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Data reveals retail green shoots as lockdown restrictions ease

Published: 29 September 2021

The knock-on effect of the series of lockdowns was most severely felt by the retail sector especially as traffic drivers like restaurants, beauty, cinema and other leisure venues remained closed for the longest time. A better-than-expected recovery and steady vaccination numbers has given the government more options to reopen the economy with confidence. This is reflected in the new data and shows spending at physical stores has reached pre-Covid levels in spite of the growth in online retail.

The national card purchase trend volumes analysed by Nedbank point to an average 4% growth in number of online transactions in 2021 compared to 2019. During the same period online sales grew by 1% to 1.5% indicating smaller basket sizes for online sales.

A new study by MSCI shows that some areas of retail like convenience centres are seeing a rise in sales and visitors with trading densities exceeding pre-Covid levels. Others like super regional centres have not recovered to pre-Covid levels however small green shoots of recovery are beginning to emerge.

“The growth of convenience centres is hardly a new trend. First witnessed during 2016, the work from home tailwinds really helped convenience centres to quickly grow from bread and milk stops to shopping destinations. This impressive growth has even caught the eyes of major fashion retailers and brands who are now actively seeking space in the once humble centres,” says Nashil Chotoki, National Retail Asset Manager, Redefine Properties.

“We are confident that as we inch closer to vaccination numbers required for herd immunity and hybrid working conditions are in place, traffic will return to large format centres. We are already seeing a rebound in Q2 2021, as people have slowly started returning to them.”

Redefine Properties which has some 70 retail properties, of which 48% are regional and super regional centres expects negative rental reversion to ease as other retail outside of essential services recover and the diversified nature of the retail portfolio has proven to be defensive despite volatility. Redefine’s retail portfolio generates on average R173.7 per m2 and are 94.5% occupied.

According to Leon Kok, COO, Redefine Properties, physical shopping centres will continue to be the mainstay of shopping activity, but online must be part of the offering to consumers.

“After more than 18 months of limited shopping, social distancing and working from home, we expect people to return with more confidence as we emerge from the pandemic. Last year we learned the convenience of online shopping, and now it is likely that there will be more premium placed on shopping experiences.”

“We are partnering with Quench to launch a pilot at the Kyalami Centre during December which will allow shoppers the ability to buy from multiple stores in a mall on a single platform, pay for all the purchases in a single transaction and have it delivered to your home.”

The partnership will give independent retailers an immediate online presence and shopping centre owners will be able to track sales and turnover performance. If the pilot is successful, Redefine plans to roll-out to other centres in its portfolio.

“As channels, both the store and online are complementary. And numbers make it evidently clear that e-commerce growth has not impeded opportunity for brick-and-mortar to grow. This omnichannel growth demonstrates the need to bridge the physical and digital divide in the new normal. Shoppers want a multi-dimensional retail option, and retailers and landlords need to speak to needs in both environments.”

Within its portfolio Redefine is finding that its turnover recovery continues to be driven by essential services, home improvement, apparel and take-outs.

“In and through the pandemic, we have retained our focus on de-risking our balance sheet, lowering our LTV ratio and trimming our local and offshore property platforms. This has not only provided us with sufficient liquidity to position the company for exciting opportunities but also focus on the key issue of sustainability,” adds Kok.

Active asset management will see Redefine reduce water consumption by over 42 megalitres in its retail portfolio alone. Furthermore, the successful sustainability linked bond raise of R1 billion will also see Redefine investing in expanding solar capacity by a further 13.4 MWP achieving annual electricity cost savings of R36.5 million. Already underway are energy efficiency projects to reduce consumption by 1.2 MWh.

"The economy and consumer spending have proven to be more resilient than initially forecasted. While there are downside risks related to unemployment and economic policy reform overall households are healthier, and consumers are demonstrating their ability and willingness to spend despite fewer visits to the mall, concludes Kok.