Performance gap widens
Shoppers spending more on groceries, less on fashion
LATEST TRADING REPORTS from shopping centre owners show consumers aren’t only spending less but are also spending differently. Craig Ewin, CEO of listed property counter SA Corporate Real Estate Fund, reports a definite change in consumer demand and buying patterns, resulting in a very mixed trading performance from its R5bn retail portfolio last year. Ewin says centres that don’t have a food anchor but are more fashion focused are sinking to the bottom of the performance rankings.
For example, SA Corporate’s Highland Mews, a 16 000sq m centre in Witbank’s CBD that has a large fashion offering, saw negative growth of 5% in retail spend in December 2008 year-on-year. By contrast, its township flagship mall – Umlazi Mega City, in Durban, which is anchored by a large Spar and offers other grocery outlets – reported a 13% rise in turnover in December.
Says Ewin: “December trade analysis shows meaningful increases from grocery anchors. In certain of SA Corporate’s Durban-based retail properties – for example, Bluff Shopping Centre, Umlazi Mega City and the Village Centre in Hillcrest – the growth from the food anchors has been more than 30% in December year-on-year.”
At the same time, the trend from highend fashion, jewellery, furniture and homeware stores shows flattish or negative growth. Ewin says that’s evident at its Musgrave Centre, a 40 000 sq m centre in Durban’s Berea. “A change in shopper demand in the area, as well as an increase in retail competition, resulted in a marginal 1% increase in turnover in December year-on-year.”
Gary Hardisty, portfolio manager at Old Mutual’s Triangle Real Estate Core Fund, notes a similar trend. He says the rapid economic decline is clearly evident in certain retail sectors, notably where the consumer can exercise discretion or trade down, such as homeware, jewellery, luggage, restaurants and entertainment.
Hardisty therefore expects lifestyle and neighbourhood centres of less than 25 000sq m and centres with high exposure to independent line shops will come under severe pressure over the next 18 months.
Another key trend is that shoppers are making fewer trips to malls but spending more at each visit. That probably explains why large regional malls that offer critical mass for comparative shopping are generally recording better turnover growth than smaller centres.
Hardisty says marginal changes to foot count and vehicle visits at Old Mutual Property Group’s malls indicate shoppers are still visiting its centres at the same rate as before but spend per head is up. “That clearly indicates an increase in basket size.”
Retail spend at Old Mutual’s five top shopping centres, including mega-mall Gateway Theatre of Shopping (Umhlanga), Menlyn Park (Pretoria) and Cavendish Square (Cape Town), increased 6,5% in 2008 year-on-year.
Says Hardisty: “Although the real value of money has been reduced, consumers continue to visit our centres and are allocating a larger proportion of their spend to each visit.” He says that trend supports the view shoppers are planning their trips and allocating spend in a more controlled way than before.
Listed retail-focused property fund Hyprop Investments saw retail spend rise 11% at its KwaZulu-Natal-based regional centre, Southcoast Mall, in 2008 year-onyear, while retail spend at its flagship megamall Canal Walk (Cape Town) was up 7% over the same time. While turnover was up, footfall (number of visitors) remained constant. Hyprop CEO Pieter Prinsloo says that again confirms bigger malls in dominant positions are proving more resilient to the adverse factors affecting consumer confidence and spend.
The latest Sapoa/IPD Retail Trends report supports the view consumers are cutting back on non-essential spending, with travel, jewellery and fashion stores experiencing a noticeable drop in trading densities (turnover/sq m) in the six months to September 2008. The report notes travel stores have been hardest hit, with an average decrease of R314/sq m in turnover over the six-month period.
The report says super regional centres, typically bigger than 100 000sq m, were the only category of shopping centres reporting positive growth in trading densities from the second to third quarter 2008. Community centres, typically sized between 12 000sq m and 25 000sq m, reported the biggest decrease in average trading densities over the same time.
Latest available figures from Sapoa/ IPD show the total return for retail property came in at just 5,9% in first half 2008. It’s therefore not entirely unlikely that shopping centre owners’ total return could slow to less than 10% for calendar 2008 when Sapoa/IPD announces full-year results in March. Retail property still recorded a total return of 26% in 2007.
Shopping centre owners report mixed trading results. Canal Walk