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Brighter days for retail

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Report show this property sector is showing signs of muted recovery

Rays of positivity are starting to shine through the dark clouds that have hung over the country’s retail property sector in recent years.

The sector has been hard hit by the struggling economy and falling sentiment, but Broll’s divisional director Frank Reardon says there appears to be hope on the horizon.

“South Africa’s retail property sector has struggled with an economy that has gone sideways as well as falling business and consumer sentiment. But there have been some positive signs that retail property is showing signs of a muted recovery.”

The South African Property Owner Association’s (Sapoa) Q2 statistics mirror this improvement, with its latest Retail Trends Report stating that the country’s shopping centre trading performance – as measured by the MSCI South Africa Quarterly Retail Trading Density Index – recorded its best year-on-year growth since December 2016.

“Trading density growth (sales per square metre annualised) came in at +5.7% year-on-year to June 2019 in current price terms, up from +3.2% recorded for the year to March 2019.”

The index is based on retail performance metrics across 24 merchandise categories in more than 100 retail centres covering more than 4000m².

The report attributes the annual trading density (ATD) growth to “spend per head” increasing by 4.2% and aggregate foot count per m² growing by 1.4%.

“It marks the first period of positive foot count per m² growth since September 2016.”

Despite the improvement, the Sapoa report says household expenditure continues to be constrained by consumer and administered price increases, as well as higher income tax and levies such as the carbon fuel levy.

Evaluating the performance of merchandise categories, Reardon says apparel remains the category with the slowest ATD growth. Food and supermarkets, as well as department stores, are the two strongest categories. “Apparel may be hard hit as new clothes often remain on households’ ‘non-essential’ lists. 

The apparel retail category has been the hardest hit by the tough economic conditions. Picture: Artistic Operations

The growth of online shopping and its easily available local and foreign apparel products may also affect this segment.” Tenants most in demand by consumers are supermarkets.

The Q2 report says the ATD growth increase has been driven by smaller retail formats, while the Super Regional shopping centre segment saw its growth rebound after fears it was “running out of runway” in 2019 Q1.

“Mid-tier centres also saw their trading density growth increase on the quarter before but remain in the low single digits. These centres often don’t dominate their catchment areas amid a need to balance convenience, experiential and comparative shopping.”

Among the five largest merchandise categories, the Sapoa report says department stores outperformed with ATD growth of 7.5%, while the food and electronics categories saw annual growth in excess of 6%. In light of the economic conditions Reardon says shopping centres are implementing “a more client-focused approach”.

They are also:

● Strengthening community ties through events;

● Re-evaluating issues that reduce a centre’s attraction, such as paid parking; and

● Upgrading property to provide more attractive and contemporary spaces.

The report says: “Growth in shopper numbers will play an important role as we approach Black Friday in late November and then head into the festive season.”

ATD growth for five largest merchandise categories Q2

  • Food 6.17%
  • Department stores 7.49%
  • Apparel 2.52%
  • Food services 4.99%
  • Electronics 6.09%

Source: MSCI Real Estate

ATD growth for Q2 

  • Food 6.17%
  • Department stores 7.49%
  • Apparel 2.52%
  • Food services 4.99%
  • Electronics 6.09%

Source: MSCI Real Estate

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