Too many malls mean pain for all, say centres
Mushrooming developments compete for static spending
WEAK consumer spending coupled with a glut of new retail space is starting to put pressure on shopping centre returns, results released this week by two of the country’s largest mall owners show.
For the year ending June, trading densities — turnover to square metres — across Growthpoint Properties’ portfolio of 58 shopping centres slowed to 2.72%. That’s down from growth of around 7% about 12 to 18 months ago.
Speaking at the company’s annual results presentation in Johannesburg this week, CEO Norbert Sasse said nine of the company’s shopping centres had been negatively affected by the opening of new malls in their direct catchment areas.
These include Greenacres and Walmer Park in Port Elizabeth, Alberton City south of Johannesburg and City Mall in Klerksdorp, which all faced new competition following the opening of mega-centres Baywest Mall (Port Elizabeth), Mall of the South (Johannesburg) and Matlosana Mall (Klerksdorp).
“There hasn’t been enough growth in consumer spending to justify the addition of so much new retail space. Turnovers are simply being split between existing centres and new ones,” Sasse said.
However, there are exceptions, with some malls still recording inflation-beating turnover growth.
Sasse said Growthpoint’s Western Cape malls were outperforming those in other regions, no doubt due to the province’s prominence as an international tourist destination.
Malls catering for more affluent shoppers are also performing better than those in middle- and lower-income areas.
The jewel in Growthpoint’s crown is Victoria Wharf at the V&A Waterfront, which recorded 13% growth in trading densities for the year ending June. At the V&A, which Growthpoint co-owns with the Public Investment Corporation, foot count increased 2.7% to 24.2 million visitors for the 12-month period.
Sasse ascribed the V&A’s performance to a weaker rand, which has boosted overseas tourism.
“The weak rand also benefited local tourism as more South Africans travelled to Cape Town instead of Mauritius,” he said.
The V&A’s enhanced tenant mix, with the recent addition of a number of international retailers such as H&M, Versace, Hackett and Seafolly, is also a major contributor to the precinct’s success, said Sasse.
Trading density growth, a key metric used by retailers and mall owners to measure the strength of the retail sales environment, also slowed across Hyprop Investments’ R27-billion portfolio of 11 malls, although not to the same extent as that of Growthpoint. Hyprop recorded an average 5.2% year-on-year growth for the 12 months ending June, down from around 7%.
Hyprop CEO Pieter Prinsloo said the performance of shopping centres was becoming increasingly divergent, with location, size and dominance of a catchment area the key differentiators. Rosebank Mall was the top performer in Hyprop’s portfolio with growth of 18%. However, that was off a low base NEW LOOK: The revamped Rosebank Mall in Joburg was Hyprop’s top performer, with growth of 18% — although this came off a long period of disruptive construction work following last year’s completion of a R920-million redevelopment. Hyprop’s Western Cape malls are its best performers from a regional point of view. Somerset Mall in Somerset West and Canal Walk in Cape Town recorded growth of 9% and 7% respectively.
Hyprop has also been impacted by new malls, with The Glen in the south of Johannesburg recording a 9% slump in trading densities. Prinsloo said the opening of the Mall of the South had caused an oversupply of retail space in the area that “could take years to correct”.
Stanlib head of listed property funds Keillen Ndlovu predicted a further slowdown in trading density growth and foot counts “given the weak economy and cannibalisation of retail sales, especially among bigger shopping centres”.
Turnovers are simply being split between existing centres and new ones