Regional shopping centres under pressure
DOWNSIZING by retailers and store closures have resulted in a marked increase in the vacancy rates of super regional shopping centres.
Jones Lang LaSalle (JLL), the real estate consulting firm, said super regional shopping centres had recorded a 1.6 percent year-on-year increase in vacancies, which highlighted the prevailing pressures in this type of retail accommodation.
Its commercial property report for the second quarter of this year said the increase in the cost of occupancy was another factor that may have contributed to the underperformance of larger centres. JLL said the SA Property Owners Association had indicated that the cost of occupancy in super regional shopping centres had increased significantly since 2016. It added that the average vacancy rate for retail accommodation was at 4 percent in the first quarter of this year and had remained within the 3 percent to 4 percent range over the past few years.
“The vacancy rates for bigger sized shopping centres (super regional and regional) have continued an upward trajectory while the vacancy rates of community and neighbourhood shopping centres have recorded a decline.”
JLL said retail sales growth for June was well below expectations, with Statistics SA reporting an increase of 0.7 percent year-on-year compared with 1.9 percent in May.
It said market expectations were for a 2 percent year-on-year growth in retail sales for June. “The moderate growth in retail sales is indicative of the difficult consumer spending environment. The credit environment for households remains under pressure, due to high indebtedness and stricter credit regulations,” it said.
JLL said given the prevailing economic conditions, consumer expectations were likely to adjust and be in line with the current economic reality, which may result in retail sales remaining low and more retailers possibly downsizing or consolidating their stores. It added that the notable decline in gross domestic product during the second quarter of this year was a forewarning of a challenging economic climate in the remainder of the year, but there were windows of improvements across the commercial property sectors, indicating both occupiers and developers had a positive outlook.
JLL said the Joburg real estate market remained resilient, reflecting healthy confidence in the city.
It said there had been a slight quarter-on-quarter and year-on-year improvement in the office sector vacancy rate to 12.4 percent in the second quarter of this year, but the vacancy rate had declined considerably over the past few years from 19.7 percent in the second quarter of 2015.