Retailers find rural and township malls more appealing as they look to grow again – Vukile

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Vukile Property Fund's Gugulethu Square.
Photo: Vukile Property Fund
Vukile Property Fund's Gugulethu Square. Photo: Vukile Property Fund
  • Vukile Property Fund says retailers are looking to expand again.
  • More are looking to increase their footprint in rural malls, townships and value centres.
  • Township, rural and convenience value centres have shown resilience throughout the pandemic.

Vukile Property Fund says for the first time in almost two years, retailers are excited about expanding again. The owner of Gugulethu Square and Mdantsane City Shopping Centre said it has just finished a roadshow with its top retailers.

"And really, with almost no exception, every one of them has got aggressive expansion plans going forward. And that all augurs really well for the retail sector," said Vukile CEO Laurence Rapp.

Since there's no development of new malls going on – and Rapp believes there are enough malls and shopping centres in SA anyway – existing landlords are bracing themselves for fuller malls. 

"If you've got limited space and strong demand, retailers have to start competing for space, and that should be positive for rental growth," said Rapp.

It's about being closer to people

The demand for space is particularly pronounced in shopping centres located in townships and rural areas. Landlords owning smaller convenience centres in the suburbs are also in luck.

Rapp said already in the last six months to 30 September, Vukile witnessed strong demand and trading activity in its townships, rural and value centres. More retailers wanted to get space there. 

As a result, vacancies in Vukile's rural malls declined to 1.9%, the lowest in four years. And value centres only have 1% of their space empty. Of all Vukile's malls, 13 are fully let, and 21 have vacancies of less than 1 000m2

"We are pretty much seeing demand across the board from all of the retailers based on the roadshow we've just had with them. They're looking to grow, and particularly into our types of assets," said Rapp.

Rapp said looking at Vukile's tenants' recovery; it's clear that resilience lies in how close the mall is to the masses. It's not so much about the income bracket of the catchment area. For instance, most shoppers who visit these Vukile malls buy very small baskets. But they shop frequently.

"You just have to look at the volume of people in South Africa, where they live, how they shop. That is where the strength of this portfolio comes through," said Rapp.

Throughout the pandemic, convenience centres, rural and township malls showed better resilience than their urban and super-regional counterparts. 

However, in 2021, big malls like Sandton City started bouncing back again.

But the early days of the lockdown seem to have shown retailers that they need to be closer to the people to hedge their bets should another economic crunch similar to 2020s reoccur. 

However, Rapp said the retailers looking to set shop in Vukile's rural and township malls aren't necessarily closing their operations in the urban centres. Those who have closed shop in centres like the East Rand Mall were predominantly in the leisure and restaurant industries. 

So, the retailers going to the rural and township centres are doing so in addition to maintaining their presence in the East Rand Mall.

Almost all retail categories back to pre-pandemic levels

Vukile's Southern African business is now trading ahead of pre-pandemic levels.

The group's net operating income grew by 3.7% on a like-for-like basis in the year ended on 30 September. Tenants' trading density growth was up 4.3%.

Vukile has been tracking the performance of 13 different categories of retailers in its shopping centres. Six months ago, five of those categories were still in the red in terms of growth in trading densities and turnover. 

Now, 12 of the 13 categories are in positive territory. The only retail category that is still struggling is department stores, primarily because of Edgars and Game.

Retailers focused on home furnishings, art, antiques, and décor had the biggest annual turnover growth at 8.8%, followed by food and pharmacies. 

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