Mall building boom is over

South Africa boasts the sixth-highest number of shopping centres in the world, with malls covering a whopping 23 million square metres.

Aslide in Vukile Property Fund’s annual results reads “Retail market reaching maturity” – one of the first admissions by a major sector participant that the market is increasingly saturated and SA doesn’t need much more retail space.

SA has the sixth-highest number of shopping centres in the world, according to the SA Chamber of Shopping Centres’ 2015 research. In 2015, there were just under 2 000 malls covering over 23 million square metres.

Admittedly Vukile, one of SA’s largest retail real estate investment trusts, is active in the small regional (25 000m² to 50 000m²) and community (12 000m² to 25 000m²) shopping centre segments (68% of its portfolio, by market value). This is where much growth has been in recent years, with centres built in townships and smaller towns. At the mega end of the market, commentators are clear Mall of Africa is likely SA’s last super regional (100 000m²) shopping centre to be built for a while.

Trading densities are under pressure, with “regional, small regional and super regional segments… now some way off their three- and five-year average yearon-year growth rates”, according to the SA Property Owners’ Association Retail Trends Report for 2016. The super regional segment showed a decline in trading densities of 1.2% year-on-year.

The failure of Stuttafords will affect vacancies across the sector. Hyprop CEO Pieter Prinsloo recently told Financial Mail it’s likely to take six months “to negotiate lease agreements with new tenants”. Hyprop-owned Canal Walk, Rosebank Mall and Clearwater Mall are affected. Demand from international retailers for space has moderated.

Analysis of StatsSA building statistics since 2000 reveals a clear trend. In building plans passed by municipalities for shopping and the amount of space completed, it’s apparent a peak has been reached. In 2016, preliminary data shows a decline of 200 000m² of space planned (20%) versus 2015. That’s almost two Mall of Africas.

Mall of Africa is likely the last super regional shopping centre to be built in SA for some time.

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