After a dismal 12 months, shopping centres are showing signs of marginal recovery, says report
South Africa’s shopping centres are furiously treading water in a sinking economic environment, and managing only just to keep afloat.
That they have survived so far is something to be celebrated.
For the first time in a year, the 2018 Q2 saw shopping centre trading performance record positive growth, based on the latest figures from the South African Property Owners’ Association (Sapoa).
Trading density growth (sales per square metre) ended at 0.2% for the April to June 2018 period.
“The improvement was mainly driven by a recovery in the trading density of super regional centres – malls with a gross lettable area in excess of 100000m²,” Sapoa’s retail trends report states.
This recovery has been “particularly encouraging”. For the year ending June 2018 this segment was the top-performing with 2% growth year-on-year from -6.6% in July 2017.
Also noted in the Sapoa report is that consumers “may be preferring” to visit specific retail formats for certain types of purchases with factors such as convenience, drive time and comparative shopping “potentially playing a role”.
Department store retailers based in community shopping centres outperformed all other segments, recording trading density growth of 20.47%. But the average store sizes of these retailers decreased year on year.
Trading density growth statistics for other merchandise category across store types are recorded by Sapoa as the following:
- Super-regional: 1.02%
- Regional: 1.55%
- Small regional: -3.37%
- Community: 20.47%
- Neighbourhood: -0.76%
- Super-regional: 4.03%
- Regional: -0.63%
- Small regional: -6.67%
- Community: -5.41%
- Neighbourhood: -3.55%
- Super-regional: 0.33%
- Regional: -0.83%
- Small regional: -0.33%
- Community: 2.11%
- Neighbourhood: 5.94%
- Super-regional: 2.08%
- Regional: 3.34%
- Small regional: 13.75%
- Community: 2%
- Neighbourhood: 0.41%
- Super-regional: 3.52%
- Regional: 2.3%
- Small regional: 5.81%
- Community: -5.36%
- Neighbourhood: -6.21%
Overall, statistics from JLL’s September South Africa Retail Report show the highest growth in retail trade sales was recorded in household furniture, appliances and equipment, and in pharmaceuticals, medical goods and toiletries.
Despite recent petrol price hikes, VAT increases and higher income tax, the FNB/ BER consumer confidence index recorded a four point decline. But while the index remains “fairly high” at 22 points in the second quarter of 2018, JLL says it has “not necessarily translated into increased consumer spending since retail trade sales have recorded meagre growth”.
“Given the prevailing economic conditions, consumer expectations are likely to adjust and be in line with the current economic reality. Retail sales may continue to be low and we may see more retailers downsizing or consolidating their stores.”
Also, despite the recovery of trading density growth, Sapoa notes the current retail sector vacancy rate is 4.2%, a figure above its long-term average of about 2.7%. JLL says:
“Vacancy rates for bigger shopping centres (super-regional and regional) have continued an upwards trajectory, while the vacancy rates of community and neighbourhood shopping centres have recorded a decline.” Super-regional shopping centres recorded a 1.6% increase in the vacancy rate year-on-year, highlighting the prevailing pressures in this type of retail accommodation.
The marked increase is due to downsizing, in some cases due to store closures, and increase in the cost of occupancy, which is 11% in super-regional centres.
Types of centre
- Super-regional > 100 000m²
- Regional 50 000m² – 100 000m²
- Small-regional 25 000m² to 50 000m²
- Community 12 000m² to 25 000m²
- Neighbourhood 5 000m² to 12 000m²