Redefine Properties has noted an improvement in trading conditions in SA’s retail sector with positive trends in sales, rental renewal rates, and foot count.
During August 2024, retail sales in SA increased year-on-year by 3.2%, marking the sixth consecutive month of growth in retail activity. Additionally, foot traffic in major shopping centres rose by 8.3% year-on-year during Q2 2024, a positive trend that has continued since December 2021. The rent-to-turnover ratio, a measure of retailers’ cost of occupancy, is now at its best level in more than ten years.
“Within the Redefine portfolio, grocers contribute 64% of turnover growth. Therefore, a tenant mix of essential services and retailers aligned with value offerings that is relevant to the demographics of the catchment areas will be a key success factor for shopping centres. It is why Redefine will increase its exposure to this category to 40% of its GLA in the next financial year,” says Nashil Chotoki, retail national asset manager at Redefine who attributes the growth in activity to non-discretionary spending.
“Lower interest rates and improved consumer confidence will further drive retail sales growth into some of the discretionary retail categories, and, ensuring that the tenant mix of a shopping centre is aligned to this will create sustainable growth.”
The REIT’s retail portfolio accounts for 45% of its SA property asset platform with a carrying value of R28.3 billion (up from R24.6 billion in FY2023). It owns 59 retail assets nationwide, occupied by 2 807 tenants with an annual trading density of R34 700 per square metre and a current rent-to-turnover ratio of 7.7%.
Its active retail occupancy rate of 95% is anticipated to increase in FY2025 due to healthy letting demand, says the Group.
“We have also found that upgrades to stores, particularly grocers, drive improvements in turnover through attracting new customers to shopping centres. That is why Redefine is working closely with national retailers to support this, culminating in 8 500 square metres worth of upgrades scheduled to commence in February 2025,” Chotoki adds.
To further diversify income streams, Redefine has pursued alternative revenue opportunities through in-mall and exterior billboards, and electric vehicle charging infrastructure installed at eight sites.
“There are still challenges in our path, but what is certain is the resilience and promise that South Africa’s retail industry poses from both a consumer and business perspective. Through strategic planning and implementation, and by prioritising the needs of consumers and our tenants, we are fully tapping into the power of retail spaces as social and economic enablers,” Chotoki concludes.
