The retail property sector, which suffered greatly under last year’s lockdown, is making a comeback this year – but its long-term survival and performance could be more worrying.
The hard lockdown, which saw customers spending less and some retailers closing their doors, was the biggest shock to the sector’s performance, but post lockdown it is a lower household income that is proving to be the biggest challenge.
Not even the steady growth of e-commerce is having as much of an impact on current sales performance.
This will, however, change, and with e-commerce continuing to gain momentum, along with changed consumer habits and people’s financial struggles, retail properties are going to have to make some changes to stay relevant and counter their vacancy rates.
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Addressing a virtual briefing on the outlook for the retail property sector, John Loos, commercial property economist at FNB, said retailers in prominent business hubs were under particular pressure.
“Certain centres with restaurants and pubs that cater for corporate employees – like those in the Sandton area or close to the Cape Town CBD – are under severe pressure. With fewer employees in the office there are fewer customers going for business lunches and after-hours get-togethers.”
E-commerce is another big player set to become a strong threat to traditional retailers.
This is already the case in many developed countries and South Africa, although progressing slower in the adoption of this technology, is not immune to the trend.
“Online shopping was growing even before Covid-19, and the lockdown gave it a bump up as more people used it for the first time. A portion of them will continue to shop online and as more consumers use it their habits will change (in favour of e-commerce).
“Retail has got to get cleverer. If more shopping is done online in the future they will have to find other uses for the space,” he says.
While residential conversion of underused retail property is a possible solution, Loos said it was not always a straightforward task.
“In Sandton, for example, there is already a high residential vacancy rate so if there were to be any conversions they would have to be more affordable homes. This will obviously affect the income level of the area and, in turn, impact the type of retail offerings in it.”
Other possible use of bulk retail space is conversion into storage facilities or others that support last-mile delivery. Overseas there have even been examples of unused space utilised for indoor agriculture in order to bring fresh food closer to their customers.
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