Advertisement
During the pandemic, people had no choice but to stay at home and use online shopping. Fast forward a few years and the retail sector (although back to ‘normal’) is still suffering from a reduced footfall – particularly in shopping centres.
It wasn’t the worst performing sector though – office property is still lagging according to industry commentators, but it’s not outperforming industrial property just yet.
However, Redefine Properties argue that there’s now a strong indication that South Africa’s post-Covid 19 recovery is back on track and that retailers are becoming more confident and signing longer leases again. This, they say, is in lockstep with increased footfall at its properties.
Is the retail sector back at pre-Covid levels?
According to Redefine, its sales and total turnover across its retail portfolio is already in excess of pre-Covid 19 levels, and believes this growth will continue. The drivers are the need for essential services, apparel, and the recovery of entertainment in shopping centres.
‘The negative lease renewal reversions have already started improving and the continued growth of retail sales will see this trend continuing in 2023. Total foot count is now at 94% of pre-Covid levels, with a 2% growth on the prior year. This is an improvement from the average of 80% seen throughout the year when compared to pre-Covid levels,’ says Nashil Chotoki, Redefine’s national retail asset manager.
Redefine says that while foot count, particularly for retail centres with one-stop-shop solutions, will increase there are others that will see an improvement too. Restaurants and cinemas have both seen a recovery but it’s the operating costs for these establishments that remain a concern.
Advertisement
Load shedding will add to the financial cost burden. “This will continue to impact margins for property owners and retailers who will not be able to pass this onto constrained consumers,” says Chotoki.
Struggling consumer
While footfall is on the up, developers must still bear in mind the financial pressures that consumers are facing and take that into account when forecasting for their retail portfolios. There is, after all, a global cost of living crisis and inflation is impacting the cost of fuel, food, and with electricity prices going up following Nersa’s approval of Eskom’s 18.6% hike it’s bound to squeeze consumers even more.
This will require careful regard for who to extend leases to. ‘Consumer loyalty to shopping centre and brands will be more strongly driven by environmental and community support initiatives. I expect consumer support to grow for locally manufactured brands such as Bathu and Drip and locally manufactured will influence spending behaviour,’ says Chotoki.
Competition from Amazon?
Another threat on the horizon for retailers remains online juggernaut, Amazon. Last year we wrote that Amazon is set to launch in South Africa in 2023. Amazon was meant to launch next month (February 2023) however, according to reports it has now delayed this till the end of the year.
All eyes will certainly be kept on this multi-national corporation which, in other parts of the world, has put some out of business if they haven’t learned to adapt.
