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New shopping malls take the shine and consumer spend

There’s no end in sight for SA’s mall development boom.

The on-going shopping mall developments and others that are still in the planning phase is increasingly driving concerns about an oversaturated retail market despite consumer spending being in the doldrums.

Shopping mall developments, which have been long-favoured by property punters as an investment for their defensiveness when consumers scale back on retail therapy, are in for tough times.

Growthpoint Properties – which owns a retail portfolio of 58 properties worth about R29.2 billion including its 50% stake in Cape Town’s V&A Waterfront – is seeing increased competition at some of its shopping malls due to the development of new malls in their catchment area.

The opening of Baywest Mall in Port Elizabeth last year impacted Growthpoint’s Walmer Park Shopping Centre and Greenacres Shopping Centre. Similarly, the opening of Mall of the South, south of Johannesburg, put pressure on its Alberton City Shopping Centre and Matlosana Mall’s roof wetting in Klerksdorp affected its CBD shopping centre.

Growthpoint’s more affluent shopping malls recorded trading density (sales per square metre) growth of 7.1% for the year to June 30. A trading density is a key measure of a shopping mall’s strength and performance. Historically, Growthpoint’s trading densities would record growth of nearly 10%.

Growthpoint’s CEO Norbert Sasse said the low growth in trading densities is a function of the turnover split between its shopping malls and the new ones coming on stream. “They are all in direct competition… and we are aware of others being in the process of being built,” he said.

A count from the South African Council of Shopping Centre’s 2015 directory revealed that there are about 71 proposed new shopping malls, which will begin to break ground from 2016 while others only in 2018. See some of the malls below.

Proposed new malls

   

Shopping Mall

Province

Size

Year of development

Zonk’Izizwe Mall

Johannesburg Gauteng

120 000 square metres

2017

Cornubia Mall

Umhlanga, KwaZulu-Natal

90 000 square metres

2017

Atlantic Mall

Cape Town, Western Cape

78 000 square metres

2018

BT Ngebs Mall

Mthatha, Eastern Cape

58 808 square metres

2016

Durban Point Waterfront

Durban, KwaZulu-Natal

55 000 square metres

2016

Herbron Shopping Centre

Pretoria, Gauteng

35 000 square metres

2017

Mams Mall

Mamelodi, Gauteng

75 000 square metres

2018

Soweto City

Soweto, Gauteng

65 000 square metres

2017

Thavhani Mall

Thohoyandou, Limpopo

55 000 square metres

2016

Source: South African Council of Shopping Centre’s 2015 directory.

These developments are happening at a time when consumers battle with sustained rising costs, unemployment and high interest rates – which is expected to limit their spending power.

You don’t have to look far for reasons behind the mall boom; an insatiable demand for space by retailers looking to expand their footprint at shopping centres to be more competitive, rapid urbanisation and investors looking to amass attractive returns.

Community malls, typically designed for quick stops for food or household items, outperform super regional malls (that are over 100 000 square metres – equivalent to Sandton City in Johannesburg, Gateway Theatre of Shopping in Durban and Menlyn Park Shopping Centre in Pretoria), in terms of trading density growth.

According to MSCI’s IPD Retail Trading Density Index for the second quarter to June 2016, community malls recorded trading density growth of 11.9% while super regional malls pulled in a growth of 6.4%.

(Click to enlarge)

Screen Shot 2016-09-05 at 6.50.12 PM

Source: MSCI’s IPD Retail Trading Density Index.

Hyprop Investments’ most impacted shopping mall is The Glen Shopping Centre, south of Johannesburg, which saw negative trading density of about 9% during the year to June 2016. Hyprop’s CEO Pieter Prinsloo said the opening of Mall of the South near The Glen impacted the mall.

“The area at the moment is oversupplied in terms of retail and everyone has been affected. But The Glen is still attracting a number of good shoppers, about 1 million shoppers per month,” Prinsloo said at the company’s results presentation last week. 

Hyprop’s best performing malls include the high-end Hyde Park Corner, which saw trading density growth of 4% and Rosebank Mall, which grew trading densities by 18% (coming from a lower base).

Prinsloo said retailers’ appetite for shopping space is starting to decline. “The sentiment is not there to aggressively expand. Because of this, we would rather recycle the existing space and get rid of weaker tenants and give it to other stronger retailers.”

Due to the retail market being oversupplied, Hyprop is rather focusing on sprucing up its existing malls by adding more retail space rather than embarking on new developments. Planned projects include the installation of H&M at Somerset Mall in Cape Town, adding a further 5 000 square metres at Rosebank Mall for fashion retailers and refurbishing the food court at Cape Town’s Canal Walk.

But shopping malls in well-located areas will seemingly survive, as seen in Growthpoint’s best performing shopping mall the V&A Waterfront, which recorded retail sales growth of 22% and trading density growth of 13%. The V&A Waterfront opened the first H&M store in South Africa in 2015, which Sasse rates as “one of the top five H&M stores globally in terms of unit sales”.

The V&A Waterfront continues to benefit from increased tourism given the weak rand, which has translated to higher footfall.

Another mall that is expected to take away the shine from existing malls is Attacq Limited’s Mall of Africa at Waterfall City, located along the N1 near Midrand, which opened its doors in April. Redefine Properties CEO Andrew Konig said the company is closely looking at footfall figures of its malls that are close to Mall of Africa, believed by Attacq to be the largest single-phase shopping centre to be built from scratch in South Africa at 130 000 square metres. “We believe that the hype needs to die down before we can really measure the impact,” he said.

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We avoid all large regional shopping malls and keep to the local community centres and local farmers’ markets. Easier parking, more personal involvement with our local shop owners and food producers and all in all a more pleasant shopping experience….

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