Rise of the mini-city

Mixed-use property is not new to South Africa’s urban planning landscape. The idea of combining a mix of buildings on one site — office, retail, residential, leisure and hospitality — was conceived in the mid-1990s, when Cape Town’s Century City and Joburg’s Melrose Arch appeared on architectural drawing boards.

The V&A Waterfront, Waterfall City in Midrand, Steyn City on the outskirts of Fourways and Menlyn Maine in Tshwane followed suit.

While precinct‑led development is a global phenomenon, the rise of mixed-use nodes — or mini-cities — has become increasingly relevant in the South African context thanks to electricity and water supply issues, deteriorating municipal service delivery and poor road infrastructure upkeep. Precinct developments, which are typically self-sufficient and security-controlled, with costs carried by the developer, tenants and residents, are effectively filling the gap left by failing cities.

Jackie van Niekerk, CEO of Attacq, the JSE‑listed developer of Waterfall City, says the mini-city model addresses the country’s unique urban challenges such as spatial fragmentation, limited public transport infrastructure, extended commute times, unreliable utilities supply and crime. “Privately managed precincts are often better equipped to mitigate these risks,” she says. Waterfall City, at 2,200ha, is South Africa’s largest mixed‑use development.

However, mixed-use is not necessarily what it used to be. Abcon Developments MD Bryce O’Donnell tells the FM that the precinct development model has evolved in recent years in response to shifts in how people live, work, shop and play.

“A generation ago, mixed-use developments were largely defined by their physical components. Retail was anchored by a major supermarket or department store, some office space above or adjacent, and perhaps a hotel.”

Back then, the logic was additive. “Put different uses next to each other and the sum would be greater than its parts.

“But what we’ve learnt since is that proximity alone is not enough. The real value lies in integration — in creating an environment where the various uses genuinely feed and reinforce one another.”

O’Donnell notes that the new generation of mixed-use precincts is fundamentally lifestyle-led. “The starting point is no longer what we can build, but rather what problem we are solving for the people who will live, work and spend time here.”

Importantly, today’s occupiers and residents demand alternatives to municipal services: solar power, water backup and reliable waste management. O’Donnell says developers are also starting to add more mid-priced housing options to mixed-use precincts, which traditionally catered mainly to wealthier buyers. Broadening the pool of residential buyers means more feet on the ground to support and sustain a precinct’s retail and leisure components.

Not all mixed-use developments fulfil the same needs. O’Donnell cites two distinct typologies.

First, there is the large-scale greenfield precinct developed on the urban edge, such as Waterfall City, Century City and the emerging Westown node in Shongweni, between Durban and Pietermaritzburg. These are ambitious, long-term projects that seek to create new urban nodes from scratch — a model requiring vast landholdings and significant upfront capital investment.

This approach is built around the concept of the 15-minute neighbourhood — the idea that people should be able to meet most of their daily needs within a 15-minute walk or cycle from where they live, without depending on the broader city’s often overstrained infrastructure. O’Donnell notes that traditional mixed-use developments were often conceived as destinations in their own right — places you drove to, used and left. So what has changed?

The move from urban sprawl to densification has forced developers to rethink their approach, along with capital constraints, and then post-pandemic work and lifestyle shifts require shorter commute times.

That has given rise to the second model: infill development, which O’Donnell argues has greater relevance given South Africa’s immediate urban challenges. “These are smaller-scale projects that plug into existing nodes rather than creating new ones. Urban infill developments are consciously designed to mesh with their surroundings rather than turn their backs on them,” he says. “Think of Newtown Junction in Joburg’s inner city or Sandton Gate at the western edge of the Sandton CBD.”

The starting point is no longer what we can build, but rather what problem we are solving for the people who will live, work and spend time here

—   Bryce O’Donnell

O’Donnell singles out Sandton Gate on Winnie Mandela Drive as a prime example of what an urban infill precinct should look like. The first phase, comprising 136 apartments and 16,500m² of office, retail and leisure space — including a Planet Fitness gym, The Baron restaurant and Seattle Coffee Company — will be followed by the addition of a 12,000m² destination retail centre (Sandton Gate Central) and a further 10,000m² of office space.

Anchors at the centre, which was set to open on March 26, include Checkers, Dis-Chem and Woolworths alongside several wellness tenants (hair, skin and beauty businesses) and a refined dining lineup that includes Italian restaurant Tortellino D’Oro, Vlamo (formerly Ukko), and seafood restaurant Tightline. Bootleggers, Kauai, Luigi Coffee Co and Milky Lane will complete Sandton Gate Central’s food and beverage offering.

Estienne de Klerk, South African CEO of Growthpoint Properties, the JSE’s largest domestic property counter with assets worth more than R150bn, says Growthpoint’s strategy is increasingly focused on clustering investments in secure, well-managed mixed-use precincts. As a result, the group is exiting some of its smaller standalone assets.

Growthpoint’s R28bn V&A Waterfront — the most visited precinct in South Africa with an annual foot count of 25-million — has provided the company with a valuable blueprint for delivering successful mixed-use developments. De Klerk hopes that Growthpoint’s next big project, Sandton Summit, will become Gauteng’s premier walkable precinct. The node stretches roughly from Growthpoint’s head office in Sandton Drive opposite Sandton City and Discovery’s head office off the corner of Rivonia Road and Katherine Street to Inanda Greens Park on Wierda Road West.

Construction started last month on Olympus Sandton, a R2bn residential high-rise in the midst of Sandton Summit. The first 24-storey tower of 288 studio, one- and two-bedroom apartments and penthouses is almost sold out, with prices ranging from about R1.5m to R20m. Soon after launch last year, a lavish 911m² duplex penthouse fetched R45m.

The building, which will house a Marble restaurant and sky bar as well as the group’s Pantry deli and café concept, offers direct access to neighbouring luxury retail centre LXX Sandhurst.

The growing popularity of mixed-use precincts is creating a meaningful knock-on effect for property buyers and investors. Industry players argue that mixed-use neighbourhoods deliver better capital growth and rental yields than standalone residential developments.

Helga Clemo, licensee for Seeff Century City, says sustained demand from buyers, investors and tenants at the 250ha node near Bloubergstrand has pushed residential property prices up by more than 20% over the past two years. That compares with average growth of about 16% across the Cape metro.

Apartment prices typically range from R1.8m to R3m, while full-title clusters sell for R3.5m-R4.5m and can reach as much as R16m. Landlords are achieving gross rental yields of 7%-10%, with average monthly rentals of about R19,000 for a two-bedroom unit. Clemo adds that Seeff has recently concluded rentals in the R40,000-R80,000 range at Century City, which is anchored by megamall Canal Walk.

The V&A Waterfront has also recorded strong capital growth at its Marina residential offering, where apartment prices are up about 30% over the past five years to an average of R18m, according to Seeff and PropStats. At the precinct’s latest apartment development, 5 Dock Road, 94 out of the 96 units launched off-plan in August have already been sold at record prices of between R100,000/m² and R140,000/m².

There’s been similarly robust demand at Waterfall City’s Ellipse residential scheme, launched in 2018 across from the Mall of Africa. Only a handful of the 672 studio, one-, two- and three-bedroom apartments that have since been released in three phases across four towers at R1.57m-R15.87m are still for sale. In 2023, a 400m² penthouse fetched R75m, setting a new benchmark for sectional-title prices in Gauteng.

Reinier van Loggerenberg, CEO of Gauteng-based residential developer Craft Homes, says residential developments integrated into mixed-use precincts consistently outperform standalone schemes across key metrics: rental demand, vacancy rates, leasing velocity and longer-term capital appreciation.

Van Loggerenberg attributes the outperformance of mixed-use developments close to economic hubs primarily to the convenience factor: reduced commuting times and transport costs due to easy access to business, retail and lifestyle amenities. Security, walkability and reliable infrastructure and service delivery are other key attractions.

Craft Homes’s portfolio includes The Terrace at Sandton Gate, Iconic Melrose in the Melrose-Illovo-Rosebank corridor, The Hive in Rosebank, Riverstone Wetland Estate near Montecasino in Fourways, and Hazeldean, a 950ha mixed-use node in the east of Tshwane. Citing The Terrace as an example, he says two-bedroom apartments that sold in August 2022 at an average of R2m are now fetching up to 25% more. That’s impressive, given the near-zero capital growth most Joburg homeowners have had to contend with in recent years.

Sandton Gate apartments rent for an average of R14,500 a month, translating to gross yields of 9%-12% for landlords. “By comparison,” says van Loggerenberg, “the broader Bryanston and Sandton market typically has rentals of R12,000-R22,000, with standalone premium developments delivering yields of 5%-8%.”