A 'convenient truth' - the rise of the small shopping centre?

Posted On Monday, 19 December 2011 02:00 Published by
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Average trading density and turnover growth remains relatively buoyant compared with the historical average and is particularly strong in the smaller retail centre segments

Additionally, the SAPOA/IPD Retail Trends report Q3 2011 highlights the following:

• Despite an ongoing drop in the number of shoppers frequenting retail centres, their per capita spending pattern continues to bolster and support the trading performance of centres in general. 
• Shopping centre vacancies are coming down – although only slightly – which is helping to prop up income in an environment that remains operating cost sensitive.

On the first point above, the dramatic drop in retail foot count is offset by growth in per capita spend. According to Marc Schneider of IPD, the declining foot count growth is worrying and he cites the fact that the last time that positive annual growth was recorded across retail centres was in March 2007. Thereafter, without exception, a negative growth trend has materialised. In fact looking at the foot count levels recorded over the period January – September 2011 as compared with the same period in 2007, we see that foot count levels have dropped by a significant 15.2%.

Whilst this of course reflects the growth in the supply of competing retail generally, ideally were supply in line with demand, one would expect to see a neutral foot count growth trend; and since this is clearly not happening, the case made for retail oversupply can be more broadly supported.
Of course this trend must factor into account the macro economic environment where consumption patterns and credit access has deteriorated over the past three years.

That being said, the per capita spend in shopping centres has been remarkably robust and in fact has picked up in pace; whereas per capita spend growth was below inflation levels through 2010, it has steadily improved and is now reflecting modest real growth.

On the economic front, the report suggests that key factors behind the success and expansion of South African retail remains certain ‘non- negotiables’ including underlying economic growth, rising disposable incomes, falling unemployment, increasing urbanisation and the emergence of a black middle class.

With 2010’s real growth rate of 2.8%, forecast to increase to 3.2% over 2011 as the economy continues to recover, another key ingredient supporting GDP per capita growth over the next five years will be the population increasing from an expected 50.5 million in 2011 to an estimated 51.7 million in 2016.

Supportive of the per capita spend trend noted earlier is the relatively strong growth in disposable income of around 5% recorded in the first half of 2011. Also of positive influence is the decline in debt servicing costs mimicking the lower interest rate regime. Although current retail sales growth during the third quarter of 2011 is above inflation levels, it is nevertheless growing at a slower rate than anticipated by consensus forecasts. This no doubt reflects a certain degree of hesitation in consumer confidence and notwithstanding the improved debt servicing costs, a big theme remains the ‘de-gearing’ of consumer debt levels going forward, which in turn is likely to weigh on any significant improvement in the retail sales environment. Household consumption expenditure is anticipated to come in at 4.4% over 2011 and roughly in line with what transpired in 2010.


Publisher: eProp
Source: IPD

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