Large shopping centres suffered greatest losses in past year as consumers preferred affordability and convenience of big box store offerings. Picture: Tariq Abro/Pixabay
Large shopping centres suffered greatest losses in past year as consumers preferred affordability and convenience of big box store offerings. Picture: Tariq Abro/Pixabay

Hypermarkets scored most during Covid-19 lockdown

By Bonny Fourie Time of article published Mar 19, 2021

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Hypermarkets have emerged as the best performing shopping centres over the past year as consumers changed their habits and increasingly bought only necessities.

This sector is now considered the “sweet spot” in retail property, a title that was expected to be snatched by neighbourhood convenience centres, says FNB commercial property economist John Loos.

Analysis of FNB card spending over the past year – which is a good indicator of general spend because of the Bank’s market share – shows that larger shopping centres recorded the biggest loss in income as the entertainment and experiences that come with them were not prioritised by shoppers.

Hypermarkets – also known as “big box store” and sell groceries, clothing, and household items under one roof – though, offer consumers the ability to shop in bulk and are perceived to be more affordable.

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“It is not about the experience and entertainment anymore. Even grocery and clothing and apparel shopping in super regional stores dropped.”

While neighbourhood centres have become the place to go in recent years, he says hypermarkets appear to have had the “right mix” and “a really good mix” during lockdown.

Overall, the retail property sector is set to be the comeback kid this year as it continues on a strong recovery path following the lifting of hard lockdown restrictions. In 2020, the sector had the worst net operating income decline of the three commercial property sectors, but is set to perform better than the office property sector this year.

The industrial sector will maintain its position as the strongest of the three sectors, Loos says.

“The lockdown was a shock for retail tenants. At the beginning of the lockdown, only 40% of tenants were in good standing with their rental payments. Some had to shut their doors.”

By December, this figure had climbed to 61% – a much better percentage but still off the 72% before lockdown. The biggest contributor to the struggles still facing retailers is weak consumer finances, he says. Weak confidence appears to be translating into a gradually improving household saving rate which is good news for long-term financial sustainability but bad for retailers in the short.

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