- Liberty Two Degrees is one of the companies with iconic businesses in Sandton, a place to be before the pandemic.
- But footfall in Sandton and other prime office and retail precincts in Johannesburg refuses to go back to pre-pandemic levels.
- Restaurants and hotels around these areas are struggling, but the Sandton City mall is still coining it.
Africa's richest square mile is no longer what it used to be.
A lot has changed in the past two years as the Covid-19 pandemic confined people to their homes, leaving some of offices in Sandton empty. Residential apartments in the area are just as badly affected as South Africa's financial hub recorded the highest number of empty apartments ever in 2021.
For the owner of Sandton City, Liberty Two Degrees (L2D), it's been an uncomfortable two years. The company also owns the Nelson Mandela Square shopping complex and three hotels in that vicinity.
When Sandton was booming, L2D also invested in Melrose Arch, another precinct that thrived on Johannesburg's growing high-income earning population and companies' desires to have the best address and occupy the fanciest offices before Covid-19. Together with Liberty, L2D owns 25% of the Melrose Arch precinct.
The InterContinental Sandton Towers hotel has remained closed for two years now. Sandton Sun Hotel and the Garden Court had significantly low occupancy. L2D tried to reopen the Garden Court when hotels could operate but closed it again until the last quarter of 2021. Even then, it only had an occupancy of 29%.
Nelson Mandela Square is not only prejudiced by the start-and-stop of restaurants under the lockdown, but it also has a large office component. Melrose Arch suffers from the same.
More than 30% of office space in Nelson Mandela Square didn't have any tenants, while vacancy rates sat at 16.3% in Melrose Arch. But even if offices had paying tenants, many of their staff members still worked from home.
Not having people in the offices means there isn't a constant feed of footfall to the restaurants around Nelson Mandela Square and Melrose Arch anymore. L2D CFO José Snyders said most of the retail revenue decline in the company's portfolio came from Nelson Mandela Square.
"There are differentiated retail offerings there that still battle under the current environment because there are no grocers and apparel store there," he said.
Snyders said while sometimes restaurants in both Nelson Mandela Square and Melrose Arch appear busy and packed, they are not generating the revenues they used to.
"It's not always easy to see it with a naked eye. But restaurants operate at a much reduced capacity to maintain space between the tables. There are probably 20% to 30% less tables in all the restaurants than what they would normally be," he said.
But there's more life in Sandton City
Amid all that gloom, Sandton City's spark is becoming brighter. Even though footfall to the mall was still down 12.2% in December compared to 2019, it generated the highest annual turnover in its history of around R7.4 billion. This outpaced 2020 and 2019 annual turnover by 31.3% and 4.3%, respectively.
"The shopping patterns have changed. People come less often, but they shop more when they are here," said Snyders.
In the first few quarters after the hard lockdown, Sandton City benefitted mostly from people seeking luxury brands they used to buy overseas before the pandemic.
Luxury brands retailers still lead the pack as they sold 50% more than they did in 2019. But now, more retail categories are doing better than before the pandemic
"But what we are seeing is a strong recovery on apparel tenants and grocers. So, collectively, retail is significantly better than in 2020 in Sandton City, even though not everybody is there yet. Certain categories of tenants are still battling like the restaurants," Snyders said.
But since December 2021, there's been improvement even in turnover of those battling tenants. And tenants are filling the mall up again. Sandton City's occupancy rate rose from 97.9% to 98.3%, ahead of the Q3 MSCI Super Regional benchmark of 93.2%.
2022 might be better
But L2D is more hopeful that 2022 will bring more life to Sandton and help feed foot traffic to its Sandton City Complex. Snyders said early signs in the first two months of the year show that there will be an uptick in activity, even though he doesn't expect activity to go back to pre-pandemic levels this year.
"In the early months of 2022 is that it does look a little busier than it did in the comparative months of 2021. We had the Meetings Africa conference at the Convention Centre this week. The hotels feed a lot from business activity related to those conferences, and we are hoping that it will be a bit more positive in 2022," said Snyders.
Other conferences scheduled to take place in Sandton Convention Centre this year include the Manufacturing Indaba, hospitality and foodservice show, Hostex, RMB WineX 2022, Power & Electricity World Africa conference and The Water Show Africa 2022.