National dip in retail trading, but Western Cape shopping centres perform best

Posted On Tuesday, 02 July 2024 08:39 Published by
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Trading density levels at more than 4.1 million square metres of prime retail space in South Africa dipped further in the first quarter of 2024 but the rate of contraction was more muted than in the last six months of 2023.

That’s according to the Clur Shopping Centre Index, an independent industry standard and economic indicator, which is part of the broader Clur Collective asset management support platform.

This interprets performance at more than 100 centres and 140 merchandising categories across SA and Namibia, helping listed and unlisted property funds to understand asset health and strategically optimise returns.

According to the Q1 2024 provincial indices for Gauteng, KwaZulu-Natal and the Western Cape, newly launched by Clur International, the Western Cape and KwaZulu-Natal show the highest annualised trading densities of R45,460/sqm and R42,676/sqm, both outperforming the national Clur All Centres Index, which closed at R41,163/sqm. Gauteng underperformed the national Clur Index at R40,348/sqm.

Belinda Clur, managing director of Clur International says: “Growth rates for the first quarter tell a different story, with the Western Cape showing the highest y/y growth of 8.2% and Gauteng at 5.9%, both outperforming CPI by 2.9% and 0.6% respectively. KwaZulu-Natal, though, shows negative y/y growth of -2.4%, underperforming CPI by -7.7%.

“The Q1 2024 national Clur Index for all centres closed at 4.4% y/y growth. This represents a contraction of 0.6% relative to 2023’s 5% y/y growth. The national index has underperformed the inflation rate since November 2023.”

Nationally, super-regional centres - 100,000 sqm plus - showed the highest trading density for the first quarter of R49,066/sqm, followed by community and smaller centres - those below 25, 000 sqm - at R42,386/sqm.

“This reflects top strength at the two size extremes of shopping centres, and may be linked to identity,” says Clur. “It is much easier to have a specific identity when one is very large or very small. Super regionals have a natural gravitas and identity defined by destination shopping and entertainment. Whereas the smaller centres have the strength of a natural intimacy and convenience appeal. Mid-sized centres should capitalise on the current consumer position by embracing a lifestyle stance, with a focus on balance, health, wellness and zen-seeking.”

In the first quarter, larger super regional and regional centres showed the highest growth rates of 5.4% and 4.7% respectively, with the former outperforming March 2024’s CPI by 0.1%.

Regional centres were resilient over the quarter, recording a negligible contraction in trading density levels relative to 2023. Small regional centres showed an expansion over the quarter from 3% to 3.5% y/y% growth.

She says against the national backdrop, the provincial indices serve an important purpose in providing a more granular understanding of provincial performance given their differing personalities and dynamics around areas such as seasonality, semigration, staycations, civil unrest and other economic, logistical, health, climate and political occurrences.

“If one looks back to the Covid era when considering the case for portfolio diversification, Gauteng and Western Cape centres both moved into negative growth territory in March 2020, one month before the consolidated national index. KwaZulu-Natal centres were the last to move into negative growth territory in June 2020.

“In February 2021, when the national index was at its worst at -7.5% y/y growth, the Western Cape and Gauteng centres were the hardest hit at -10.9% and -8.5% respectively. At this time, trading density levels at KwaZulu-Natal centres showed a milder -4.6% y/y growth impact.

“KwaZulu-Natal also had the shortest Covid negative growth run from June 2020 until May 2021. Gauteng ran negative from March 2020 until June 2021, whereas the Western Cape had the longest negative run lasting from March 2020 until August 2021.”

Clur Index 2023 provincial results reflected Western Cape centres as star performers at R44,965/sqm and 9.9% y/y growth, outperforming annual CPI by 3.9%.

KwaZulu-Natal centres followed at R42,783/sqm, seeing -2.6% y/y growth and under-performing CPI by -8.6%. Gauteng centres traded at R39,924/sqm and 6.6% y/y growth, outperforming CPI by 0.6%.

In all cases, in line with national performance, the provinces saw higher growth over January – October 2023, and higher trading densities from the consolidated November and December festive period.

The Western Cape festive season traded at R60,875/sqm with y/y growth of 10.4% for the rest of the year (Jan – Oct). KwaZulu-Natal’s festive season traded at R59,052/sqm with y/y growth of -2.6% for the rest of the year. Gauteng’s festive season traded at R52,972/sqm with y/y growth of 6.9% for the rest of the year.

The three provinces saw a substantially stronger December 2023 trading month relative to November 2023, in line with the broader national picture.

KwaZulu-Natal showed the highest December 2023 trading density of R72,748/sqm along with a y/y growth rate of 1.5%, underperforming the month’s CPI by -3.6%. However, since December 2019, KwaZulu-Natal has consistently been the top-performing province for the December month in terms of trading density.

“This illustrates the economic importance of the December summer holiday season to KwaZulu-Natal, and its impact on retail trade there,” says Clur.

The Western Cape and Gauteng’s December 2023 trading densities were R72,601/sqm and R62,148/sqm respectively. Both provinces showed a y/y growth rate of 9.4%, both outperforming the month’s CPI by 4.3%.

“KwaZulu-Natal and Gauteng are most aligned to the overall national trend which saw a 2023 shift away from a combined November and December festive season toward a December only defined festive season.

In contrast, the Western Cape still shows resilience in its November trading position and a stronger pattern supporting a combined November and December festive season.

"As we move through the property cycles and life’s ups and downs, we see the benefits of diversification evident across centre sizes, category and tenant mixes, rural versus upmarket portfolios and now geographically across the provinces,” she says.

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