Muted growth, yet retailers will still seek to expand - Broll Retail Consumer Survey

Preston Gaddy, Divisional Director: Strategic Retail Leasing at Broll Property Group.

These are some of the trends that Preston Gaddy, Divisional Director: Strategic Retail Leasing at Broll Property Group will touch on briefly during his address at the South African Council of Shopping Centres Research Conference in Sandton.

"Although muted growth is expected for the sector, retailers targeting the value chain will continue to show growth slightly higher than sector averages.

"However, national fashion retailers will still seek to expand but will be far more cautious in their selection of new sites. Meanwhile, grocery chains continue to target the mass market and the opportunities in rural and township areas, however these developments are starting to 'dry up'. Grocery chains will also seek to have an increased presence in smaller format stores.

"With constant power outages, shopping centres with full standby power are now becoming the preferred choice for many retailers, as this means they can continue trading even during load shedding periods.

"Retailers simply cannot afford further downtime in retail trade, and those landlords that have invested in standby or alternate energy will have the 'value add' that retailers are seeking.

"Landlords will also investigate more innovative ways of understanding shopper behaviour via CCTV profiling. For example, there are some interesting products on the market that profile demographics, shopping patterns and conversion ratios.

"Shopping centre security will continue to be a challenge for most landlords. With the recent spate of armed robberies at electronic stores, they may be considering whether having these electronics retailers in their centres, is worth the risk."

Retail trends

The Broll Retail Consumer Survey 2014 showed that going in a physical shop is still important for consumers and is expected to remain so in the near future, however, online shopping is expected to increase in the near future, as consumers get used to the idea.

The retail sector remains optimistic, with some trends likely to impact retail in 2015. National retailers are acknowledging the threat of online retail on physical stores and this will definitely continue in years to come.

"As South African consumers become more tech savvy, so will their choice of shopping mediums change. We are seeing further enquiries for 'click and collect' facilities, particularly in convenience centres."

Furthermore, with limited 'green-fields' opportunities, shopping centre owners will look to their existing centres to unlock value. Therefore, refurbishments, expansions and redevelopments will mean significant investment by owners, with a number of them already in progress and expected to come on stream towards the latter part of 2015 and into 2016.

"Landlords are seeking to re-tenant these centres to adapt to changes in demographics and spending patterns, as well as to reposition the centres for the next 10-15 years.

"Another trend is that value/off price retail will continue to grow in 2015. We are seeing more entrants in this sector and, with consumers feeling the effects of rising costs, they seek to stretch their budgets by shopping at these value chains. We should see more outlet stores opening in various locations."

International retailers

In general, South Africa and Africa remain an attractive proposition for international retailers, especially in light of the muted growth coming out of European markets. These retailers see the tremendous opportunity on the continent and are looking to set up their base in South Africa. Given its advanced retail industry, South Africa will be the platform for many international retailers to expand northwards into potentially lucrative markets. Most new entrants are in the fashion sector, and are only looking at regional centres (over 50,000 m2).

There have been a few cases where international entrants have taken space in busy small regional centres. Larger fashion entrants will only place a handful of stores in the major metropolitan areas and will not at this stage, venture into outlying areas.

"We are also seeing that many South African retailers are looking at collaborating with international retail brands to expand their offering and diversity either in-store or in standalone stores. I believe that 2015 will signal further local/international partnerships and this will continue to be positive for the shopping centre industry."

"Overall, the retail sector should see further progress on the part of the Competition Commission about exclusivity clauses in national grocery chains leases. Whatever the outcome, this could spell some significant change in the transactions between landlords and certain chains and this will depend on whether one is a landlord or a grocery chain," he concludes.

To download the report, go to Broll Retail Consumer Survey 2014.