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Traffic at large format shopping centres is almost back to pre-Covid-19 levels with JSE-listed Redefine Properties reporting that the increased footfall has given retailers the confidence to sign longer leases, improving negative lease renewal reversions for property owners.
The real estate investment trust (Reit) said footfall at its retail properties has increased to 94% of pre-pandemic levels as consumers flood back to mall favourites like cinemas, which were hard-hit by pandemic restrictions.
“This is an improvement from the average of 80% seen throughout the year when compared to pre-Covid levels,” says Redefine national retail asset manager Nashil Chotoki in a statement.
Redefine owns flagship malls across the country such as Centurion Mall, Blue Route Mall, Kenilworth Centre, Matlosana Mall and East Rand Mall, which it owns jointly with Vukile Property Fund.
It says its Western Cape properties received the most love from consumers as inland residents headed to the province for the holiday season.
“Most Gauteng residents travelled out of Gauteng for their holidays and therefore the large format centres in Cape Town had better total footfall and footfall growth than those in Gauteng, while KwaZulu-Natal was muted on the back of the current water quality challenges in the province,” says Chotoki.
He believes consumer loyalty to shopping centre and brands will be “more strongly driven by environmental and community support initiatives” going forward.
“I expect consumer support to grow for locally manufactured brands such as Bathu and Drip and [that] ‘locally manufactured’ will influence spending behaviour.”
Recovery uneven
Redefine notes that the recovery is largely concentrated in its bigger retail properties in major cities, with footfall still significantly below pre-pandemic levels in smaller malls in less populated regions – a trend the developer believes will continue in the short term.
It says operational challenges such as those presented by rolling blackouts will continue to slow down recovery for retailers in less populated regions. The cost of moving away from the national grid is significantly higher in these areas as retailers have a harder time passing costs on to cash-strapped consumers.
“To me, these trends indicate that foot count will, on the whole, continue to remain below pre-Covid-19 levels for the short term as some stores are still struggling to fully recover and the recovery is not equal across regions, or business types, but foot count recovery of large format centres will continue due to the appeal of one-stop-shop solutions,” says Chotoki.
Read:
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Impact of war in Ukraine
Despite the continuing war in Ukraine, Redefine’s newest Polish acquisition EPP – which it bought around the same time Russia launched its attack on Ukraine – reportedly ended 2022 “with tenant turnover in most categories above 2019”, while footfall is said to be approaching pre-pandemic levels.
Redefine says after battling a global pandemic and now with increased uncertainty related to the war in Ukraine, Polish consumers have demanded more value retailers and retail parks.
“We addressed this trend with the opening of a retail park in Galeria Twierdza in Zamosc in November, and we already see a positive footfall growth,” says Agata Sekuła, board member responsible for investment and asset management at EPP, adding that a number of value retailers have been introduced to many of its shopping centres.
The Polish business has in the past year also seen a jump in shopping centre maintenance costs as a result of rising energy prices, wages and inflation.
“To address it and save energy, we have already implemented changes in our BMS systems optimising equipment’s operations. We installed LED lighting and invested in photovoltaic panels. We also educate and promote the idea of a responsible use of resources among our employees and tenants,” says Sekuła.
Listen to John Loos from FNB Commercial Property Finance commenting on what the future holds for South Africa’s commercial property sector in 2023:
You can also listen to this podcast on iono.fm here.
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