Pet-friendly spaces, open-air malls, immersive experiential stores and energy alternatives are among the retail space trends that South African property professionals are keeping an eye on as the industry considers ways to stay competitive.
These were some of the key insights from the Broll Property Management team, who recently joined property sector colleagues on the South African Council of Shopping Centres (SACSC) tour to the United States and Mexico to view some of the best malls in the world.
Importantly, the trip allowed them to benchmark how South Africa fares in relation to what is happening in the retail space overseas and identify trends that can be put into practice locally.
Nkuli Bogopa, Broll Property Management’s Chief Operating Officer, Theresa Terblanche, Divisional Director of Broll Retail Leasing & Sectional Title Management, and one of Broll’s valued clients, Vuso Majija, Executive Director at Fortress Reit Limited, unpack key takeaways from their trip.
Focus on aesthetics
Bogopa says she was struck by the number of open-air malls in the United States. “From a design point of view, the US definitely boasts more open-air malls than South Africa. This is probably due to our different economic landscapes. South Africa has had to build more enclosed malls as a security consideration. As a country, we have much work to do before we can be more flexible in this respect.”
Majija adds that a notable difference in the United States is its focus on the look and feel of its shopping centres. “A lot of time and money is spent on landscaping and ‘softening’ the centres. My view is that there is greater focus on functionality or making the centres work in South Africa. This does, however, seem to be a slowly evolving space, with greater attention being paid to the aesthetics of shopping centres.”
Bogopa says the softening of the landscape away from hard bricks and mortar towards more experiential retail experiences is also evidenced by the many art exhibitions, lounge areas, large outdoor sculptures and water features that abound, resulting in a good mix of nature and the built environment.
“This ensures shopping centres become destination venues and not just places to shop. With people working from home during the pandemic, mall managers invested significantly in enhancing the look and feel of malls to encourage people to linger. Of course, after an hour or so of lounging around, people will spend money.”
Terblanche says South African shopping centres are so pressured to prove viability and make returns that they don’t have a lot of common areas. “We tend to go for the highest lettable area and that’s where we’ve lost the soft touch.”
Welcoming spaces for pets
Majija notes that many of the shopping centres in the United States are pet friendly. “While there are several parks and outdoor venues people can take their pets to in South Africa, not many centres are pet friendly. This is definitely a trend that we are currently looking into since being on the tour. We have begun to identify shopping centres that we believe can accommodate pets with in-store grooming parlours, pet menus at eateries that welcome dogs at their tables.
More buoyant US market
Bogopa says the retail landscape in the United States is more buoyant than in South Africa. “There were hardly any vacancies at the centres we visited, trading densities were high and numerous premium brands were on offer.
“Once again, this points to the fundamental difference in our economies. While South Africa is battling with an unemployment rate of around 34%, some states in the United States have unemployment levels of minus two. Everywhere you go, you see ‘help wanted’ signs.”
Majija says since the onset of the pandemic, there has been some negative rhetoric around shopping centres, with some speculating that they are dying. “I witnessed the opposite in the United States, with a lot of traffic through shopping centres. It reinforced my belief that centres are not dying. There may have been an oversupply of retail offerings in different metropoles in South Africa as some point, but this has righted itself over the past couple of years and they are thriving again.”
The pandemic did, however, see more people shopping locally in community and neighbourhood centres. “While online shopping increased by about 38% during the pandemic, there is clear evidence that shoppers are back, the footfall is up, turnovers are higher, spend per head has increased, but a lot of this is happening in local shopping centres. I believe this trend is here to stay – in South Africa and the United States,” says Terblanche.
Choosing the right anchor tenants
“Retailers around the globe respond to what the customers in their specific catchment areas want, which means it is not always right to make direct comparisons between South Africa and other parts of the world, but I noticed that while South African centres are anchored by grocery stores (supermarkets), centres in the United States and parts of Europe are often anchored by large department stores such as Bloomingdales or Macy’s. This, however, seems set to change, with more centres in the United States looking to anchor with supermarkets,” says Majija.
“South Africa has had the benefit of being a follower. The United States and some countries in Europe were the first to invest in malls back in the 60s and 70s and a lot of mistakes were made. By the time we got into shopping centres, we had learnt a lot of what not to do, for instance, our centres are not as big as those in the United States. Often, you’ll hear about dead shopping centres, but we don’t have many of those in South Africa,” he adds.
Terblanche says the large department stores occupy about 15,000m2 in each centre. In South Africa, our footprint for a supermarket is about 5,000m2. “In the United States, many of the centres have a stereotypical tenant mix, with a limited number of moms and pops stores and less innovative stores. In South Africa, I believe we have more of an interesting mix, with much smaller stores and a greater degree of creativity when it comes to our tenant mix.”
Trend towards sustainability
Sustainability initiatives observed by the visiting team are similar to those in South Africa. “Most landlords in South Africa and the United States are introducing sustainability measures, but I think we can do better, such as, using hand paper towels and toilet paper that are produced of ‘brown paper’. Our recycling efforts could be also be greater,” says Bogopa.
She says South Africa is doing well from a solar energy perspective. “I think we are on the right track when it comes to using solar energy and many landlords have introduced water harvesting initiatives, which they are benefiting from.”
Incubation and pop-up stores
Speaking on leasing tactics, Terblanche says United States centres shared some of the steps taken to help them navigate the pandemic. “To fill the empty space left by tenants who were unable to survive the pandemic, one of the centres in Los Angeles collaborated with several local designers, giving them each a space and rack to display their merchandise. It was a highly successful endeavour.”
Another centre in the United States was highly invested in pop-up stores. “A notable difference between South Africa and the United States in their approach to pop-up stores is that pop-up store installations in some United States centres are financed to ensure they adhere to the overall look and feel of the centre. The idea is also to view the pop-up entrepreneurs as the tenants of the future and give them a boost. In South Africa, you know a pop up when you see it,” adds Terblanche.
With small business the backbone of South Africa’s economy, Bogopa says the focus on providing more entrepreneurs with an opportunity to sell their products in bricks and mortar spaces is important. “It has already done much for the country’s economy and will continue to do so if the retail sector continues to provide these types of opportunities.”
Getting to grips with secondary markets
Terblanche notes that some of the centres she observed in the United States are in touch with their secondary markets. “In South Africa, we are largely focused on our primary markets, while some centres in the United States reach out to customers located as far as 18km away to get their input on optimal tenant mix.”
Nkuli believes South Africa compares well with the United States. “There are things we can learn from the United States, such as introducing seamless tenant engagement platforms and creating more welcoming spaces. After all, we want our consumers to have the best of all worlds here on African soil.”
