Warning bells for mall mania

Despite depressed consumer spending, developers are bringing more shopping malls to an already saturated market

Another 3-million square metres of formal retail space is currently either being built in SA or is in the planning phase, according to Broll Property Group.

That means the rough equivalent of 20 Sandton City malls will be added to SA’S already crowded landscape of shopping centres in the next few years.

One of the largest projects on the go is the redevelopment of Fourways Mall on the northern outskirts of Joburg, which will become SA’S largest shopping centre after completion of a 114,000m² extension later this year.

But there are also two new malls being built in Pretoria (the 60,000m² Capital Mall and the 92,000m² Rainbow Junction), and the seaside city of Umhlanga is getting the Oceans Mall (36,000m²).

The question is, how will mall owners fill so much additional space? Especially given the parlous 0.2% growth in the year to March of SA’S wider retail sales, according to Stats SA.

Elaine Wilson, Broll’s divisional research director, says the days of tenant waiting lists are long over.

“We have already seen that trading densities are under pressure with luxury goods in particular being hardest hit. Vacancies are slowly increasing with space staying empty for longer,” says Wilson.

In particular, marginal tenants are “under a lot of pressure”, she adds.

Other metrics are equally worrying. For instance, the SA Property Owners Association’s latest retail trends report shows that vacancies across SA have risen noticeably over the past two years and are now at an average of 4.2%, compared with the long-term average of 3%.

Larger-format centres, typically exceeding 100,000m², are bearing the brunt of this. After Stuttafords collapsed in 2017, a number of standalone stores of international fashion brands like Mango, Banana Republic, Gap, Nine West, Topshop and River Island have closed or slimmed down. And, more recently, Edcon had to be “restructured” to survive, which resulted in it shedding shop-floor space.

Worse — industry players expect a further increase in vacancies over the next 12 months, given Edcon’s plans to close some of its smaller and more poorly performing stores, as leases come up for renewal. At least three more international retailers are closing shop in SA this year: lingerie brand Victoria’s Secret and US fast-food chains Dunkin’ and Baskin-robbins.

Partly mitigating those losses last year, a few new foreign entrants opened shop in SA, including fashion retailers LC Waikiki, Christian Dior, Coach and Tod’s; Japan-based Miniso; and home improvement chain Leroy Merlin. But it remains unclear to what extent these new retailers can capture a slice of SA’S consumer spending, especially given the wider slowdown in spending.

Theresa Terblanche, a director at Broll, says that while multinational retailers usually undertake extensive market research before entering a market, this doesn’t necessarily mean they fully understand the SA market or automatically price their products correctly.

In a report titled “The Evolution of Retail”, Terblanche says one of the reasons foreign luxury brands in particular may have struggled in SA is that wealthier consumers travel so much. “The challenge in SA is that the shoppers who can afford these brands often opt to rather purchase these items during their overseas trips at cheaper prices, instead of at home for an inflated price.”

Which is an ominous warning, especially considering how many new malls are being opened every month with the expectation of throngs of new customers.

Vacancies across SA have risen noticeably over the past two years and are now at an average of 4.2%, compared with the long-term average of 3%