Spend per head at SA malls below that of 2015
This was in spite of an improved trading density performance in the third quarter, with foot count - expressed per square metre - having grown every month since April 2019. Trading density had grown every quarter since the second quarter of 2018.
“So, shoppers are starting to visit the malls more frequently but, critically, they are not maintaining their spend per visit and are possibly spreading out the same level of spend over more trips,” Sapoa said of its research findings.
Trading density growth (annualised sales per square metre) came in at 4.3percent year-on-year to September 2019, compared with 4.1percent for the year to June 2019.
The 4.3percent was a function of 5.5percent sales growth and a 1.2percent increase in the amount of reported trading area.
The research showed that trading density had largely been driven by the smaller retail formats. The neighbourhood retail segment in particular showed strong growth in trading density in the past two quarters - a like-for-like density growth of 9percent year-on-year.
The three larger retail formats reported trading density growth of 2percent, or about half the inflation rate.
“Regional shopping centres, on average, are having a tough time of it. The segment has not seen any trading density growth above 2percent since early 2017. Many of them operate in the same catchment areas as larger malls, with more tenants and longer trading hours, as well as smaller convenience centres.”
Among the five largest retail merchandise categories, electronics stores outperformed with a trading density growth of 8.3percent for the year to September. The food and department store category also reported trading density growth of more than 8.5percent.
The sales growth of 5.5percent was more than Statistics SA’s retail sales growth of 3.6percent for the year to September, which continued a trend of mall-based retailers outperforming the broader market.
“Over the long-term, the growth in the amount spent per head has been the primary driver of trading density growth and further decline in this figure may see overall trading density decline, impacting the tenant's cost of occupancy and consequently landlords’ net income growth,” the Sapoa research showed.
The vacancy rate at the more-than-100 shopping centres that formed part of the MSCI Retail Trading Density Index was 4.4percent at September 30, 10 basis points up on a quarter before and above the long-term average of 2.9percent.
The highest vacancy rates were in the neighbourhood and small regional shopping centre segments of 5.5percent and 4.9percent respectively, followed by the super regional shopping centre segment at 4.7percent.
For perspective, a 5percent vacancy rate at a super regional shopping centre can equate to empty floor space of 7000m², larger than some neighbourhood centres.