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CONSUMERS MAY WELL have tightened their purse strings over the past 18 months but that hasn't stopped developers adding more shopping centres to what many believe is an already overtraded sector. In fact, South Africa is still in the midst of its strongest retail development boom ever, with around 470 000sq m of new shopping centre space expected to come on stream over the next 12 months. That's equivalent to roughly four times the size of Sandton City, one of SA's largest malls.
Latest figures from the SA Council of Shopping Centres (SACSC) reveal that in the five years to end-2010 an unprecedented 2,8m sq m of shopping centre space will have been added to the market. That makes it the strongest five-year retail boom period recorded in SA since 1970.
The next highest period of growth in shopping centre development in SA was between 2000 and 2005, when close to 1,4m sq m of retail space was completed (see table).
The massive growth in new shopping malls in recent years, coupled to the current slump in retail sales, raises questions about how many of the newer malls will survive. And to what extent is retail cannibalisation - when a new store takes away spend from the same retailer's existing stores - taking place?
In a research report released last week by Dirk Prinsloo, CEO of market research company Urban Studies and a director of the SACSC, it's clear cannibalisation is now a reality evident in a number of SA's shopping nodes.
Prinsloo says the industry has over recent years created a false belief that shopping centre developers and retailers can't fail. He says three years ago, when SA's economy was still booming, retailers began ignoring the principles of responsible store expansion. In many cases the approach was: "I'd rather eat myself than have somebody else eating me."
Although the retail development boom was driven largely by the growth in residential households between 2002 and 2006, Prinsloo says it appears retailers and developers didn't bargain on SA's economy ever slowing down. Unfortunately, the expected residential growth that would have supported many new suburban shopping centres now coming on stream has come to a virtual standstill over the past year, severely affecting the performance of many retail centres in new growth areas.
At the same time, higher inflation and interest rates dampened consumer spending, which further impacted on the phenomenon of retail cannibalisation.
Prinsloo says there's no doubt retailers have opened more branches than necessary over the past five years. He also blames irresponsible developers for building too many centres purely due to greed.
Prinsloo urges retailers and developers in his report to return to responsible building principles and avoid developments that have no clear focus or purpose but merely serve to further cannibalise existing retail spend.
