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The driver of malls’ success turns the corner


Some cause for optimism for shopping-centre landlords has been the recovery in retail sales volumes over the past few months.



In March 2010, the yearly growth in real retail sales turned the corner — from contraction to expansion — by growing by 1%; this after 13 consecutive months of contracting sales volumes.

Interestingly, a look at what has happened “behind” the growth-in-retail-sales graph reveals a few reasons for the improved performance. For one, consumer confidence has had a noticeable revival. In the first quarter of 2010, the FNB/BER Consumer Confidence Index increased to an index value of +15, up from +6 in the previous quarter. According to the compilers of the Index, the sharp improvement can be attributed to more respondents (on a net basis) expecting the economy and their own finances to improve during the next 12 months. In fact, in the reporting quarter, the economy grew at a better-than-expected rate of 4,6% (year-on-year and annualized).


A symptom of the improved retail sales performance — as seen in the corresponding graph — is the fact that the growth in the value of credit card purchases processed by banks has also passed through its nadir. The growth in the value of credit card purchases has been heading south since about 2006, triggered by rising interest rates and spurred on by the National Credit Act in 2007. Since the end of 2009, however, the growth in the value of credit card purchases has started to accelerate again, which can be seen as signalling the end of consumer deleveraging.


As for the retail-rental outlook, improved retail sales do augur well for market rentals from the demand side. However, the rise in the unemployment rate in the first quarter of 2010 does bring to question whether the increased willingness to spend — increased consumer confidence — will be matched by a much improved ability to spend. Added to this, a relatively large quantity— more than 300.000 m² — of new shop space is still expected to come on line in 2010, which might also put a damper on market rentals from the supply side.

Hence, shopping-centre landlords should be warned to be cautiously optimistic.

For more information, contact John Lottering on 021 946 2480.