Property owners reveal which shopkeepers are more sheltered in recession
South Africa’s recession is hitting most retailers hard, with shopkeepers in larger size malls faring better than most. The latest quarterly South African Retail Property Trends/IPD report show trading densities for all shopping centres declining by 12,5% y/y to March, the sharpest drop since the report started earlier this decade. Trading density figures (turnover/gross lettable area) give an idea of how many rands are being generated per square metre.
Larger centres fared better over Christmas, thanks to the “more varied tenant mix”. The report’s authors said “shoppers tend to choose the ‘convenience ‘ of being able to do all their shopping in one location – as opposed to the perceived convenience of smaller centres”.
However, not helping tenants in smaller shopping centres is the fact that larger ones sprung up nearby in the boom years, competing for customers. Said the SAPOA retail report: “The fact the catchment area of many of today’s larger-sized centres overlap with that of community centres doesn’t help the cause of the smaller centres.”
As one might expect, pressure on interest rate-sensitive retailers has been felt the most, with sales falling for household furniture, appliances and equipment retailers (3,6% y/y). “Retailers in hardware, paint and glass also experienced negative growth, perhaps signifying consumers’ preference for essential goods and services in tough economic times,” said the report. Car and motorbike sellers saw the largest declines as well as big-ticket – electronics, jewellery – retailers. “Necessities like food and clothing are less affected by the current economic climate – although closer inspection may indicate a shift in buying patterns,” it said.
Rentals – and increases – obtained for retail space included:
· R186/m² on average for tenants in Super Regional shopping malls – up 12.3% y/y;
· R127/m² on average for tenants in regional- that’s up not far off 20% y/y;
· R125/m² on average for small regional shopping centres (up 13,6%); and
· R101/m² for community centre space, showing an increase of 9.8% y/y on a moving average basis.
The report noted that all centre types except small regional centres experienced a decrease in turnover per store, with community-sized centres seeing average turnover per store falling by a stark 9.1% y/y. “The turnover per store for Super Regional centres was virtually unchanged – a significant decrease in money spent per capital being offset by an increased footcount,” it said.
Encouraging, said the report, is the rate of relief consumers are expected to experience for the rest of 2009, thanks to lower interest rates. There is a lag effect of up to 24 months between interest rate movements and their effect on the economy, it said.