Going mad at the malls

Judging by the latest upbeat trading figures reported by JSE-listed mall owners, these businesses have hardly been affected by interest rate and fuel price hikes, and the continued rise in e-commerce. It seems South Africans still have a penchant for in-person retail therapy.

Results and pre-close trading updates released by several real estate investment trusts (Reits) in recent weeks show shopping centre portfolios are in good operational shape. Retail specialist Reits including Vukile Property Fund, Hyprop Investments and Fairvest, and those with sizeable mall portfolios such as Growthpoint Properties and Attacq, have all delivered impressive retail metrics year to date.

Every one of these counters is on track to deliver dividend growth comfortably ahead of inflation this year, a welcome change from the preceding three to five years when most Reits were battling to grow earnings on the back of higher vacancies and negative rental reversions.

Strong performers

Vukile, which owns a R19.5bn South African portfolio of township, rural, urban and commuter malls, alongside its R44.2bn retail exposure to Spain, Portugal and Italy, has been one of the sector’s strongest operational performers. Last month, it declared better-than-expected dividend growth of 9.3% for the year to March, which CEO Laurence Rapp credits to the strength of its South African mall portfolio. He said Vukile is on track to deliver dividend growth of 10%-12% for the 2027 year.

For the year to March, like-for-like net operating income across Vukile’s 34 local centres was up an impressive 10.3%. The portfolio includes East Rand Mall, Dobsonville Mall in Soweto, Gugulethu Square in Cape Town, Botshabelo Mall in the Free State and Mall of Mthatha in the Eastern Cape. Sales growth clocked 5.4%, with increases across most retail categories. Foot count was up 2.2%, while vacancies remained at a low 1.7%.

Rentals continue to rebound, with reversions on lease renewals rising by 3.7% (up from 2.3% for the year to March 2025). Vukile’s like-for-like South African portfolio was valued 12.3% higher, which Rapp says reflects strategic asset management initiatives and the resilience of the lower-income consumer market.

Hyprop, owner of landmark centres including Rosebank Mall and Hyde Park Corner in Joburg, and CapeGate, Somerset Mall and Canal Walk in the Western Cape, is also on track to meet its 2026 income growth guidance of 10%-12% for the year to June 30. For the five months to May 31, Hyprop achieved a 5.5% year-on-year uplift in tenant turnover. Foot count was up 2.1%, while retail vacancies are at 3.3%.

In a pre-close operational update, CEO Morné Wilken says tenant demand in Hyprop’s Western Cape portfolio – Canal Walk in particular, the Western Cape’s only super-regional shopping centre at close to 150,000m² – is at a record high. Notable recent openings at the centre include Anta, True Religion and Liverpool FC’s first African store. Somerset Mall, which has undergone a R350m redevelopment and expansion project, has welcomed several new brands since November, including Anta, Truworths and Office London. Table Bay Mall, which Hyprop acquired in October 2023, has also attracted new tenants, including Faithful to Nature, MiMiQ, and Krumble.

New offerings at Hyde Park Corner include Bootlegger Coffee, Marc’s by Marc Jacobs Café (the first designer café in Africa) and Checkers’s clothing brand, UNIQ. At Rosebank Mall, the vacancy rate has dropped from 2% to 1.3% on the back of recent store openings by FARO, Wellness Warehouse, Lupis, and Livo.

On the rebound

Waterfall City developer Attacq released a similarly bullish pre-close update for the year to June 30, confirming it is on track to achieve 11%-14% growth in earnings. CEO Jackie van Niekerk says the Reit’s above-sector performance has been supported by “operational excellence” in its portfolio of eight shopping centres, including Mall of Africa, the anchor of the Waterfall City precinct in Midrand; Brooklyn Mall in Pretoria; Garden Route Mall in George; Eikestad Mall in Stellenbosch; and MooiRivier Mall in Potchefstroom.

Attacq recorded a 4.8% uplift in trading densities (turnover per square metre) for the 10 months to April 30. That’s up from 4.1% in the 2025 financial year and is a key metric used by mall owners to gauge the strength of consumer spending.

At Attacq’s flagship R6.6bn Mall of Africa, which at 131,000m² is the largest mall to be built from scratch in South Africa, foot count rallied 7% to a record 17.2-million (rolling 12 months to April 30).

Growthpoint, the JSE’s largest domestic property stock, has also seen an encouraging rebound in several key metrics in its R37bn retail portfolio of close to 40 shopping centres.

In a trading update for the nine months to March, Growthpoint reports that trading density growth accelerated to 4.2% in the first quarter, while foot count was up 1.2%. Vacancies in its retail portfolio dropped to 3.9%, down from 4.6% in June 2025, the lowest level in nearly seven years. Management says value-orientated formats and necessity-based retail continue to outperform on a relative basis. Geographically, Growthpoint’s Western Cape retail portfolio was the standout performer. The latter includes Cape Town’s Longbeach Mall, Mitchells Plain Plaza and Bayside Mall, as well as Paarl Mall in the Cape Winelands.

The Western Cape numbers were boosted by robust trading at the V&A Waterfront, the crown jewel in Growthpoint’s real estate portfolio, where foot count reached a record 2.4-million in March, up 1.2% year on year. Sales growth at the V&A rallied by 6.9% in the 12 months to March. It is also the first time since the pandemic that Growthpoint has been able to increase rentals on lease expiries. For the nine months to March, retail renewals clocked in at 1.3%, up from -0.3% in June last year.

Expanding footprints

The improved fortunes of mall owners is good news for Reit investors, given the huge investments being made by retailers to optimise digital delivery channels, especially in the grocery and fast-food sectors.

Independent property analyst Keillen Ndlovu notes that despite rapid growth in online sales, most retailers continue to expand their physical footprints. For example, despite the phenomenal success of Checkers Sixty60, Ndlovu says Shoprite plans to open 123 new physical stores in 2026 alone. Mr Price is planning 180 new stores while Pepkor, Boxer, Lewis and Woolworths are looking at 200, 60, 40 and 55 respectively.

Ndlovu says that, for now, TFG is the only major retailer with plans to close underperforming stores – 100 have been earmarked for the group’s 2027 financial year and 300 more over time.

He ascribes continued store expansion among most other retailers to the ever-growing tally of new shopping centres and the fierce battle for market share. Still, Ndlovu cautions that store rollouts are likely to slow down as the retail market becomes saturated and retailers begin to cannibalise their own stores — or if economic growth stalls.

“The continued rise in online shopping activity, investment, innovation, improved efficiencies, economies of scale and changing shopper behaviour should not be underestimated by retail landlords – even if they believe it may cap out at some point.”

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_{Top image: Mall of Africa. Picture: waterfallcity.co.za.}