SUPER CENTRES BUCK THE TREND AS THEY BEAT RECESSION BLUES
Suren Naidoo
The super regional shopping centre sector in South Africa – including the likes of Gateway Theatre of Shopping and Sandton City – is the only shopping centre segment that is experiencing positive growth in the face of the current downbeat economic environment.
This is revealed in the latest South African Property Owners Association (Sapoa) Retail Property Trends Report for the first quarter of 2009. Statistics in the report show the negative impact of the global credit crunch and consequent recession in South Africa on consumer confidence, retail sales and shopping centre performance.
“All (shopping) centre types except super regional centres recorded a decline in year-on-end growth for the period ending March 2009. Community centres continue to be particularly hard hit with trading density for the quarter ending 15.3% down when compared to the same period in 2008. On a year-on-end basis, super regional centres recorded a positive growth of 6.2% to
March 2009 - highlighting the defensive nature of larger centres,” said the report.
“In contrast, the trading density year-on-year growth of community-sized centres has been negative for the last seven months. Regional and small regional centres both recorded a slight decline in year-on-year trading density growth, ending down by 202% and 3.0% respectively,” it added.
According to the Sapoa Retail Property Trends Report, in terms of overall performance of shopping centres this meant that trading densities for all shopping centres declined 12.5% year-on-year to March 2009. This is the sharpest decline in the 69-month history that these figures have been collated.
The report said that the positive performance of super regional centres, showed that shoppers tend to choose the “convenience” of being able to do all their shopping in one location - as opposed to the perceived convenience of smaller centres.
“Of course, the fact the catchment are of many of today’s larger-sized centres overlap with that of community centres does not help the cause of the smaller centres… In terms of aggregate trading density figures for the year ending
March 2009, super regional centres were the top earner for the past 12 months (at R24 887m). Regional centres surpassed Small Regional - which had recorded a higher trading density than regionals for the period of March-November 2008.
Community centres recorded a trading density of R13 018 per square metre for this period,” it said. In terms of retail sales and the current macroeconomic environment, the study showed that real retail trade sales declined 5.3% year-on-year to March 2009 - the sharpest decline since August 2008.
“Retail sales growth has now been negative for 11 of the last 13 months, despite interest rates being cut by 250 basis points in the period, November 2008 to March 2009. However, the full effect of the interest rate cycle will not have filtered through the economy by March 2009 as there is typically a lag of between 12 and 24 month between interest rate movements and its effect on the real economy,” the report said.
“For the year to March 2009, the combined effect of several forces had a recessionary effect on consumer spending and thus also on real retail sales. These factors include a tight monetary policy environment; high levels of inflation and household debt; as well as declining consumer and business confidence.”
“What is encouraging however is the rate of relief consumers are expected to be provided with during the rest of 2009 …
(However) interest rate relief is expected to be relatively swift when compared to previous cycles while inflation is also expected to moderate - albeit at a slower rate.” it added.
The Retail Property Trends Report said the FNB/Bureau for Economic Research (BER) Consumer Confidence Index showed an increase of five index points to 1 during the first quarter of 2009.
“A figure of 1 indicates that there are currently slightly more optimists than pessimists. This increase follows on the sharp fall of 2008, when the index plummeted from 22 during the fourth quarter of 2007 to a -4 a year later,” it said.
Meanwhile, according to the BER’s Retail Trade Survey, confidence in both the retail and wholesale sectors remains under pressure with wholesale confidence increasing from 31 to 36 index points and retail confidence dropping from 52 to 47 index points.
Commenting on the survey, Derek Engelbrecht - Retail and Consumer Products Sector Leader at Ernst & Young - said retailers in the durable goods sector continue to bear the brunt of the retail recession with 84% reporting a contraction in sales numbers.
“This indicates that the consumer is continuing to favour necessities and value-for-money goods at the expense of durable goods, choosing to postpone all but the most essential purchases of durable goods,” he said.
“At the same time continuing job losses are having a marked impact on the disposable income of South Africans and this has a knockon effect on the demand across all sectors … The survey indicated that retrenchments in the corporate sector have intensified over the period of the survey with 26% of the respondents in the retail sector reporting lower employment numbers,” added Engelbrecht.
“Although the core date from this quarter’s survey is predominantly negative it appears that across the market companies are anticipating that a turnaround is near and that the SA market as a whole will return to its growth phase soon,” he said.
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