Wednesday, 26 April 2017

Opinion

Mall of Africa versus rivals

Hilton Tarrant




Nearly one year after opening, just how well is the Mall of Africa trading? Developer and manager Attacq stated in February that "trading densities exceeded expectations".

The country’s largest single phase shopping mall, which opened on April 28 2016, “achieved more than 1.1 million visitors per month” through last year. In what could be considered rather limited disclosure, Attacq said a “monthly average trading density of R2 777 per m2" was achieved. Trading density, which measures the the turnover achieved per square metre, is a critical metric for retail. Expansions aside, this is how stores and shopping malls grow: by attracting more shoppers (and better quality range/tenants).

Annual trading densities of selected shopping malls

Nelson Mandela Square1

R65 043 / m2

Sandton City1

R52 715 / m2

Hyde Park Corner2

R50 784 / m2

Canal Walk2

R43 464 / m2

Somerset Mall2

R42 156 / m2

Brooklyn Mall1

R37 644 / m2

Eastgate1

R37 622 / m2

Clearwater2

R37 308 / m2

Willowbridge2

R35 976 / m2

Mall of Africa3

R33 324 / m2

Rosebank Mall2

R33 276 / m2

1 12-month average (to 31 December) as published by Attacq and Liberty Two Degrees

2 Annualised from Hyprop H1 results to 31 December 2016.

3 Annualised from monthly average provided by Attacq for Mall of Africa since opening (eight months).

Sources: Liberty Two Degrees, Hyprop and Attacq financial reports

On a headline level, Mall of Africa is lagging direct super-regional rivals like Sandton City, Canal Walk and even Eastgate. However, these figures need to be seen in context: the Mall of Africa is a brand new development.

One (albeit not 100% precise) comparison, based on publicly disclosed data, is with Rosebank Mall which underwent a major R1 billion redevelopment in 2013 and 2014. It is about half the size of the Waterfall giant, with a total retail gross lettable area (GLA) of 62 413m2, versus Mall of Africa’s 131 000m2 (although, based on Attacq’s reporting of its 80% share as at December 31, the primary GLA seems nearer to 123 000m2).

The Rosebank Mall achieved an average monthly trading density of R2 738m2 in the six months to December 31 2015. This aligned almost perfectly with the reopening of the substantially bigger (and completely developed) mall. That reported trading density was a 33% increase on the prior period (when the centre was effectively a giant construction site). On an annualised basis, the trading density soon after reopening translates to R32 856m2. One wonders just what expectations Attacq had set for Mall of Africa.

Also, when it comes to malls, not all trading densities are created equal. Certain sizes of malls and categories of tenants will generate different trading densities.

In an extraordinarily detailed trading statistics and supplementary information document, Liberty Two Degrees, with stakes in Sandton City, Nelson Mandela Square, Melrose Arch and Eastgate (among other assets) provides colour on trading densities achieved at its malls. In the accessories, watches and jewellery category, Nelson Mandela Square achieved annual trading density of R253 052m2 (with 5.6% of gross lettable area), while Sandton City reported a figure of R212 991m2 (only 2% of GLA). Food services, which makes up 36% of GLA in Nelson Mandela Square, had a trading density of R55 552m2, while in adjoining Sandton City it was slightly lower at R52 802m2 (3% of space).

Data for malls such as Menlyn Park and Tyger Valley (both owned by PIC property arm Pareto) and Gateway Theatre of Shopping and Cavendish Square (both Old Mutual Properties) is not publicly available. Surprisingly, few other property funds with large retail portfolios, including Growthpoint, disclose specific trading densities of their assets. All Growthpoint will say about performance of the V&A Waterfront, in which it holds a 50% stake, is that it has the “best trading density compared to other super regionals in country”. This would suggest it is easily over the R50 000m2 (annualised) mark.

For Attacq, key to growing and sustaining footfall during the week at Mall of Africa will be the completion of office and residential developments in Waterfall. In its H1 results to December 31, it says “trading is expected to increase as Waterfall City and its surrounds continue to densify, extracting further value from Mall of Africa in the years to come”.

The mega developments of new head office campuses for PwC (45 000m2) and Deloitte (43 000m2) will certainly help. These two projects alone will bring an additional 7 000-plus employees to within walking distance from the mall. The incredible development in the Sandton CBD, especially surrounding Sandton City, means it will take decades for Waterfall to achieve the same densities its Sandton rival enjoys, and it’s not clear that it ever will…. 

Hilton Tarrant works at immedia. He can still be contacted at hilton@moneyweb.co.za.

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