Trading density growth in retail centres on a go-slow
SOUTH Africans’ penchant for retail therapy has meant that shopping centres traditionally make more money for property investors than any other sector of the SA real estate market, be it offices, industrial buildings, hotels or housing.
Over the 10 years to the end of last year, retail property delivered an annualised total return (income and capital growth) of a substantial 16%, as measured by MSCI’s Independent Property Databank (IPD) index.
However, ongoing pressure on consumer spending amid SA’s ever-growing pool of new shopping centres is starting to eat into profit margins.
Latest industry data and results from listed property funds reflect noticeable shifts in some of the key metrics that drive the performance of shopping centres.
Growth in trading densities (turnover/m²) in the larger malls, which have traditionally outperformed their smaller counterparts, has slowed while the opposite is true for smaller malls, according to the latest IPD SA Retail Trading Density Index.
Stanlib head of listed property funds Keillen Ndlovu said recent results from listed mall owners confirm that sales turnover growth and footfall are holding up better in smaller shopping centres than in some of the bigger ones. He ascribes this to the opening of so many new regional and super-regional malls.
While demand for retail space in large malls has been strongly supported by the entry of international retailers to SA over the past two to three years, Ndlovu said there is no doubt the environment is becoming more competitive due to increased supply of retail space.
The Eastern Cape and Gauteng are the most oversupplied with new megamalls, with Baywest in Port Elizabeth and Mall of the South in Johannesburg having placed pressure on sales turnover and visitor numbers at nearby centres.
Ndlovu believes the new 131 000m² Mall of Africa in Midrand, coupled with the huge extensions under way at Fourways mall in Johannesburg and Menlyn Park in Pretoria will also affect surrounding centres.
“We expect a further slowdown in trading density growth and footfall given the slowing economy and cannibalisation of retail spend, especially among bigger shopping centres.”
Results released this month by JSE-listed mall owners, including sector heavyweight Growthpoint Properties, Hyprop Investments and Mall of Africa owner Attacq, tell a similar tale – ongoing pressure on consumer spending, growing competition from new centres, and retailers becoming more circumspect in their expansion plans. — Financial Mail