Oversupply of Retail Space no good news to Pretoria East

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At least 11 new shopping centres have been planned for Pretoria East, raising the likelihood of an over-supply of retail stock in the region. At least 11 new shopping centres have been planned for Pretoria East, raising the likelihood of an over-supply of retail stock in the region.

Shopping Centre demand in Pretoria East is almost tipping over, but more malls are still coming online — raising the likelihood of an over-supply of retail stock in the region.

While the region already has 50 formal shopping centres, 11 more proposed centres have been planned in close proximity to the area despite consumers’ seemingly waning appetite for retail therapy.

Generally, South Africa has a mall culture where most people living in suburbs shop, dine and go out for the night. But the big question is whether Pretoria East can support any more centres.

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The latest findings released on Wednesday by Broll Property group confirms the proposed centres, measure a combined 555,459m² of space, of which approximately 21% is situated in Pretoria East.

“The numbers suggest Pretoria East, much like the retail sector in South Africa, is perceived to be oversupplied, however, since the area is still developing, the impact of the proposed new centres (if and when they come to fruition) on existing centres remains to be seen,” says Elaine Wilson, Divisional Director for Research at Broll.

The roll-out of new malls and an acceleration in consumer spending is defying the slowest expansion in gross domestic product since the 2009 recession, the highest interest rates in six years and an unemployment rate of about 20%. It cannot last, and rising inflation and the deteriorating economy will eventually take its toll, according to Zandile Makhoba, an analyst at Jones Lang LaSalle.

The study shows people living in Pretoria East have, a staggering amount of formal retail space available to them in comparison to other major cities within South Africa with approximately 3,827m² available per 1,000 people, meaning for each person in the area, there is 3.83m² of retail space available.

Proposed Shopping Centres

Small regional centres (25,000m² – 49,999m²) make up the largest component of total retail GLA in the area, accounting for around 26% of space while local convenience centres (1,000m2 – 4,999m2) account for the least amount of total space (6%).

Wilson says Pretoria East has an approximate population of 201,510 people, with 61% aged below 40 and a high economically active percentage of 84.6%, which bodes well for the retail sector, as the more economically active people there are in an area the more retail spending is likely to take place.

Menlyn Park Shopping Centre owner, Pareto CEO, Marius Muller recently warned SA Retailers to guard against cannibalization — citing bigger centres taking away spend from the weaker centres.

The current influx of new shopping centers reflects the length of projects and how some developers “pull the trigger” at the top of the business cycle and deliver the completed centers in a downturn, according to Marvin Nair, head of new business in real estate finance at Standard Bank.

South Africa has an astounding 23,046,181m² of formal shopping centre space which comprises of close to 2,000 centres, nearly 45% of this space is in Gauteng, 15% in the Western Cape and 13% in Kwa-Zulu Natal.

Although Gauteng is the smallest province in terms of size, it has the most retail space as well as the highest population percentage with the City of Johannesburg’s formal retail space measuring roughly 4.5 million m² while the City of Tshwane has ±3 million m² of space with Pretoria East accounting for around 771,098m² of that total.

Province by Area and Population

Meanwhile Cape Town and Ethekwini’s (Durban) formal retail space measures roughly 2.6 million m² and 1.7 million m² respectively.

Wilson adds that the City of Tshwane has the highest formal shopping centre density compared to other major cities in the country, with 955m² of formal retail space available per 1,000 people followed closely by the City of Johannesburg with 900m²/1,000 people, the City of Cape Town with 681m²/1,000 people and eThekwini with 473m²/1,000 people.

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Retail Property  |  Pretoria Property Market  |  Broll Property Group  |  Marius Muller  |  Elaine Wilson  |  Zandile Makhoba  |  Marvin Nair