Redefine expects growth in essential services within the retail sector to stay strong, tracking food inflation despite a broader slowdown in turnover.
While overall trading density growth moderated slightly to 3.5% in the first quarter, it continues to outperform inflation, reflecting that retailers are generating more sales per square metre than the rate of inflation, said Redefine head of retail asset management Nashil Chotoki.
According to Chotoki, retailers’ cost of occupancy has held steady, providing a solid foundation for rental growth.
“With higher disposable incomes due to lower interest rates, growth in essential services will match food inflation, while turnover slows. Fashion, food, entertainment and experience-based retail will drive turnover and rental growth, while furniture, homeware and hardware adjust from post-Covid highs. Shopping centres will reassess tenants,” Chotoki said.
This outlook is echoed by the latest figures from the SA Property Owners Association (Sapoa) compiled by MSCI, which reported a slight increase in trading density growth to 4.1% in the second quarter from 3.5% in the first.
The boost in the second quarter reflects the sector’s steady recovery, particularly in essential retail services, which continue to thrive despite broader economic challenges.
However, the national vacancy rate rose to 5.1% in the second quarter from 4% a year earlier, reflecting both retailer caution and the challenges of sustaining profitability in a tougher consumer environment.
Chotoki said that over the past three years reduced disposable income — driven by higher interest rates and load-shedding — shifted consumer spending towards essentials, especially groceries and pharmaceuticals. This trend has spurred turnover growth and the expansion of grocery retailers.
“Food has been the steady anchor in this market, with consumers continuing to prioritise essentials, supporting trading densities across grocery and fresh produce categories,” said MSCI real estate vice-president Eileen Andrew.
Chotoki said Redefine responded to this shift by increasing its exposure to essential services, which has supported growth in market share and rental income.
East Rand Mall, 50% co-owned by Redefine and Vukile, serves as a prime example of the company’s strategy to realign its tenant mix in response to changing consumer behaviour and shifting demographics.
“Edgars was replaced to boost fashion options and Checkers added as an anchor, turning the weakest entrance into the busiest. Ongoing improvements include reconfiguring Ster-Kinekor to expand food services and essential offerings via Dis-Chem,” Chotoki said.
The focus on services, fashion and food has been ramped up to meet changing consumer needs, leading to an average turnover of R1.9bn and a monthly foot count of 760,000.
Similarly, Park Meadows is undergoing redevelopment to include Woolworths Food and upgraded restaurants, he said.
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