Retail spending: Well, at least Mall of Africa is doing OK
Other upmarket shopping centres, not so much
Shopping centres are no longer the money spinners they used to be judging by the latest results announcements from mall owners such as Growthpoint Properties, Hyprop Investments and Attacq.
Management teams of JSE-listed property stocks all tell a similar story: returns on malls are being squeezed by growing competition from new centres, weaker consumer spending and retailers closing shop or cutting back on store expansion plans.
Trading density growth (sales turnover/m²), a key performance metric that measures the strength of retail spending, has slowed from an average 7%-10% two to three years ago to the low single digits in many upmarket malls across SA. In some centres, trading densities have dipped into negative growth territory.
Attacq, which owns stakes in the Mall of Africa at the Waterfall precinct north of Sandton, Brooklyn Mall in Pretoria and Garden Route Mall in George among others, on Tuesday reported average trading density growth of 5.3% for the year to June.
Although that is still comfortably ahead of the average 1.3% and 0.5% growth recorded respectively by Growthpoint and Hyprop’s shopping centres over the same time, Attacq’s outperformance appears to be driven partly by its flagship Mall of Africa, which notched up stellar growth of 11%.
However, some of Attacq’s other centres such as Brooklyn Mall and Waterfall Corner near Midrand have clearly been hit by tougher conditions with trading densities down 4% and 2% respectively.
The bad news for retail property investors is that planned store closures by the struggling Edcon group could exert further pressure on the profit margins of JSE-listed mall owners over the next 12 months.