According to an industry barometer, several provinces within South Africa and Namibia have started to show a growth trend within 2.2 million m² of physical retail space.
The Clur Report of SA Retail Property portrays several merchandise categories seeing trading growth in shopping centres. The report provides strategic indicators on market movements, consumer behaviour, shopping centre segments and retail merchandise trends to listed and unlisted South Africa property funds. These are based on an underlying interpretive shopping centre early warning system developed by Clur Research International.
The key consolidated Clur benchmark for subscribing South African shopping centres showed an annualised trading density of R32 919/m², a decline year on year of 1% for 2017.
Managing director Belinda Clur says: “This rate shows a favourable movement into less negative territory and back to zero,” she says. “This has been the case since September 2017, when the year on year rate came in at minus 1.7% and then improved to minus 1.1% in November”.
“Pure unadjusted shopping centre sales – that is not relative to space – for 2017 showed growth of 2.9% across this portfolio. December 2017 sales growth was 2.4% year on year and for November it was 5.8%.”
Ian Watt, international retail strategist who chairs the Clur benchmarking process, cautions property owners about the impact of tax issues arising from the Budget.
“The consumer is still experiencing a great deal of pressure and there is every likelihood that disposable income is being reduced” he says. “One therefore needs to take care in managing activities that will drive additional foot traffic into a shopping centre. Either that or one has to expect a substantial growth in the basket spend. Foot traffic has become a concern for many centres internationally as the trend has been for the number of visitors to decline.”
Amelia Beattie, chief executive officer of Liberty Two Degrees, says: “The Clur statistics re-enforces our long held belief, as an owner of leading shopping centres such as Sandton City and Eastgate, that we must consistently innovate to provide our customers of today, with unique places and environments which create a sense of upliftment and self –expression. It’s all about allowing people to be who they wish to be.”
Belinda Clur says the report indicates the possible benefits of portfolio diversification in the current market, both in terms of geography and centre format.
“Larger centres do deliver the highest trading densities, the Clur benchmark for 2017 being R34 964/m², a negative 2.5% year on year“.
“But smaller centres provide the highest annual growth rates. The Clur small regional, community and neighbourhood centres benchmark came in at R28 401/m² with annual positive growth of 2%“.
“Coastal and inland centres tend to show differing growth trends, and there are a number of categories that also show differing trends across high profile versus mid-low profile centres.”
Belinda Clur says that the report confirms a broad trend of spend having shifted towards entertainment, communications, speciality and ‘the person’ with spend shifting away from apparel in mall space.
“Supporting the move to entertainment, communications and speciality, positive growth has been seen in categories such as electronics, e-commerce, travel, fast foods, liquor stores, family entertainment and theatre. Movies are flat as people seem to choose more interactive and creative mall entertainment formats, especially with significant movie options at home. Groceries are also trending flat. The growing speciality category includes craft, hobby, books, cards, stationery, hardware and security and toy stores“.
“The shift to a closer focus on ‘the person’ is supported by positive growth in gyms, hairdressers who say service sales are up, but product sales are down, optometrists and pet stores as people increasingly treat their pets like children“.
“Apart from the apparel sector, categories where trading density was negative year on year in 2017, according to the report, are catalogue stores, cell phones, health and beauty – the latter two perhaps because of an oversupply of stores in response to the high growth in the sectors“.
“Other sectors displaying negative year on year trends are jewellery and accessories, home furnishings, sunglasses – possibly in response to an oversupply of stores and optometrists offering sunglasses and linked specials, photography – as cell phones increasingly take over this sector, and restaurants – as customers become more demanding of excellent food due to internationalisation and are simultaneously sensitive to price points.”
Belinda Clur says the shopping centre model is turning on its head as mass store replication falls out of favour and individuality wins. Further, smaller stores are favoured over larger stores – smaller department stores outperform larger department stores.
“Current trends point to the need for the chameleon shopping centre, an ever-changing, quickly adaptable, high impact, connected and interactive experiential environment. This concept has critical implications for flexibility, sizing, tenant mix, product mix, design, rentals and retail classifications. All of these need careful consideration in order to drive market share, profitability and manage risk“.
“Key to the chameleon centre is the need to be ‘The Place’, which must synthesize elements of home, work and community to create an attractive leisurely experience. The attraction to and enjoyment of ‘The Place’ experience will then drive spend“.
Ian Watt says that over and above the impact of taxes one also needs to consider that people are spending their money differently.
“Internationally there has been a reduction in spend on merchandise like apparel in favour of greater spend on entertainment and leisure and eating out which is impacting the more traditional thoughts on tenant mix, “ he says.