February 19 2024
This is a guest article by Clur International. Belinda Clur is the founder and driving force behind the Clur Shopping Centre Index, an essential tool for real estate asset managers.
Retail sales strength eased in the final months of 2023 with the festive season unable to generate a large enough boost. In fact, growth in trading density levels at more than four-million square metres of prime retail space in SA contracted further in 2023, dipping below the annual inflation rate, according to the Clur Shopping Centre Index.
This index is derived from The Clur Report, an asset management industry standard, tracking performance for listed and unlisted property funds (at more than four million square metres of prime retail space) in over 100 centres across SA and Namibia. While some super-regionals enjoyed some momentum in trading densities, overall retail landlords have seen a contraction. Trading density measures turnover over the space used to generate that turnover, or sales per square metre for a mall.
The downward trend was first noted in September 2022, says Belinda Clur, managing director of Clur International, which produces the index. She help asset managers to optimise performance.
The full year 2023 index for all malls closed at 4.9% year-on-year growth, with an annualised trading density of R40,899 per square metre, under-performing 2023 CPI by 1.1%. This represented a 7.2% contraction from the 2022 full year growth of 12.1% year-on-year.
The 2023 festive season index for all centres, covering November and December, closed at 4.4% year-on-year growth, with an annualised trading density of R55,007 per square metre. This represented a 5.3% contraction from the 2022 festive season growth of 9.8% year-on-year.
“The rest of year 2023 index for all centres closed at 5.1% year-on-year growth, with an annualised trading density of R38,056 per square metre. This represents a 7.7% contraction from the 2022 rest of year growth of 12.8% year-on-year.”
This looks like a significant drop but the reasons behind it are varied and speak to consumers recalibrating their spending decisions.
Clur explains that larger centres, specifically super-regionals, which fell the furthest during the 2020/21 downturn in the face of the Covid-19 pandemic, continue to lead growth, despite the marked drop-off relative to 2022 levels.
“In 2023, super-regional centres again performed best in trading density levels, reaching R48, 628 per square metre, despite harsh economic and social headwinds. Smaller centres, which showed a stronger growth trend during the downturn, have shown a softer contraction over the year, recording sales per square metre of R36, 119.”
Larger centres have maintained the highest trading density levels since mid-2018, when the Clur Indices were introduced.
It’s clear that different kinds of shopping centres may actually face different cycles.
Belinda Clur says even though the narrative has been that even though SA’s economy has battled to grow and been beset with low unemployment, shopping centres are quite defensive.
The retail property sector has done well against a backdrop of many challenging global and local circumstances, she says.
“One must be realistic about continually chasing growth. We live in cycles and should be careful of being seduced by misleading growth rates which may be off a very low base. Lower growth off the back of maintained high dependable trading densities is a far safer proposition. The industry should be applauded for the healthy solid trading density levels it displays and has maintained, irrespective of growth,” says Clur.
Clur says the 2023 sector performance comes at a time when the “consumer position is recalibrating”.
“The world is seeking balance, and this transcends everything, reframing all facets of life. This is in response to numerous shocks, since 2019, and is a push-back on chronic stress, reflecting important boundary setting, thoughtfulness and a new consumer mindset.
“The consumer desire for balance, underpinned by respect for time, energy and health, both guides strategy and comes with high expectations from shopping centres and retail brands around quality, marketing, entertainment and experience. Quick, clever, thought and joy-inducing marketing is desired, along with shopping and entertainment experiences allowing escape and engagement of all the senses” she says.
Clur says shopping centres have an important role to play in supporting this community need for what seems to be both “grounded wholeness” and “fantasy escape”.
“Central to the focus on balance is the desire to have a life affair, to live life now. This ‘La Dolce Vita’ attitude recognises that life is short and fragile, to be enjoyed rather than worked away,” she says.
Time could be viewed as a currency more valuable than money.
“This is highlighted by the emergence of time banking and alternative economies such as second-hand luxury goods investing and bartering of goods and services,” she says.
Health and beauty are vital pillars of the prioritisation of balance, says Clur, with specialist retailers targeting rapid expansion.
“The trajectory for the sector is endless as health also further entrenches as a currency more valuable than money and self-care becomes more important. Fitness and athleisure popularity continue to soar, along with considered beauty and integrative wellness formats. The ‘Ozempic Economy’, linked to a new class of successful weight loss drugs, has been identified in the US, where its impact on altered healthier grocery and alcohol purchase patterns is being watched. In addition, specialised wellness resorts are on the rise and lipstick index behaviour prevails as people turn to small uplifting indulgences in hard times,” says Clur.
“Respect, substance and intentional living sit at the core of this desire for balance, where we see an evolution from hard values to soft, enlightened and meaningful values built on ethics, inclusivity, personalisation, innovation, circular economics and bio-tech,” she says.
While this approach to spending may be more prevalent in larger economies, it is growing in SA.
Dignity is paramount in this new framework, where issues such as equality, animal rights, respectful technology, climate change, poverty alleviation and solving future protein supply chains are critical says Clur.
“A philanthropic and educational focus of brands is welcomed as the world seeks meaning. Increasingly, insights and wisdom are sought from the East, which represent new growth territories for many categories, especially luxury,” she says.
Clur says that at least globally, there was “a collision between the future and the past. A return to physical books signaled this. People did not want to live with ever-advancing digital screens, intensifying sharp technology and artificial intelligence. They also craved texture, reality and tactile physical sensory experiences.
“People are seeking meaning and resonance in a world that has become fast and superficial to which the retail property sector has to continue to adapt,” she says.
alistair@propertyflash.co.za
