisson Blu Hotel in Durban’s Oceans Umhlanga development that’s expected to open its doors in 2019. Designed as an urban resort, the high-end complex will feature luxury apartments and a shopping mall with leading international brands.

Hotel guests can enjoy the convenience of being a few footsteps away from leading restaurants and an array of recreational and entertainment areas as they rediscover the charm of these urban areas.

“In South Africa specifically, we are finding that these mixed-use developments bring an element of safety and improved sense of security to many. Local examples of such precincts are the well-designed V&A Waterfront, Cape Town and Melrose Arch, Johannesburg”.

Whether these mixed-use hospitality developments are built or the result of urban upgrades restoring these buildings to their former glory, this property trend is here to stay.

It is often said that hospitality businesses within mixed-use developments perform at much higher levels than their standalone counterparts. The “visitor experience” is a priority with tourists preferring their accommodation establishments to be mini tourist destinations rather than unconnected buildings.

But what should hospitality owners and tenants look out for before they invest and set up shop in such integrated areas?

Research to check new neighbours will deliver substantial foot traffic and brand exposure

· It is essential that you ensure you know exactly who your retail, commercial and residential neighbours are?
· Will your company be able to feed off the businesses surrounding you?
· Is there a healthy synergy?
· Do they complement your brand?
· Will they give your brand greater exposure?
· What are the possible reputational risks?

Making the right choice of housemate also leads to many opportunities for cross-promotion, as well as shared marketing and public relations campaigns.

“Try and establish what will be expected of you as a tenant. For example, if your company is a restaurant and you’re opening within a hotel area, you might be legally obligated to serve guests breakfast or room service. Or, a hotel adjacent to a conference centre might be expected to keep rooms aside for mega conferences” says Karen.

“If possible, try to make a more recently developed mixed-use area your new home. They are normally built from the ground up and specifically designed to be mixed-use developments, sport newer common-area facilities and might even offer leasing incentives”.

“It’s also imperative that you review zoning details and legal realities before opening your doors. Your lease or contract will probably be part of a net lease which normally provides for Common Area Maintenance (CAM) charges that relate to common areas’ cleaning, painting, landscaping, all charged over and above rent depending on the amount of space one hires. A good tip is to negotiate a fixed CAM rate before signing your lease, preventing an increase if other tenants decide to pack up”.

“In addition, make sure you know what will be required from your business regarding insurance payments, union rules and agreements, service level agreements and other shared costs and responsibilities”.

“All the more reason why the necessity for in-depth homework to be done long before you put up your signage” concludes Karen.