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MORE "mom & pop" stores, as well as independent line shops, could close their doors in first quarter 2010 following what's turned out to be a less than merry Christmas sales period for many shopping malls in South Africa's bigger cities. Vacancies increased noticeably last year in many retail portfolios, the bulk of which are owned by major pension funds and listed property companies.
Latest research by Old Mutual Investment Group Property Investments (OMIGPI) - with mega-malls, such as Menlyn Park (Pretoria), Gateway Theatre of Shopping (Umhlanga Rocks) and Cavendish Square (Cape Town) in its stable - shows December 2009 sales turnover figures were flat in nominal terms, translating into a year-on-year decline in real terms of almost 6%. That compares with real retail sales growth of 12% to 15%/year typically recorded at OMIGPI's shopping centres at the height of the consumer-spending boom between 2003 and 2006 (see graph).
Gary Hardisty, fund manager of OMIGPI's Triangle Core Fund, notes travel agencies, florists, hardware as well as toys and music stores were particularly hard hit in December. Categories that performed well included pet stores, electronics and photography, accessories, specialised gifts and food stores, as well as cinemas.
Vacancies in OMIGPI's R8bn retail portfolio increased to 3,6% in December 2009, up from 2,7% 12 months earlier. Hardisty expects SA's retail-trading environment to remain in the doldrums over the short term.
Listed property funds with exposure to the retail sector are reporting mixed results for their centres. It generally appears bigger, dominant malls typically exceeding 40 000sq m are outperforming smaller centres in secondary areas. Malls catering to the lower income market are also weathering the downturn far better than those catering to middle and higher income shoppers.
Mike Rodel, MD of Hyprop Investments, which own malls such as Canal Walk (Cape Town) and Hyde Park and Rosebank Mall (both in Johannesburg), says shoppers aren't only spending less but are also spending differently.
Says Rodel: "We've seen a definite move towards value without sacrificing quality." Although he sees no sign yet of a recovery in retail sales, he notes restaurants and cinemas performed surprisingly well in December. "Clearly, more people were staying at home and spending more money on leisure activities."
Anton Raubenheimer, MD of Fountainhead Property Trust, says there's no doubt the performance of shopping centres has become increasingly location and size driven. He says bigger centres are generally proving more defensive in the downturn than smaller ones, as they offer the critical mass to conduct comparative shopping.
Fountainhead centres, such as the Kenilworth Centre (Cape Town) and Benmore Gardens Shopping Centre (Sandton, Johannesburg), that have been extensively refurbished also continue to show above average sales growth. Raubenheimer says consumers have clearly become more discerning and like to shop in a modern, welcoming environment that offers a pleasant retail experience.
Des de Beer, MD of Resilient Property Income Fund, says the group's centres that cater to lower income shoppers in outlying, rural areas in Limpopo, Mpumalanga and North West are still pumping. All Resilient's rural malls delivered double-digit sales growth over the festive season. One Limpopo mall notched up sales growth of 25% in December year-on-year.
De Beer says Resilient's centres in the bigger cities, such as Jabulani Mall (Soweto) and Rivonia Village (Johannesburg), haven't shown the same level of growth, with sales mostly flat or in the lower single digits.
Existing centres will face further pressure from a number of new malls that are still expected to open this year. Latest figures from the SA Council of Shopping Centres reveal at least another 400 000sq m of shopping centre space is due to come on stream this year.
The market expects the total return from shopping centres for calendar 2009 to come in at below 10% when IPD SA releases full-year results in March. It will be the first time in 10 years that shopping centre returns have slowed to single digits.
