Naledi Threads Business Plan — Location Strategy

Why Protea Glen Square, what the 55 m2 gross lettable footprint costs, and the trading conditions the site brings.

Location Strategy

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4.1 Why a community centre rather than a regional mall
4.2 Site screening methodology
4.3 Recommended site
4.4 Store specification
4.5 Lease terms and the turnover clause

4.1 Why a community centre rather than a regional mall

Location is the most consequential decision in this plan, and the most commonly got wrong. The instinct of a first-time fashion retailer is to seek the highest-footfall centre available. For a business of this size that instinct is close to fatal.

Super-regional centres achieved market rentals of roughly R308 per square metre against an all-centre base rent index near R235 in late 2024, and premium locations such as the V&A Waterfront are reported to let at R400 to R600 per square metre. At R500 per square metre a 55 m² store carries R330 000 of base rent a year. Against the plan’s Year 1 revenue that is a rent-to-sales ratio of 18.2 per cent — roughly double what fashion retail can sustain. The store would be insolvent on rent alone before it bought a single garment.

Meanwhile community and smaller centres closed 2024 at trading densities of about R42 918 per square metre against R49 443 for super-regionals — a 13 per cent shortfall in sales productivity for something closer to a 20 to 25 per cent saving in rent. That arithmetic favours the smaller centre for any tenant whose competitive advantage is not footfall-dependent.

4.2 Site screening methodology

Six candidate sites across four provinces were scored against seven weighted criteria. The weights reflect what actually drives an independent boutique’s survival, which is not the same as what drives a chain store’s site selection.

Criterion	Weight	Why it carries this weight
Catchment size and density	20%	Determines the ceiling on achievable transactions per day
Target-segment income fit	18%	R270 average unit retail requires disposable income, not just population
Occupancy cost affordability	17%	The binding constraint identified in 4.1
Competitive saturation, inverse	15%	Direct fashion competition dilutes an already thin catchment share
Footfall quality and dwell time	12%	Dwell time converts better than raw traffic; transit nodes convert poorly
Anchor and tenant mix support	10%	A grocery anchor drives the weekly visit the store depends on
Availability of a 50–70 m² line shop	8%	A 55 m² unit must actually exist and be available at the right rent

Figure 7. Weighted site scores. Sandton City scores well on customer income and footfall and is disqualified on occupancy cost — illustrating why unweighted footfall is a misleading guide.

4.3 Recommended site

Protea Glen Square in Soweto scores highest at 8.25 out of 10. The case rests on four points: catchment depth, with Soweto’s population measured in the region of 1.3 to 2 million depending on boundary definition and Protea Glen one of its faster-growing residential extensions; occupancy affordability, with community-centre line-shop rentals in this band supporting the plan’s assumed base rent of R248 per square metre, close to the national all-centre base rent index and roughly 20 per cent below super-regional market rentals; grocery anchoring, because a supermarket anchor generates the weekly repeat visit that the revenue model’s assumption of four to seven visits per customer per year depends on; and lower fashion saturation, because the regional malls serving Soweto carry the full national fashion line-up while community centres carry value chains and a thin independent presence.

The honest counter-argument: Gauteng’s township retail is not under-shopped, competition can arrive within one lease cycle, and a 55 m² independent has no defence against a national chain taking space in the same centre. Section 16 carries this as a specific risk with a specific response.

4.4 Store specification

Parameter	Specification	Rationale
Gross lettable area	55 m²	Smallest area that carries a credible size curve across seven categories
Selling floor	45 m²	82% of gross lettable area; the balance is stockroom, fitting rooms and back-of-house
Fitting rooms	Two, both fully enclosed	Non-negotiable for a size-inclusive proposition; drives conversion
Frontage	Minimum 5.5 m glazed	Window display is the store’s largest single marketing asset
Position	Ground floor, on the anchor desire line	Between the grocery anchor and the main entrance
Trading hours	09:00–18:00 weekdays, 09:00–17:00 weekends	30 trading days a month assumed
Fit-out density	R7 582 per m²	Entry-level specification; a premium fit-out at R12 000/m² is not affordable here

4.5 Lease terms and the turnover clause

Figure 8. Base rent against the turnover clause. Turnover rent overtakes base rent in Year 3 and remains the operative basis thereafter.

	Year 1	Year 2	Year 3	Year 4	Year 5
Base rent escalated at 7.0%	163 680	175 138	187 397	200 515	214 551
Turnover rent at 7.5% of sales	135 950	171 297	190 140	204 401	217 687
Operative basis, greater of	Base	Base	Turnover	Turnover	Turnover
Rent payable	163 680	175 138	190 140	204 401	217 687
Recoveries and marketing levy	49 500	52 965	56 673	60 640	64 884
Total occupancy cost	213 180	228 103	246 813	265 040	282 571
As a share of revenue	11.8%	10.0%	9.7%	9.7%	9.7%

Term	Assumed in the model	Negotiation objective
Base rental	R248/m²/month (R13 640/month)	Hold at or below this level
Operating cost recovery	R64/m²/month	Require an audited annual reconciliation
Marketing levy	R11/m²/month	Confirm what the levy actually funds
Annual escalation	7.0%	Push to 6% or CPI plus 1.5%
Turnover clause	7.5% of turnover, greater-of basis	Raise the breakpoint or cut the rate to 6.5%. This becomes the operative basis from Year 3
Lease term	Five years	Five years with a tenant-only break at month 36
Beneficial occupation	Not assumed	Secure 6–8 weeks rent-free for fit-out and trading build
Deposit	Two months gross rental	Negotiate to one month, or a bank guarantee in place of cash

Beneficial occupation is the term most often left on the table. Six to eight weeks rent-free during fit-out is worth roughly R25 000 to R33 000 of cash at a point in the plan where the opening buffer is doing all the work, and landlords in community centres will frequently concede it to secure a five-year tenant. It costs nothing to ask and it is not recoverable once the lease is signed.

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