Retail Rental Growth vs CPI: Clur Shopping Centre Index Q3 2024

• Rental growth nears CPI: Q3 2024 shows rental growth at 3.7%, just 0.1% below CPI of 3.8%, marking a shift since Covid-19.
• Regional Performance Shift: The Western Cape leads in trading density growth (5% y/y) and rental growth (4.8% y/y) compared to Gauteng and KwaZulu-Natal.
• Smaller Centres outperform: Small regionals now surpass super regionals in trading density growth, reflecting a shift toward community-focused, socially impactful retail.

The latest Clur Shopping Centre Index for Q3 2024 reveals that the gap between base rental growth and the Consumer Price Index (CPI) at South African shopping centres is narrowing. As of September 2024, rental growth for the Clur All Centres Index was recorded at 3.7%, just 0.1% below the CPI of 3.8%. This marks a notable shift from previous years when rental growth consistently lagged behind CPI, particularly since the impact of the COVID-19 pandemic in 2020.

The Clur Shopping Centre Index is a key part of the broader Clur Collective platform, which helps asset managers of listed and unlisted property funds optimize returns across more than 4.1 million square metres of retail space in South Africa and Namibia. This coverage will soon expand to over 5.4 million square metres. The index tracks a broad spectrum of retail space, spanning 140 different merchandising categories, offering valuable insights into the performance of the retail sector.

Key Insights from Q3 2024 Index

1. Rental Growth Outpaces Trading Density - Rental growth has shown consistent improvement over 2024, with a solid 3.7% year-on-year increase in base rent per square metre for the All Centres Index. This is a marked shift from the period between April 2021 and March 2024, when rental growth lagged behind trading density growth. However, Q3 2024 saw rental growth outperform annualised trading density growth, indicating a reversal of trends seen during the pandemic.
2. Regional Performance Trends - The Western Cape has continued to outperform other key provinces, with the highest trading density growth at 5% year-on-year, and the highest rental growth rate at 4.8%. In contrast, Gauteng and KwaZulu-Natal performed less strongly. This reinforces the trend of the Western Cape’s retail market continuing to show resilience and growth, even in a challenging economic environment.
3. Shift Between Large and Small Centres- A significant shift has been noted between large (super regional) and smaller retail centres. Since September 2021, larger centres had outpaced smaller centres in terms of growth, but this trend reversed in Q3 2024. Small regional centres now lead the way in trading density growth, with a 3.7% year-on-year increase, compared to 2.9% for super regional centres. Small regional centres also saw the highest growth in rentals at 6% year-on-year, while super regional centres had the highest market rental rate of R307.97 per square metre. ‍
4. The Rise of Social Impact Retail - The shift in performance between large and small centres also highlights the growing importance of “social impact retail.” This type of retail is geared toward serving local communities and enhancing economic opportunities within those areas. As consumers continue to prioritise necessity shopping over discretionary spending, the role of small centres in addressing community needs has gained prominence. This trend aligns with the broader global shift towards wellness, encompassing not just personal health but community and financial wellness as well

Looking Ahead: The Festive Season Outlook

With the festive season approaching, questions are emerging about consumer behaviour. In 2023, December trading saw Black Friday sales overshadowed by an extended festive period. Will 2024 follow this trend, or will we see a return to a more traditional two-month festive season? The Clur Index's insights into trading density and rental growth may provide clues as to what retailers can expect in the coming months, especially as consumers continue to focus on essential goods and services.

In conclusion, the Q3 2024 Clur Shopping Centre Index signals a positive shift for South African retail, with rental growth closing the gap on CPI and smaller centres becoming increasingly important. As retailers adapt to changing consumer preferences, understanding these dynamics will be crucial for optimising returns in the retail property sector.

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