Redefine Properties, one of SA’s top real estate investment trusts (Reits), has reported a positive shift in trading conditions in the country’s retail sector as the holiday season approaches.
The group is optimistic about the retail sector’s outlook and its potential impact on the country’s economic growth in the coming year, fuelled by strong growth in retail sales, rental renewals and increased foot traffic.
Retail sales in SA increased by 3.2% year on year in August 2024, marking six consecutive months of strong growth.
Foot traffic in major shopping centres rose 8.3% year on year during the second quarter of 2024, continuing a positive trend since December 2021.
Meanwhile, the rent-to-turnover ratio, which measures retailers’ occupancy costs, is at its best level in over ten years.
According to the latest SA Property Owners Association (Sapoa) global property trends and valuations midyear report, retail properties are leading the recovery of the sector, with trading densities growing faster than inflation and rent-to-sales ratios maintaining a healthy balance at about 7%.
Nashil Chotoki, retail national asset manager at Redefine, credited the growth in retail activity to increased non-discretionary spending, with food and value-orientated retailers leading the way.
“Within the Redefine portfolio, grocers contribute 64% of turnover growth. Therefore, a tenant mix of essential services and retailers aligned with value offerings that is relevant to the demographics of the catchment areas will be a key success factor for shopping centres. It is why Redefine will increase its exposure to this category to 40% of its gross leasable area in the next financial year,” Chotoki said.
Redefine Properties owns Centurion Mall, Blue Route Mall, Benmore Centre, Centurion Lifestyle Centre, Cradlestone Mall and East Rand Mall. The group owns 59 retail properties across the country, leased to 2,807 tenants, with an annual trading density of R34,700 per square metre. The portfolio’s rent-to-turnover ratio stands at 7.7%.
Chotoki added that lower interest rates and rising consumer confidence are expected to boost retail sales in discretionary categories. Aligning the tenant mix of shopping centres with these trends would help foster sustainable growth.
“We have also found that upgrades to stores, particularly grocers, drive improvements in turnover through attracting new customers to shopping centres. That is why Redefine is working closely with national retailers to support this, culminating in 8,500m2 worth of upgrades scheduled to commence in February 2025,” Chotoki added.
The Centurion mall owner has also diversified its income by adding in-mall and exterior billboards, as well as electric vehicle charging stations at eight locations.
“There are still challenges in our path, but what is certain is the resilience and promise that SA’s retail industry poses from both a consumer and business perspective.
“Through strategic planning and implementation, and by prioritising the needs of consumers and our tenants, we are fully tapping into the power of retail spaces as social and economic enablers,” Chotoki said.
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