They stand out like gaps between teeth. Maponya Mall, the high-end mall that opened in September 2007, is now dotted with empty sites - 11 of its original 160-odd lie fallow - and the first level office floor is a vacant sea.
A vacant shop at Maponya Mall.
Image courtesy of Business DayCredit: Michael Bleby
While the 75000m² mall is suffering from the recession that slashed nearly 1-million jobs and saw consumer spending fall for five straight quarters, it is still better off than smaller centres, many of which are going into liquidation.
Small on auction
Earlier this month, for example, two smaller centres went under the hammer. Port Elizabeth's King's Court, with a retail space of almost 14000m², was auctioned for just more than R66m days after the R62m sale of East London's 15000m² King's Mall, which opened in 2007. Last month, the 8090m² Shoprite Mall in Makhado was sold at auction for R28,5m.
"We do see, for the rest of the year, a lot more shopping centres coming onto the market," says Rael Levitt, CEO of Auction Alliance. "There are some distressed centres in liquidation."
Part of the problem is that the economy, stoked by high levels of borrowing and spending, is now stuck with a consumer hangover and a glut of malls.
The supply of new floor space in 2004 totalled just more than 400000m², and then surged above 650000m² in every year to 2008. Last year, it sank back to about 200000m², figures from research company IPD and the South African Council of Shopping Centres show.
"At the end of a property boom, certain decisions get made on the back of a herd mentality," says property economist Francois Viruly. "Some of the last shopping centres built in a boom are a bit more iffy than the earlier ones."
Potential tenants are wary. Carlo Gonzaga, CEO of Maxi's restaurants and NWJ jewellery chain owner Taste Holdings, has 170 outlets and plans to open another 30 this year. When deciding to site an outlet, Gonzaga looks more closely at a mall's surrounds than the centre itself. "It doesn't help you if a 100000m² giant is going to open in a year's time across the road. That's what's kept us out of a lot of smaller strip malls," he says.
The returns on all shopping centres have dropped over the past few years. The average total return on so-called regional centres, having a gross leasable area of between 50000m² and 100000m² - the category into which Maponya falls - dropped from 27.7% as recently as 2007 to 15% in 2008 to 11.9% last year, IPD figures show.
Maponya Mall spokeswoman Palesa Mzizi says conditions are improving. Overall turnover is up 6% on last year and with the mall finding tenants better suited to the local market - perfumer O Boticário is one that shut its doors - all but two vacant sites have tenants lined up, she says.
Gonzaga's concern about small malls is clearly shared. These centres are suffering. The return from community centres - between 12000m² and 25000m² and the category into which King's Mall and King's Court fall - fell off a cliff in one short year, sinking to 6.9% in 2008 from 26.2% a year earlier. Last year it improved to 9.6%.
And this lies behind another shift in the industry. Levitt says more malls will come onto the market as large listed property funds sell small ones to smaller, private owners.
"The bigger guys want to own Century City and Sandton City. It's not worth their while to work those (small) centres.
"In a tough market it's not an easy game for them."
Source: Business Day