The South African retail sector has traditionally always been a high growth market; however, the pandemic has caused the sector to experience profound changes in the current economic climate. Embracing the opportunities that are available has told an interesting story and one that sets retail players apart.
While retailers have done well in finding ways to ride the effects of Covid-19, the lockdown restrictions have had an impact on retail performance as consumers face immense financial pressure. Despite this, Liberty Two Degrees (L2D), a precinct-focused and retail centred REIT, continues to counter the current trends in the retail environment.
Experiential retail, achieved through its strategic building blocks and its unique tenant mix, continues to draw consumers back to L2D’s retail environments which is evident in the increased foot count levels compared to 2020. Its portfolio will continue to benefit from the eased restrictions, the opening of borders and the removal of South Africa from the UK’s red list into the festive season as well as the run up to Black Friday.
Amelia Beattie, Chief Executive of L2D, is encouraged that the areas that were adversely affected by lockdown are seeing a marked improvement in key indicators including foot count which is evident in the number of people that are dining at its iconic Nelson Mandela Square restaurants. She also highlights that the turnover levels in L2D’s retail portfolio are generating a sound recovery in performance.
The REIT houses some of the world’s most premium retailers, flagship stores, and award-winning restaurants in its retail portfolio which have seen an improvement in sales. TFG’s CEO, Anthony Thunström, says that the group reported a rise in sales across various categories more particularly in smart wear. “The return-to-work phenomenon has certainly boosted this outcome and we look forward to customers coming back to shop as restrictions are eased”.
A strong performance in the luxury brands category housed at L2D’s premium, super-regional mall, Sandton City, has witnessed long queues outside the coveted Louis Vuitton store.
Despite South Africa’s depressed economy, L2D’s retail occupancy rates remain above the benchmark. The trends seen within its retail portfolio are with no doubt an indicator that there continues to be high demand for retail space, due to the quality nature of its malls with a significant number of exciting new tenancies opened across its portfolio since June 2021.
Omnichannel strategies have become an increasingly important focus area too. According to the Klarna report, ‘The State of Smooth: 2021 Holidays Unwrapped’, gift cards trump physical gifts for certain consumers. Cognisant of this, L2D is launching its digital gift cards offering in Sandton City and Nelson Mandela Square this month, a value-added service for its shoppers and part of its digital transformation strategy.
It is also imperative to balance shoppers’ need to social interaction with their need for a safe shopping experience. L2D achieves this through its SAFE Spaces building block which ensures the highest standard of safety and security across its malls.
“The trends we have seen require us to rethink the role of the mall, emphasising our role in not only facilitating an exceptional customer experience, but also focusing on other innovative retail formats. We have therefore made good progress in Open Spaces, a platform that enables us to reach a wider audience of small, independent brands and entrepreneurs to occupy kiosk space within our malls – thereby showcasing exciting new retailers to the tenant mix. The kiosks also allow us to incubate and test the success of suitable concepts before introducing them into formal retail space – and this has worked well during the pandemic“, adds Beattie.
She further adds that the future of retail means understanding that smart solutions need to be delivered alongside traditional engagement strategies. Beattie contends that the role of the physical store will always be important in the life of customers, especially in quality and well-located malls, but reiterates the importance in complimenting this with online platforms and a world class shopping and retail destination.
The office sector remains under pressure in terms of occupancy. In understanding that the future of work is flexible and hybrid, there has been a dramatic departure from the traditional work model, this entails balancing remote working with in office experiences.
“We have moved our offices to Nelson Mandela Square, where we have created a collaborative space that inspires creativity and the future of what an office will look like. Our people are certainly excited to be back and to make use of this space, we hope that this will inspire more people to return to the office environment“.
In the hotels space, the Sandton Sun remains open and continues to attract the local traveller with an improved occupancy at the end of September 2021 of over 60%, which remains well above the Stats SA Hotels occupancy rate for August 2021. Tsogo Sun’s CEO Marcel von Aulock says; “We saw sufficient demand to open these hotels. We anticipate increased occupancies in the region of 15 – 20% at the Garden Court Sandton, of which some bookings can be attributed to foreign travellers, and 50 – 60% for the Sandton Sun for the next six months, notwithstanding further restrictions in terms of the alert levels“.
More events hosted at the Sandton Convention Centre since the easing of lockdown restrictions is seen, which is encouraging. This will improve as more foreign travellers make their way into the South African borders.
Beattie concludes that Covid-19 has served to accelerate changes that were already underway and fast-track innovation among retailers and mall owners alike. Commercial spaces in the future will be markedly different. As retail environments capitalise on the opportunity to reinvigorate the shopping environment, which will undoubtedly continue to succeed in the long term, safety remains a priority. L2D will continue to provide frictionless environments while balancing those with the need for social and interactive spaces.