Restaurants, gyms and other small businesses under severe strain as lockdown bites: property group

A positive effect of the recently-imposed adjusted Level 4 lockdown is that a lot more private investors are seeking or enquiring about professional management services, says Nkuli Bogopa, chief operating officer of property management at commercial property services company, Broll Property Group.

However, the lockdown has put many small businesses – restaurants and gyms in particular – under severe strain, with many closing down.

Broll, which manages over 400 shopping centres at present, said that there are a lot more properties up for sale, including in the industrial sector, which has performed better than most in recent times.

“Numerous office buildings are up for sale, but that has been going on for a while. The fact that a number of retail centres are also on the market is evidence that listed funds are under pressure and offloading assets as a result,” said Bogopa.

She stressed that this is part of a larger cyclical process. “What it has done is create a new wave of investors in a buyer’s market. Combined with favourable interest rates, it is generating quite some movement in the sector, which means we are getting some new players in the game.”

From a retail perspective, retailers are under tremendous pressure due to the latest lockdown, Bogopa said. “We are seeing all over again the closure of smaller businesses from restaurants to gyms. It is definitely going to impact our rental collections and the investor landscape in terms of income.”

Broll said that while retailers are largely in a hybrid mode, with some open and others closed, the third wave combined with the Level 4 lockdown remains a major cause for concern in the office sector, as people are more concerned about their health than ever due to the more transmissible Delta variant.

“The concern is palpable, and offices are obviously not the place where people want to be right now. Employers are also having to be guided by the regulations, with the lockdown dictating that we keep people out of office spaces,” said Bogopa.

She said that the duration of the pandemic is something few were prepared for. “We were all disrupted at the outset and the resultant concern about the impact of Covid-19, but the current uncertainty has been brought about by the fact that we do not really know when the pandemic is going to end.”

Increasing the speed of the national vaccination rollout will assist in returning a sense of stability and hope, she said.

From a retail perspective, while people are keeping the time they spend in malls to a minimum, the spend per visitor has increased.

“Both our super-regional and strip malls rely heavily on anchor tenants and the restaurant trade, which has now been shuttered again by the lockdown. Retailers will opt to remain open if not
compelled to do otherwise. We are noticing a higher rate of Covid-19 infections among retail staff.

“Restauranteurs are reporting that takeaway or home delivery is not a viable option in terms of cost, so are rather opting to do with less staff. It is unsure how the current scenario will play out in the broader retail and clothing sector,” Bogopa said.

Foot traffic at Level 4 lockdown

Elaine Wilson, divisional director, property intel at Broll Property Group, said that June data points to an obvious decline in foot traffic in shopping malls since the move to an adjusted
Level 4 lockdown.

“This can be expected with the closure of food and beverage outlets and gyms. Looking at year-on-year for June, only regional centres show an increase from last year.

Compared to the initial lockdown in April 2020, foot traffic increased in community centres by 51.2%, 68.2% in small regional centres and 111.7% in regional centres. “This can be expected, as only essential services were open during hard lockdown, Wilson said.

Buying behaviour has changed as a result of lockdown restrictions over the past year-and-a-half. “Basket spend has increased, but this can be attributed due to rising prices. Food prices continue to skyrocket.

“Sunflower cooking oil now costs customers 30.3% more than a year ago, while white sugar has increased by 11.5%. Global food prices have also recorded their fastest growth rate in more than a decade,” Wilson said.

The Food and Agricultural Organisation of the United Nations reported a 4.8% increase in May 2021, its highest value since September 2011. Impacted by the rise in fuel and electricity tariffs, these costs are set to continue to rise, impacting the entire economy and placing further downward pressure on consumer spending.

Online retail in South Africa has also surged – more than doubling over the last two years. It increased by 66% in 2020 at a value of R30.2 billion, compared to R14.1 billion in 2018. Currently, online retail represents 2.8% of total retail sales, up from 1.4% in 2018.

Overall, trading densities decreased by around -6.4% after the outbreak of the pandemic, Wilson noted. The highest drop in trading density is in entertainment (-56.1%), followed by services (-30.6%), with only homeware, furniture and interior showing positive growth (7%).

Looking at the secondary retail categories, pharmacies and personal care increased by 4.8% and groceries/supermarkets by 5.1%.

Hobby stores and tattoo parlours showed the biggest rise in trading density at 10% and 28.5% respectively. “It is interesting to note the rise in not only essential services, but also in ‘home entertainment’ and in drive-throughs (6%),” Wilson said.

Read: Mr Price highlights 7 post-lockdown trends in South Africa

Must Read

Partner Content

Show comments

Trending Now

Follow Us

Restaurants, gyms and other small businesses under severe strain as lockdown bites: property group