Bumpy ride for South African malls and their tenants
Cape Town - South Africa’s shopping centres and their tenants have had a bumpy ride although the lockdown has eased, they still have a way to go before they recoup.
According to the Retail Trends Report published by the SA Property Owners Association (Sapoa) in September, trading across more than 100 shopping centres during the second quarter of 2020 was severely constrained by the national lockdown.
The report indicated overall trading in April declined by 64.5% compared with last year before recovering 33.4% in May and then 37.4% in June.
This resulted in an overall trading density decrease of 36.2% for the whole quarter. For luxury retail owner Robert Greenstein, the past few months have yielded a recovery after hard lockdown eased.
“There was a boost in sales in June; it was a particularly good month across retail,” he said. “It tapered off slightly in July and August, and in September it has been a bit more consistent, and we will see what happens over the next season.”
Greenstein is the co-founder of the Great Yellow Brick Company which operates the LEGO brand stores in Cape Town and Gauteng. He also owns Wolf Bros Jewellers, with stores in the Mall of Africa, Clearwater Mall and Canal Walk.
During the course of the level 5 lockdown, Greenstein successfully managed to retain all of his staff. He predicted that due to the lockdown and health and safety requirements in retail spaces, there would be
changes in how landlords and tenants conduct business.
“Shops that rely on heavy foot traffic to convert into sales should see, and are seeing a reduction in sales. For tenants who have long-standing leases, they need to be engaging with their landlords. And in the future, the way shopping centres structure deals with their tenants is going to change.”
According to the Sapoa report, a retailer’s cost of occupancy, which is measured using the ratio between gross rental rates and sales revenue, sharply increased during the second quarter as a result of many retailers being unable to trade at all during the lockdown.
The overall cost of occupancy in South Africa was measured at 9.1% in June as an increase in gross rental (4.2%) exceeded that of sales growth (3.5%).
The increase in cost of occupancy was felt in shopping centres that operate a space larger than 100 000m2,
signalling a drop in tenant affordability. The report also recorded the average vacancy rate at the country’s shopping centres at 5.6% in June, with the highest rate present in neighbourhood centres (those measuring 5 000m2-12 000m2) at 7.2%.
Larger centres enjoyed lower vacancy rates during this period, but at a cost as gross rental only increased by 3.7% since the same time last year, indicating decreased letting renewals.
On Friday, Western Cape Premier Alan Winde reminded businesses that those applying for the provincial government’s R27 million small business relief fund should do so before Monday at 10am when applications close.