South Africa’s Shopping Mall Oversupply Is About To Tip Over

South Africa’s Shopping Mall Oversupply Is About To Tip Over

South Africa’s shopping mall oversupply is almost tipping over, but more shopping malls are still coming online.

With over 2,000 malls, the country has the seventh highest number of shopping centers in the world, covering over 23 million square meters — more than all the countries in Europe, according to Bloomberg.

The big question is whether South African can support any more malls.

A new 130,000 square meters mall is set to open in the country on Thursday when Attacq Ltd. snips the ribbon on its Mall of Africa in Johannesburg, the largest first phase retail space in the Africa’s second largest economy.

“Community shopping centres and super regional centres are still doing well, but cracks are appearing in regional and smaller community centres, especially those situated in the middle of nowhere,” Kundayi Munzara,  a director of Sesfikile Capital which specialises in the listed property sector, said during the 19th Congress of the South African Council of Shopping Centres in October last year.

“We think that the risk of an oversupply of retail space in shopping malls started to increase since 2014. This could lead to cannibalisation and vacancies, especially if large retailers start closing stores. And there are already examples of that.”

New malls, like the Mall of Africa, are diverting consumers from existing one and retailer are following them there.

And old shopping centers are not the only one’s suffering from the competition. High street shops are also losing their clients as brand new shopping malls in smaller towns draw retail spending from street shops.

“The most important consequence of oversupply is that competition amongst the developers and the property owners is immense,” Rode, the CEO of Rode and Associates, told CNBC Africa . “You have this situation where shopping centers are forced into maybe a premature upgrading of their buildings because they are afraid of losing trade to the competitors.”

As a sub-sector, the retail segment of listed property in South Africa has outperformed all other asset classes over the last 10 years.

But this could be could be coming to an end, Munzara warned.

“If you invested R100 in listed property 10 years ago, you would now have R603,” he told Fin24.

“After the boom phase for listed property investment – between 2005 and 2009 – and the financial crisis, the sector is now in a questionable phase. The SA economy is not growing that much and there is a risk of oversupply of retail space in shopping centres due to new capacity being developed.”