Per­for­mance gap widens

Shop­pers spending more on gro­ceries, less on fash­ion

Finweek English Edition - - Property - JOAN MULLER joanm@fin­

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

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