“SA retail space is overbuilt, saturated, with no room for more centres, too much is too much! Too many centres around, centres are empty and have large vacancies.” This is according to the media and experts.
Are there still development opportunities? Where do they exist and where should the focus be?
SA’s total population has increased from 40 million in 1994 to the current 64 million, representing an increase of an additional 7 million households. The growth rate during the past ten years was 1.8%.
The LSM 1-4 categories represented more than 50% in 1994. This decreased to less than 25%, which indicates substantial growth in the middle market of SA where +- 6 million households were added, and a further 2 million households added to the upper end of the market. This data confirms the strength of the middle market in SA, which has a direct impact on the demand for shopping centres, housing, private schools, as well as growth in car ownership. Taxi transport remains important but the use of Uber and Bolt to some centres is already as high as 8%.
SA’s middle market is quite different to what is being experienced in most other African countries. The differences between Johannesburg, where a substantial middle market exists, compared to the middle market in other African cities is clear from the graphs. The middle segment of these markets still needs to develop, which could take some time.
Growth in population alone will not guarantee more shopping centres, according to Dr Dirk A Prinsloo from Urban Studies, with growth in income required. Lagos, Accra, and Nairobi have a higher representation in the lower and middle sectors, but their affluent market is still small. There are 362 shopping centres in Sub Saharan Africa that are larger than 6 500m2 (Market Decisions: The Sub-Saharan Shopping Centre Directory), representing +- 3.5 million m2 of shopping centre space compared to the +1 300 centres of the same size in SA.
It is expected that SA will reach the 70% urbanization level by 2030 which will have a direct impact on the demand and supply of shopping centres. In 1994, SA’s urbanization rate was 54% – much higher than that of most African countries. The high level of urbanization in Gauteng and the Western Cape also reflects the highest proportion of shopping centre space.
Source: Stats SA, Migration
Strong regional nodes in Limpopo and Mpumalanga showed growth between 2011 and 2022 which includes Polokwane, Thohoyandou, Tubatse/Burgersfort, Mbombela, and Bushbuckridge. The population of cities like Pietermaritzburg, Buffalo City, and George, all increased by more than 100 000 citizens during the same period. These new growth areas will continue to increase their population numbers.
Migration between different provinces also creates additional market potential for retail development and a decline in demand for others. The most important trends include the high inflow to Gauteng over the past ten years which will continue for the medium to long term. Semigration to the Western Cape is now an established trend and the large outflow from Gauteng and the Eastern Cape remains a concern.
In 1994, children in SA younger than two years old represented 47% of the total population. Thirty years later, the number of children decreased to 37% and this will further decrease to 31% by 2039. The children of 1994 are now in their thirties and approaching fifty which means that currently, the greatest number of shoppers are available to support retail facilities in SA.
Population growth, the increase in the middle and upper end of the market, the level of urbanization, and the movement between provinces has had an important effect on expenditure levels on consumer goods. During 1993, 53% of household consumption expenditure was spent by white households compared to African households at only 35%. This changed during 2022 when the total retail market was at R1.2 trillion.
The proportionate spending by African households increased to 57% and the contribution by white households decreased to 31%, confirming the strength of the middle- and upper-income markets.
Several changes in shopping behaviour have taken place over the past five years. The most important change was the effect of the pandemic and its impact on shopping behavior with the increase in online shopping obvious. There is also a shift to more convenience-orientated shopping centres with a fresh style and a new look.
Currently, 38% of the total market is shopping online. The figure for the more affluent market is as high as 60%. Most of the online shopping is spent on fashion (30%), food and groceries (22%), and electronics (13%).
(Source: Worldwide Worx Report, Network24, 8 May 2024).
In total, an estimated R71 billion is spent online. Online shopping in SA currently represents 7% of total retail sales with this figure still well below the 30% and 20% of retail spent online by UK and USA households respectively.
Online spending will increase by 10% over the next five to eight years. To achieve this, the retail online spend will have to increase from R71 billion to R140 billion. SA’s market potential for online shopping, however, is quite different to that of the UK and the USA with the expectation that it will increase at a slower pace once the 10% level has been reached.
With ecommerce everywhere and growing fast, its convenience has been the primary driver behind the rapid growth of over 30% in online spending per year since 2020. The drivers of online shopping in the future will be:
- Convenience: Complimenting the location factor.
- Delivery time: It will be difficult to beat the delivery promise of 60 minutes offered by Checkers Sixty60.
- Product and ranges: Most food online retailers have close to 25 000 product lines from 400 to 550 physical stores. Checkers will add 10 000 homeware, garden, and pool products to their offering. New online facilities are also on offer at Shoprite stores in townships.
- More competing platforms: Amazon will make a significant difference in this market while Temu and Shein are aggressively targeting the SA market. There are also many more specialist platforms available.
- It will be the Chinese low-cost online platforms that will be influenced by higher custom duties (up to 45% from 20%) plus VAT. However, this price is still extremely low which makes these platforms attractive.
- Price and quality comparisons between products on different platforms are becoming important. For example, the rivalry between Takealot and Amazon.
- Service levels associated with online deliveries are becoming a concern and must be addressed.
- Personalised online advertising is becoming popular.
- The application of AI to analyse consumer behaviour and personalized recommendations on what to buy will further stimulate the use of online shopping.
The future path to purchase will become more challenging especially for in-store shopping where physical interaction will be evaluated by quality service while online shopping will be driven by convenience and friction-free transactions. Cell phone apps, easy-to-operate online platforms, secure payment systems, and quick delivery will drive this success.
“South Africa is fast becoming overtraded while a number of centres came on stream in times of massive unemployment, boycott actions, high inflation and a weak rand” – quoted from the Finance Week Property Survey, February 1986. Similar comments about saturation were made in 1999, 2008, 2016 and 2024. Despite all these concerns about saturation, the shopping centre space market keeps growing. The high growth in shopping centre supply between 1990 and 2015 is highlighted in the graph below.
The supply of shopping centre space is mainly concentrated in Gauteng, KZN and the Western Cape. Between 2010 and 2024 the proportion of shopping centres in Gauteng increased from 33% to 44% of total shopping centre space. High population growth, high levels of urbanisation, and an increased middle market are responsible for this accelerated increase. The Western Cape decreased from 20% in 2010 to 14% during the same period. This also suggests a higher level of saturation. Accelerated population growth rates are however projected for this province.
The map below gives an indication of the spatial distribution of shopping centres, with an emphasis on Gauteng, Limpopo, Mpumalanga, KZN and the Western Cape. It is interesting to note that the number of shopping centres larger than 30 000m² increased from 36 in 1994 to 208 centres in 2024. This represents an annual growth rate of 6%.
The growth in township centres increased from 120 to 250 over a twelve-year period, and rural centres from 90 to 156 centres. The average size of these centres is between ±11 000m² to ±14 000m², showing marginal increases over the years.
The retail shopping centre space per capita in South Africa has stabilised at ±0.43m² since 2014. This compares favourably with other developing countries, with Brazil currently at ±0.16m², Mexico at ±0.28m², and Argentina at ±0.3m² per capita.
It is lower than the figure for Australia at ±0.9m² per capita, and the USA at ±2.2m² per capita.
If South Africa can show good GDP growth, a decrease in unemployment, address all infrastructure problems and reduce the time for town planning applications, more developers will enter the market.
Despite so-called saturation, there is renewed interest in the development of shopping centres. Currently, ±1.6 million m² are in different planning stages. Most of these proposed centres are in Gauteng and spread throughout the rural and coastal areas. Not all the shopping centres will be built simultaneously; some may happen later while others will never happen. It depends on the area, the track record of the developer, obtaining enough and the right tenants, micro economic conditions, political stability or instability, the level of competition, the market size, the demographic profile of the target market and most importantly the location of the development. The success rate of planned centres versus finally built centres is lower than anticipated.
Fourteen different centres are under construction, representing over 210 000m². The most important about these centres is that five will be larger than 20 000m², five between 10 000m² and 20 000m² and four smaller than 10 000m².
Shopping Centre Status:
Under Construction: 212 939 m²
Retail Planned: 1 604 717m²
Challenges going forward are based on population growth prospects for 2030 where ±6 million more people will be living in South Africa by 2030. This is an additional 1 million more people per year. The total population will increase to 70.5 million, representing more than 20.3 million households. More than 2 million additional people will be attracted to the metropolitan areas, cities and towns. The middle and affluent markets will increase by ±200 000 to 300 000 households. To keep up with a per capita shopping centre space of 0.43m², we need 1 million m² of additional retail space by 2030.
With the increase in supply of shopping centre space, more malls could become under pressure with the possibility of becoming a so-called “dead mall”. A dead mall can be defined as a shopping centre where more than 60% of the GLA is vacant. In the USA there are currently more than 450 dead malls.
In SA, dead malls are on the increase, and ±10 can be identified. The main reasons for a dead mall include changes in demographics, the closing of anchor tenants and cannibalisation, not enough potential, poor layout, no recent upgrades and revamps, newer and better-competing centres, urban decay, changes in the CBDs, and poor or wrong locations. The ageing of centres in South Africa is a concern, where two hundred of six hundred centres built before 1994 have never been revamped/ upgraded.
Dead malls can be prevented by understanding the changing urban environment, focusing on competition and the tenants. The most difficult to overcome is a poor location.
Source: SACSC Shopping Directory 2022.
It is up to the owners to make sure that malls are refurbished on a regular basis.
A few good examples where new centres have been built close to old and run-down centres include Neighbourhood Square in Linksfield, CastleGate in Pretoria, Irene Link in Centurion as well as Linton’s Corner in Pretoria East.
Based on all the above mentioned, the retail market will keep growing mainly because “we live in a culture of consumption and the natural trajectory of retail is up!” – Scott Galloway, 2017, The Four: the hidden DNA of Amazon, Apple, Facebook, and Google.
The future of retail will be influenced by the following:
- The growth prospects for 2030 are positive, gaps exist in the market, and saturation is only partly evident in some areas. The focus will move away from large centres and more towards new community-type centres offering something different and attractive with a renewed tenant mix, all at an accessible location within the local community.
- There are still opportunities in some townships and rural areas. These opportunities are filling up fast. The focus must be on smaller centres with one strong food anchor, affordable clothing and services.
- Shopping centres must embrace Gen AI. Convenience is becoming more important with e-commerce everywhere.
- Retail is in the age of experience e.g. bookstores as a social and place to browse for something to eat, sports stores where experiences are a key attraction and selling points, fashion stores where AI like smart mirrors, virtual dressing rooms and robotic assistance.
- Omni-channel strategies should be more innovative to ensure that people return to shopping centres.
- Shopping centres need to stay relevant, upgrade, renew, revitalise and to improve service on all levels. The shopping centre industry and by name the South African Council of Shopping Centres should formulate plans and strategies to increase the level of service amongst all retailers and shopping centres.
Broadly speaking, there are two shopper categories namely, ‘born to shop’ and ‘I hate shopping’.
The ‘born to shop’ group is already attracted to shopping centres and will always be a loyal in-centre shopper. The second category, ‘I hate shopping’, will be lost and will embrace the convenience of online shopping. The balance should be between these two to ensure that our shopping centres remain relevant, attractive and something that satisfies the needs of all shoppers.
