SA’s retail sector is on the brink of a resurgence with foot traffic in malls expected to exceed prepandemic levels and could even reach highs last seen in 2016, according to the latest SA Property Owners Association (Sapoa) retail trends report, with property owners brimming with optimism about the coming months.
This renewed consumer activity could be a game-changer for retailers. If spending per shopper remains stable, landlords may see an improvement in rental dynamics, leading to lower vacancy rates, positive rent reversions and stronger net operating income growth — ultimately contributing to increased retail sector profitability.
Shopping malls experienced a slow start in 2024, but foot traffic picked up towards the end of the year, approaching 2019 levels, with October and November particularly strong. Meanwhile, a higher monthly footcount was recorded in December than in 2023, but its increase compared with the previous year was weaker than November’s. This suggests that shoppers may have made more visits in November to take advantage of Black Friday specials.
The number of shoppers visiting the country’s major malls continued to rise in the fourth quarter of 2024, though at a slower pace. A 2.1% year-on-year increase in visitors per square metre indicates that foot traffic has been trending upward every month since December 2021.
While the country’s major malls have trailed behind the broader retail sector in terms of growth, with Stats SA reporting a 5.7% year-on-year retail sales increase in current prices, shopping centres that are owned by institutional investors such as banks, pension and listed funds have shown resilience. Their trading density (sales per square metre) has grown in line with inflation, as reflected in the MSCI SA quarterly retail trading density index covering 150 retail centres across more than 5.9-million square metres.
Retailers also experienced a boost in revenue metrics. Monthly trading density grew 2.2% year on year, leading to a 1.4% increase in spend per head. While regional shopping centres’ foot traffic remained more than 10% below prepandemic levels on a 12-month rolling basis, superregional and small regional centres were nearing their December 2019 levels. Spend per head increased across all three larger-format retail segments in the last quarter of 2024, with regional shopping centres nearing a new high.
Earlier this month Ninety-One, SA’s largest asset manager, noted that rental growth was emerging in the retail sector, supported by low vacancies, greater tenant affordability, and high sales growth. The sector is trading near its highest price to net asset value levels since before the pandemic but remains below long-term average valuations.
Despite these positive trends, gross rental growth has slowed slightly, easing from 3.6% to 3.2% year on year. Over the past year, rental growth has been trending downward, suggesting that property owners may still be making concessions when negotiating lease renewals and new lettings to retain tenants and sustain occupancy levels.
While overall vacancy rates have improved quarter on quarter, trends vary across different retail segments. Community shopping centres — those with a gross lettable area between 12,000m2 and 25,000m2 — declined the most in vacancy rates, dropping from 5.3% to 4.1%. This shows a growing appetite for mid-sized retail hubs, which may be benefiting from a balanced mix of convenience, affordability and accessibility for retailers and shoppers.
majavun@businesslive.co.za
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