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The gap between base rentals at South African shopping centres and inflation is closing fast, according to the\u00a0Clur\u00a0Shopping Centre Index for the third quarter of 2024.<\/p>\n\n\n\n
The index looks at over 4.1 million sqm of prime retail space and 140 merchandising categories across SA and Namibia.<\/p>\n\n\n\n
\u201cRental growth rates in September for the\u00a0Clur\u00a0All Centres Index were at 3.7%, only 0.1% below relative CPI of 3.8%,\u201c said\u00a0Belinda\u00a0Clur, managing director of\u00a0Clur\u00a0International which produces the index.<\/p>\n\n\n\n
\u201cRental growth rates have consistently under-performed CPI since July 2020, during the Covid-19 pandemic.\u00a0 They have also consistently underperformed annualised trading density growth rates from April 2021 through to March 2024.<\/p>\n\n\n\n
\u201cQ2 2024 suggested an inversion in this dynamic, with Q3 2024 confirming the shift, and rental growth outperforming annualised trading density growth throughout.<\/p>\n\n\n\n
\u201cThis overall position has been driven by a continued retreat in domestic inflation, a solidification in rental growth at above 3% over 2024 and a further contraction in annualised trading density growth in Q3 \u201824.\u201d<\/p>\n\n\n\n
Clur\u00a0added that in September 2024, the All Centres trading density index closed at R41,539 per sqm and 2.9% y\/y growth.<\/p>\n\n\n\n
\u201cThe All Centres base rent per square metre index closed at R234.59 and 3.7% year-on-year growth. Q3 showed a softer contraction in trading density growth of -0.5% relative to Q2 than the -1.7% against Q4 \u201923.\u201d<\/p>\n\n\n\n
She added that an expected inverse relationship between trading density growth and growth in the rent-to-sales ratio is apparent.<\/p>\n\n\n\n
\u201cThe annualised rent-to-sales ratio closed at 6.6% on Sept 24, with a flat y\/y% growth rate. 2024 to date shows the lowest overall rent-to-sales ratio levels relative to the last five years, having peaked at 8.4% in January 2021. As a rule of thumb, the lower the rent-to-sales ratio, the lower the rental risk.\u201d<\/p>\n\n\n\n
The third quarter also continued to see the Western Cape being the top performer of the three key provinces in South Africa, with a trading density of R46,248\/ sqm and 5% y\/y% growth ahead of Gauteng and KwaZulu Natal. <\/p>\n\n\n\n
It also had the highest rental and growth rate of the three at R252.22\/sqm and 4.8% y\/y% growth.<\/p>\n\n\n\n
Clur\u00a0added there are early signs of a shift in the dynamic between larger centres and smaller centres.<\/p>\n\n\n\n
\u201cLarger centres have grown faster than smaller centres since September 2021, but this trend reversed in September 2024, with the pack of super regionals and regionals slightly under-performing the pack of small regional and smaller centres by -0.1%.” <\/p>\n\n\n\n
\u201cSmall regionals closed Q3\u201924 with the highest trading density growth rate of 3.7% y\/y, followed by super regionals at 2.9% y\/y. Super regionals have held the top growth performer position since August 2021, but since July 2024 small regionals have taken the top spot.”<\/p>\n\n\n\n
\u201cSuper regional centres, however, achieved the highest market rental rate of R307.97\/sqm in September 2024, with small regionals achieving the highest y\/y% growth rate in rentals of 6%.<\/p>\n\n\n\n
\u201cMoreover, small regionals trading density growth expanded by 0.1% against Q2 and by 0.5% against Q4\u201923. The largest growth contraction of -1% against Q2 and -3.3% against Q4\u201923 was seen by super regionals.<\/p>\n\n\n\n
Q3 showed the continuing trend of the highest trading densities being achieved by the very large and very small centres, with super-regionals closing at R49,443 per sqm, while community and smaller centres closed at R42,918 per sqm.<\/p>\n\n\n