Consumers drive change in retail sector


The retail industry in South Africa has changed in recent times in response to changing consumer behaviour, poor economic growth and a general over supply of retail space in the country. Pre-Covid-19, we saw space consolidation by tenants and retailers which included the closure of non-performing stores. For example, banks re-evaluated their footprints and, in some instances, there were branch closures and branch size reductions. Similarly, improvements in technology and logistics networks drove other retailers to realise that they didn’t need massive stores with large storeroom capacity. The realisation that the bulk of storage could be managed through distribution centres and this meant that sizes of stores at  shopping centres could be reduced.


This resulted in a lot of space being available or coming available in the market. At the same time, certain retail categories were performing well and opening new stores. These include grocers, pharmacies, and athleisure tenants. Again, this was in response to changing consumer needs: people focusing on essential items, health and beauty products and changes in clothing preferences.

The pandemic has certainly accelerated the pace of adjustments and has made shifts in consumer behaviour more pronounced. According to SAPOA, “the average vacancy rate of the 100+ shopping centres forming part of the MSCI Retail Trading Density Index was recorded at 5.6% at June 2020, 80bps up on the previous quarter.” This is largely due to the initial anxiety caused by Covid-19 which resulted in retailers delaying investment decisions as well as the closure of non-performing stores. However, after the relaxation of lockdown restrictions, foot traffic at shopping centres has gradually improved. Positivity is returning to the sector and letting of vacant space is looking positive. 


Whilst some retailers maybe be closing stores (like Edcon), others are quick to occupy these vacancies. For instance, in the Fortress portfolio over the past three months, four Edcon stores were closed, and they have all been re-let to other retailers. In line with the trends we saw prior to lockdown, grocers, pharmacies, athleisure and value apparel retailers are leading the charge to take up space in shopping centres.


Contrary to the talk of a retail apocalypse, the industry is very much alive and kicking, but it is evolving in response to consumer behaviour. We remain committed to the industry and are investing time and energy into staying up to date on what shoppers want and need, so that we can respond accordingly.