A pall over the mega mall

The only mall I frequent in this big old city of Johannesburg without gnashing my teeth is my favourite — because of the relative ease with which I can enter and leave the building.

Compared to another mall some 4km away it is nowhere near as intimidating in size. Sure, it may not have the signature big-box department stores of some of the more mainstream shopping centres, such as one of SA’s oldest, Sandton City, but it more than makes up for it in the fact that it’s an easy, stress-free and quick visit.

Now, I am just a one-person survey in this city of more than 5-million people, but I am certain that given the falling levels of foot traffic that we’ve seen at shopping destinations throughout Gauteng and for longer than the industry cares to admit, there are more than just a handful of us who feel the same about these gigantic retail developments that dot every major node in the city.

It’s a global affliction: the era of the shopping mall that began in 1950s America and in the ’70s in this country is under threat from changing habits.

While some consumers now shy away from the mega-centres even at the expense of not having access to every major retailer under a single roof — not to mention a dingy food court in some hidden corner — there’s also the matter of shoppers who are increasingly looking at the online route to meeting their wants and needs.

Anything to replace the drive into some of the most tortuous, albeit very profitable, parking spaces known to man, such as those at the Mall of Africa.

Falling foot-traffic levels because of

changing consumer habits could still be dismissed as being in its infant stage, but it’s still an erosion in the fundamentals of any gigantic shopping mall.

There’s perhaps the more immediate concern of the struggling consumer that is keeping shoppers away.

When I consider the fortunes of Edgars, retail property is in a much worse position than I had initially thought. And it’s a more immediate threat to the fortunes of retail landlords.

Saddled with debt from a failed private equity buyout more than a decade ago, Edgars, which is owned by Edcon, has struggled to trade itself out of its perilous position through many failed turnaround plans over the years.

Hidden behind the latest rescue package — which involves its landlords (who have also become its biggest shareholders) agreeing to reduce its trading space and rent — is the threat of what it will mean for the lease renewals of other retailers that may not be in as perilous a position as Edgars but are facing their own headwinds.

In an attempt to save what has become retail and SA’s “too big to fail”, one wonders what landlords have in place to ensure other retailers don’t demand the same reprieve.

There’s a possible domino effect, where other tenants facing similar challenges may very well ask for a reduction in rentals themselves.

If I owned a struggling store in a mall that was anchored by Edgars, I’d be driving a very hard bargain when it comes time to renew my lease.

Certainly, listed retailers are in as tough an economic environment as the ailing Edgars chain.

This week, Mr Price said retail sales from its fashion stores, its biggest division, fell in the first four months of its new financial year on the back of a weak economy.

Weighed down by a terribly executed UK strategy, Truworths reported a 74% slide in profits.

And what were usually dependable profits from Africa’s biggest grocer, Shoprite, aren’t as dependable any more.

Lease renewal promises to be an interesting subject of discussion for the property funds that are most exposed to that sector.

I wonder what sort of anxieties the developers of that monstrous Fourways Mall are dealing with as they prepare for its full opening later this month?

They couldn’t have been cursed with worse market timing.

The foot-traffic expectations that they must have worked on when they first conceived the project more than a decade ago are unlikely to be met for the foreseeable future at least.

The continued expansion of the suburb of Fourways may grow to meet those expectations, which is what Accelerate Property Fund must be hoping for.

But judging by the fund’s more than 30% fall in valuation over the past year alone, there’s clearly deep market scepticism about the success of the project, with the change in consumer shopping habits in uncertain economic times.

If I owned a store in a mall anchored by Edgars, I’d drive a very hard bargain