Liberty Two Degrees (L2D) has reported a sustained recovery during 2022 despite the impact of the energy crisis, escalating municipal rates and Covid-19-related in-force reversions which continue to apply pressure on its portfolio.
Reporting ahead of its year-end close period, L2D says its portfolio continues to see improved annual trading density growth with September 2022 being 18.6% ahead of 2021 and 12.1% ahead of 2019. The top five retail categories with the most improved trading density performance in 2022 compared to 2019, include luxury brands (149.2%), technology (44.5%), luggage and leatherware (35.4%), grocer/supermarket (18.8%) and health/beauty/grooming/wellness (9.0%).
L2D achieved a 29.6% growth in foot count for the nine months at 2022 compared to 2021 and 9.8% ahead of 2019, with super-regional malls achieving double digit growth over the past five months – May to September – compared to 2019. Foot count growth was driven by the various experiential initiatives that dominate in the L2D precincts.
From a leasing perspective, L2D concluded a total of 281 leases (68,885m²) in the period including 102 new deals (32,701m²) and 179 (36,183m²) renewals. The portfolio reversion at the end of October has seen significant improvement and is tracking at -10.0%, with retail reversions in the retail sector at -9.0% and office reversions tracking -26.2% with a focus on retention.
Occupancy levels remain high at 93.2%, with future pre-lets improving to 93.9%. The occupancy rate in the retail portfolio has improved to 98.0% at October 2022 (versus June 2022 97.2%), including pre-lets, the retail occupancy is at 98.3% and remains well ahead of the Q2 2022 MSCI retail benchmark of 94.2%. The portfolio’s super-regional malls – Sandton (98.7%) and Eastgate (96.1%) have maintained a combined occupancy of 97.5% ahead of the Q2 2022 MSCI Super Regional benchmark of 93.7%.
Its office portfolio continues to face pressure with occupancy levels at 78.8% at October 2022 (versus June 2022 83.3% or 76.4% excluding Standard Bank). The decline seen was due to the sale of the fully let Standard Bank building. The occupancy level in the remaining office portfolio (excluding the sale of Standard Bank) has improved since June due to increased leasing in Sandton, Atrium on 5th and Nelson Mandela Square offices. Including future pre-lets the office occupancy improves to 80.5%. Management has indicated that office letting remains a priority in this space, with various strategic measures in place. Hotels continue to see recovery in occupancy levels ahead of the COVID-19 impact. The Sandton Sun achieved an occupancy of 81.2% for the month of October taking its average occupancy for the year to 74.0% (vs. 66.8% in 2019).
The Garden Court achieved an occupancy of 70.5% for October resulting in an average occupancy of 50.1% for the year (versus 72.7% in 2019). The Sandton Towers, which has been open for trade since August 2022, achieved good occupancies following the opening. Weekend occupancies continue to improve ahead of weekdays indicating that local corporate travel has still not returned to pre-pandemic levels. Year to date the Sandton Convention Centre has had 165 events compared to 41 events for the same period in 2021.
“The future proofing of our business remains our commitment and a way to ensure that we drive value and positive recovery. We are pleased with both our financial and operational performance in the period, which continues to show encouraging improvement in key indicators. As leadership, our focus remains on driving positive outcomes to counter and address the challenges presented by the operating environment through the various initiatives in place, to ensure we continue to track the positive momentum in our business performance for the long term,” says Amelia Beattie, Chief Executive of L2D.