Shopping centres are no longer the money spinners they used to be judging by 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, reported average trading density growth on Tuesday of 5.3% for the year to June.
Though that is still comfortably ahead of the average 1.3% and 0.5% growth recorded by Growthpoint and Hyprop’s shopping centres respectively over the same period, 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.
Sanlam is cornering the African market and only time will tell if any other SA insurer can catch up. Last week the firm announced that it aimed to expand its portfolio in other African countries by offering general insurance and employee benefit packages to multinational firms.
The group now has a presence in 34 African countries, thanks to its acquisition of Moroccan insurer Saham Finances, whose footprint spans 26 countries across North, West and East Africa, and the Middle East. Sanlam has strategically chosen partners who can provide a complementary footprint rather than businesses that overlap with its own offering.
Saham, for instance, has a relatively new life business and Sanlam Emerging Markets CEO Junior Ngulube said the two insurers only overlapped in three countries.
While Sanlam has strong general insurance expertise in SA through its short-term subsidiary, Santam, Saham has lifted Sanlam’s general insurance capability outside SA.
Knowing which partner to get in bed with can mean the difference between a successful venture and a costly mistake. Take MMI, for instance. The insurer is exiting five African markets due to a number of challenges, including what group CEO Hillie Meyer said were "partner complications". As Avior equity analyst Warwick Bam puts it, it’s not just about having a partner, it’s about choosing a partner that understands your new environment.
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