Neighbourhood shopping malls are welcoming back shoppers in droves

It is situated on what is arguably the busiest retail corridor on Gauteng's West Rand. But JSE-listed Redefine Properties’ new convenience shopping centre Kwena Square is pulling out all the stops to attract tenants and customers.

It has many attractions, including the first drive-through RocoMamas in the country, and a newly launched Little West Packers toy and baby store. A host of local businesses including trendy restaurants make up the rest of the mix of tenants, in addition to national retailers Checkers and Clicks.

The 10,000m centre uses solar roof panels to generate at least 40% of its energy needs, a strong selling point in a country experiencing a power crunch. As far as tenants are concerned, it has achieved a 100% occupancy rate, a rare feat in the retail sector considering leasing took place during Covid-19 lockdowns and judging from the hive of activity at the shopping centre's official launch on Wednesday. Kwena Square, which derives its name from the Sotho word for crocodile, is poised to win the hearts and minds of customers.

What differentiates Kwena Square, says Redefine, is that its tenant base is sourced from local businesses rather than just prominent national retailers. The main categories of tenants include groceries and restaurants, services and speciality retail, as well as home, beauty and health.

Among the tenants are Italian restaurant Lupa Osteria, Nossa Casa Portuguese Restaurant, Uncle Joe Florist and Neovision optometrists.

Perhaps the biggest selling point for Kwena Square, on Hendrik Potgieter Road in Little Falls, is its format. Convenience or neighbourhood shopping centres, usually 10,000 square metres or smaller, gained a lot of traction during the height of the pandemic because of their easy access to open-air parking close to the usual anchor grocery stores. This affords customers the opportunity to move quickly in and out of them. And through the threat of Covid is starting to recede, these centres have continued to experience strong foot traffic, says Nashil Chotoki, national retail asset manager for Redefine Properties.

He believes this convenience format is going to continue to be resilient, offering a strong rationale for developing Kwena Square.

Furthermore, Redefine’s COO Leon Kok says easy access and its location on large road networks make it easier for residents from regions such as Soweto to travel to do essential shopping as the centre is a 15 min drive from SA’s largest township.

But it’s not just the smaller convenience centres gathering momentum, With Chotoki saying that bigger malls are also experiencing retail recovery. The latest MSCI statistics show that trading densities across all retail formats in SA grew 21% year-on-year in 2022 and “trading density is already exceeding pre-Covid levels.” Kok believes this major revival is due in part to “the pessimism around Covid-19’s impact on retail, in my opinion, being overdone”.

“People thought [bricks and mortar] retail was going to die and that people were going to only shop online, and this hasn’t happened.”

He says the biggest impact on retail over the long term is not the pandemic nor even online retail but rather disposable income and that the “challenges our economy face is the far bigger challenge rather than online retail trends or whether the market is overshopped.”

“In the end, what determines the growth in retail is disposable income.”

This means that while SA’s future economic prospects remain a concern for the overall health of the physical retail market, online retail penetration and fears around Covid-19 in SA have not even come close to sounding the death knell for mall culture. Others are also noticing this improvement, with Galetti Corporate Real Estate saying this week the SA retail sector is showing strong signs of recovery, with shoppers' activity returning to pre-pandemic levels.

CEO John Jack says the steady growth of the economy as Covid restrictions have subsided is reflected in consumers’ spending power and their return to key shopping centres and malls, where retailers are experiencing higher turnover. “In addition, we are skiing a host of new retail developments coming to the fore. The majority of these are smaller strip malls, the kind of places where you can park out front and just walk in. Conveniently located in bustling community areas.” Says Jack.

Redefine’s Kok says he believes that trading densities, in general, are improving as people pour back into shopping centres because of the culture of SA and the way South Africans interact and socialise.

“There is a definite need for that physical experience. Regardless of what segment of the market you talk about, the higher LSM for instance who are able to buy online retail, you will also find that dual shopping is absolutely what they do. They get hooked online and they like to go and physically engage with the product and choose their own fresh veggies, for instance. So there is a need to follow an omnichannel approach so our retailers aren’t saying either/or, they all say we need to follow an omnichannel approach of having an in-store experience and online. They don’t see the two as competing with each other, instead, online and physical retail complement each other.

If you have a proper online offering you create more loyalty with your shopper and your shopper becomes a bigger basket shopper every time they go into a store.” Even with this omnichannel approach, the penetration of online retail is still relatively minor, with Chotoki saying that online retail in total probably makes up about 3-4% of the entire retail market compared with countries such as the UK and the US, where it is well over 10%.

Property economist Erwin Rode, who heads up Rode & Associates, agrees that online retail is very much in its infancy in SA and far behind developed countries, with little chance of it catching up completely in the coming years. This means, he says, that online retail is likely to largely remain the preserve of middle-and upper-income South Africans with computer access, with a big proportion of people still having to physically go to stores to do their shopping. And with consumers under pressure in a difficult economy, he believes convenience or neighbourhood shopping centres will do better than larger ones.

Rodes says smaller neighbourhood shopping centres have the advantage of being relatively close to home for South Africans as opposed to larger regional shopping centres, often situated further away. With transport costs soaring and more and more pressure being heaped on consumers, the closer a shopping centre is to them the better.

As to whether SA is “overshopped” in terms of too much available retail space, Chotoki says there is an oversupply in certain nodes or segments of the market, particularly some larger format regional shopping centres. But even here it is not the case with every regional mall. He says that Redefine’s portfolio retail centres grew sales this year to more than 6%of what they were pre-pandemic, while the largest regional malls in its portfolio were up over 4%.

As for convenience centres, Chotoki says he does not think there is an oversupply because that is where a lot of the growth is happening, and Kwena Square is proof of that. “There is also a significant undersupply of convenience retail in township markets.”