October 31, 2003

By Vera von Lieres

Cape Town - Small retailers at Cape Town's Canal Walk shopping centre are upset about a change in landlord at the mall from early next month which they claim will make the life of the "mom and pop" stores even more difficult.

But Eric Ellerine, the chief executive of private company Ellerine Brothers, one of the new landlords at the centre from next month, said yesterday concerns were unfounded.

This in the context of current debate in shopping centre circles where the SA Council of Retailers, representing the interest of the small, independent retailer, has hit out at shopping centre landlords for alleged poor treatment of "the small guys".

One of the key issues it says is the problem of small retailers cross-subsidising the major retailers' rentals in shopping centres across the country.

Big shopping centre landlords contend that normal market forces are at work in the country's malls and that if a business has high margins, it will pay a high rental.

Johan de Beer, the executive director of the SA Council of Retailers in the Western Cape, said yesterday a meeting this week of small retailers at Canal Walk highlighted ongoing anger with rental differentials between the majors and the small tenants.

Fresh issues that came to the fore was concern with the strategies of the new landlords of the centre from November, when 80 percent shareholder Hyprop Investments and 20 percent stakeholders Ellerine Brothers, take over.

There was talk that existing management would be replaced and that there would be a name change, which had caused unhappiness due to costs associated.  

Ellerine said management would not be replaced but bolstered by the addition of an experienced retail manager. A name change was not on the cards.

De Beer emphasised that the council had received many calls for assistance from small tenants at other big shopping centres in the Western Cape, highlighting the plight of the little guys in malls which he described as an "endangered species".

Illustrating the problem of small retailers cross-subsidising the majors' rentals across the country, he said:

"The seven big retail players in Canal Walk occupy close to 50 percent of space and pay rent of about R2.3 million while the smaller guys, which occupy another 35 percent, pay close to a triple, about R7 million in rent."

"The gap is just to big. We have to level the playing fields," De Beer said.

In Australia, the US and in Europe major retailers did not get subsidised by the smaller ones. There, the big guys had a cheaper rent that was much lower than here, of between 8 percent to 10 percent.

"If it works there, why not here?"

Action taken by small tenants at Canal Walk included setting up a tenants forum to challenge the new landlords on the rental differences, among a range of issues. Ellerine said his company was very sympathetic towards all tenants, big or small, and would be happy to engage with them.

The SA Council of Retailers has made submissions to the Competition Commission against the owners of shopping centres countrywide. At issue is the significant monopolised concentration of shopping mall ownership in the country.