When last did you really pay attention to what’s happening in shopping malls around the country? Churn of smaller stores in particular is at elevated levels, while the situation at neighbourhood or convenience centres is grim.
The elephant in the room is Edcon. It intends to cut about a third of the space it currently occupies across its store footprint, from 1.5 million square metres to around one million. This 500 000 m2 cut is significant: it represents more than two ‘Sandton Citys’. Standalone Boardmans, Red Square and La Senza outlets are being shut and absorbed into Edgars stores, some of which are likely to be made smaller.
This is not a Stuttafords-sized vacancy, which barely totalled one tenth of Edcon’s planned rationalisation. And given the store mix of the centres affected by Stuttafords’ failure, it was easy to fill.
Most malls will lose at least one Edcon store, with many larger regional and super-regional malls easily losing two or three. Even neighbourhood and convenience centres (the likes of Nicolway or Rivonia Village) are affected, given the shuttering of Red Square.
But this is not an Edcon-only problem.
Four of the country’s five large retail banks have been actively cutting branch space – and not just entire branches, but floorspace being occupied as well. In some cases, total floor space is down by 10% over the past five years.
Churn in the fast food, casual dining and restaurant spaces is higher than ‘normal’, affecting food courts.
On the periphery, some closures have been startling. Virgin Active shut two clubs in the six months to December, something that simply hadn’t happened previously. Cinema chain Ster-Kinekor has closed at least three complexes this year.
Space growth among the large retailers has moderated. In the year to end March, Mr Price Group grew its weighted average space by 2.1%, with a 0.1% decrease in its second-largest division (by revenue and space), mrpHome. A year ago, it grew by a net 2.6%. The 2.1% figure is noteworthy given that, in its FY2017 integrated report, it aimed to “grow trading space by ~4%”. The group says it plans to continue being “selective” on growth going forward.
Also in the year to end March, TFG Limited grew space in its Africa division (which includes South Africa) by 3.5%. Two years ago, this was running at nearly double that (at 6.6% in FY2016).
The march by international retailers, including H&M, Cotton On and Zara, which mopped up the space that was both added with mall expansion (including greenfield centres) and vacated by store closures in recent years has all but stopped.
The two latest international retailers to enter South Africa, sporting goods retailer Decathlon and home improvement giant Leroy Merlin, are not likely to fill this supply. The French chains, both owned by the Mulliez family, have very deliberate – and moderate – roll-outs planned. While the former might elect to be opportunistic, with stores at around the 1 500 m2 – 2 500 m2range, Leroy Merlin stores are significantly larger (around 10 000 m2 ), think Builders Warehouse.
This leaves a decreasing number of prospective tenants to fill relatively small stores and potential parts of larger ones. Every mall that could possibly have any number of the TFG or Truworths brands, has one. Clicks is surely finding it harder to identify sites that won’t cannibalise existing outlets. And as for neighbourhood and convenience-type centres, there simply aren’t many options at all.