While the Covid lockdowns significantly impacted the retail industry in South Africa, which no sooner began bouncing back when it was struck with the advent of severe loadshedding which created further major challenges for landlords and tenants alike, shopping centres in this country remain resilient, constantly seeking to reinvent themselves with new attractions and refurbishments to draw in shoppers, says Andrew Dewey, MD of Swindon Property.
Says Dewey: “Although much has been made of late regarding the sale of a few sizeable shopping malls, raising questions about the long-term viability of these large malls, this cannot be taken purely at face value and it’s certainly not a one-size-fits-all scenario.
“The reasons behind this trend are multifaceted. As a result of the pandemic, foot traffic in major shopping centres dwindled, retailers pressured mall owners to reduce rental rates, and property values fluctuated.
“Then there are the rising operating costs to consider, notably loadshedding, increased diesel costs – used for generators, while retailers themselves have to contend with higher expenses in terms of manufacturing, operations, and transportation – which indirectly applies pressure on the centre owners in renewal negotiations.
“Taking all these factors into account, the listed property companies (REITs), that own most of the large super-regional centres, naturally have to manage their debt ratios, and with increasing interest rates escalating the cost of ownership, some have found it necessary to dispose of certain assets in order to reduce debt levels in line with industry standards.”
Positively however, says Dewey, the retail sector has shown signs of recovery, with foot traffic and spending bouncing back, especially in 2022.
“With a population of approximately 62 million, and the sixth-highest amount of shopping centre space globally, our average dwell time in these centres remains high, driven by a lack of safe public spaces as well as a culture of visiting malls for entertainment and social interaction. This may explain one of the reasons why South Africa lags behind in online shopping compared to the rest of the world, coupled with higher data costs, less efficient networks, and challenges in physical address locations.
“Whereas super-regional shopping centres serve as hubs of convenience and recreation, offering safe spaces for families to spend quality time, with play areas for children and entertainment options for all age groups – all of which significantly contribute to the prolonged dwell time and in some cases increased trading densities in these areas. Further factors which may impact positively on foot traffic in some shopping centres in various regions may be the work-from-home trend – with residents shopping closer to home, as well as ongoing semigration – particularly to coastal areas.”
Dewey says although competition in urban areas remains robust, developers are looking to expand and modernise existing regional and super-regional centres rather than building new ones, with a focus on refurbishing and repurposing these spaces to attract more visitors and cater to changing consumer trends.
“Furthermore, the growth of retail centres in townships and rural areas is on the rise due to increased buying power and a need for safe, convenient spaces. Developers are keen to tap into this emerging market as can be seen with over 300 malls now specifically developed in townships.
“Developers are now looking at newly rezoned rural or agricultural areas and integrating shopping centres to cater for growing populations. However, the challenge lies in maintaining trading density, especially in rural areas which have lower population densities.”
Concludes Dewey: “Although challenges persist in the shopping mall industry, South Africa still holds promise for developers and investors, catering for the diverse needs of consumers. The evolving landscape of shopping centres reflects the dynamic and ever-changing nature of the retail sector.”