How SA malls are faring amidst retail sector decline

South Africa's retail sector is facing significant challenges as Stats SA's retail trade sales for May marked a sixth consecutive month of year-on-year decline. The latest reading exhibited a 1.4 per cent drop year-on-year, following a 1.8 per cent decline in April. Amidst this environment, the focus shifted towards how commercial properties, specifically malls, are navigating these hurdles. Sazi Ndabeni, Divisional Executive at Broll Property Group, shed light on the current landscape during an interview with CNBC Africa. Ndabeni outlined the pressures on tenants, particularly independent retailers, grappling with rising operational costs driven by factors like increasing diesel prices. Managing the cost implications of generator expenses has been a challenge for property owners in passing these costs on to tenants. There have been mixed outcomes, with some common areas in shopping centers creating complexities in cost recovery. The surge in foot traffic post-COVID-19 has not necessarily translated into improved turnovers for tenants. While there has been an uptick in visitor numbers, the heightened cost of occupation poses a significant barrier to profitability for retailers. The cost burden has led to an increase in vacancies within the retail sector, making it difficult for independent retailers to sustain their businesses. Ndabeni highlighted that some properties have witnessed a decrease in price per square meterage to accommodate the changing cost dynamics. With ongoing challenges like power cuts and the prevalence of e-commerce, malls are under pressure to adapt to evolving consumer behaviors. The popularity of services like Uber Eats reflects a shift towards convenience and home-based consumption, impacting traditional retail spending. In response to these trends, malls are exploring innovative strategies such as pop-up stores to fill vacancies and cater to changing consumer preferences. Pop-up stores offer a short-term solution for landlords by leveraging turnover clauses based on store performance. This adaptability to market trends and technological advancements, including prop tech solutions, has become crucial for malls to navigate South Africa's slowing economy and competitive retail landscape. Overall, the retail sector in South Africa is at a crossroads, where resilience, flexibility, and strategic foresight will be essential for malls to weather the challenges posed by economic uncertainties and shifting consumer behaviors.