“ Retailers are doing their homework far more diligently than before and won’t commit to [expansion] if there’s any risk of cannibalis ation — when new stores dilute the retail spend of existing ones in the same catchment area”

FINANCIAL MAIL

It appears that retailers are starting to expand again on the strength of a tentative recovery in consumer spending. Life assurance companies and listed property funds, which own the bulk of SA’s estimated 131 shopping centres exceeding 30000m² , have in recent weeks reported increased demand for retail space in select shopping nodes.

Walmart’s takeover of Massmart is apparently prompting an increase of Game’s footprint , as the latter aims to grow its food and beverage component aggressively. Demand is also being boosted by other international retailers keen to trade in SA. Spanish fashion retailer Zara will open a flagship 2500m² store — its first in Africa — at Sandton City in Jo’burg on November 10.

In addition, UK clothing retailer Topshop, Australian fashion brand Cotton On and America’s Burger King are believed to be scouting around for sites in Johannesburg and Cape Town.

“There’s no doubt that international retailers are focusing on SA as a launch pad for growth into the rest of Africa. And the entry of Walmart and Zara should trigger interest from other prominent international brands,’’ says Mel Urdang, retail director of Liberty Properties. The Liberty group has a 75% stake in Sandton City and owns other landmark shopping centres such as Eastgate, east of Johannesburg, and the Midlands Mall in Pietermaritzburg.

Urdang says Zara is one of 33 retailers that have already signed leases to open stores in Sandton City’s new wing — a 30000m² expansion now under construction. The R1,77bn project will take Sandton City’s total retail space to around 144000m² .

While international brands will take up a chunk of the extension, Urdang says local retail groups, including Truworths, Foschini, Mr Price, Ackermans and Edcon, are keen to increase their trading areas at Sandton City too. Foschini will almost double its floor space to 1900m² , @Home will relocate to a store nearly four times bigger than the existing one and Edgars will swell by 2800m² to 12000m² .

National retailers are also taking a fresh look at growing their presence in smaller cities and rural areas. Des de Beer, MD of retail-focused Resilient Property Income Fund, says retailers, including Shoprite/Checkers, Massmart, the Edcon group, Dis-Chem and Fruit & Veg City, are keen to expand in places like Brits, Middelburg, Burgersfort, Polokwane and Secunda. De Beer notes that malls in these areas are generally still achieving stronger sales growth and higher trading densities (turnover/m² ) than their counterparts in the big cities. “Consumer spending in non metropolitan areas is driven by large populations dependent on social grants. In addition, these communities tend to have lower debt levels than city dwellers, leaving them with a higher disposable income.’’

But not all shopping centre owners are benefiting from a renewed appetite for retail space. “National retailers are cherry-picking the best locations,’’ says Preston Gaddy, retail executive at Broll. He says well-established regional malls exceeding 70000m² are the most sought after, while those in the 20000m² - 50000m² range continue to struggle with rising vacancies.

Gaddy says these mid sized malls are not big enough to offer comparative shopping, and not small enough for convenience shoppers making frequent trips. Retailers are also wary of new malls.

Though the recovery in retail sales is still fragile , Gaddy says it makes sense for national retailers to expand now while they can sign three to five-year lease agreements at relatively soft rentals.

“But retailers are doing their homework far more diligently than before, and won’t commit to [ expansion] if there’s any risk of cannibalis ation — when new stores dilute the retail spend of existing ones in the same catchment area,” he says.

Latest figures from Broll research suggest that increased tenant demand in regional malls is already starting to translate into rental growth . Shopping centre rentals exceeding 50000m² in Johannesburg rose 7% in the second quarter year on year. In Cape Town, Pretoria and Bloemfontein rentals were up 8,4%, 9,3% and 20% respectively over the same period .