Group Property

The Group Property division is responsible for administering the group’s leases of space for all its stores, which numbered 1 393 at the year-end, and for administering three properties which the group has historically owned and from which it still trades. The division’s tasks include assessing space requirements and matching them with suitable properties, negotiating leases and extensions of leases with landlords and maintaining relationships with landlords over the periods of leases that sometimes extend for as long as ten years.

Property rental payments make up the second largest item of expenditure for the group, and it is accordingly vital to optimise the benefits to be gained from rentals.

The group’s policy is to rent rather than to own since, for a trader, the role of a tenant as against that of an owner provides greater flexibility and makes it possible for impartial decisions to be taken about all matters affecting properties.

The group’s three owned properties are located in the central business districts of Cape Town, Johannesburg and Durban respectively, and have been in its possession for several decades.

Store openings and space acquisition

During the year under review 76 new stores were opened across the group’s 14 trading units. The net total trading area grew by almost 23 000 square metres, an increase of 6,0% on the previous year. At the end of the year the group’s 1 393 stores occupied a total of 403 601 square metres of space.

The Foschini womenswear division (comprising Foschini, Donna-claire, Fashíonexpress and Luella) added the largest amount of extra space with 19 new stores.

The jewellery and sports divisions opened 19 and 15 new stores respectively. The jewellery units comprise American Swiss, Sterns and Matrix, while Totalsports, Sportscene and DueSouth make up the sports division.

Markham increased its footprint by an additional ten stores nationally. Included in these were four Markham Relay stores which carry only casualwear and, being about 150 square metres in area, are smaller than a full-line Markham store. The Markham Relay brand is seen as having substantial expansion potential.

The homeware division opened a further ten stores, one of which one was an @homelivingspace store in the Loch Logan mall in Bloemfontein, carrying a comprehensive product range that includes furniture.

Exact! opened three new stores during the year, adding an extra 1 445 square metres to this division’s trading space.

Across the group twelve stores were enlarged in key locations to relieve the pressure of excessive trading densities, whilst the trading area in three over-sized stores was reduced.

A further 14 stores were relocated to superior trading positions and “right-sized” in the process. A total of 15 underperforming stores were closed.

New centres

New centres that opened during the course of the year and in which the group is represented were:

  • Maponya Mall (Soweto);
  • Greenstone (East Rand);
  • Irene Mall (Pretoria);
  • Hillcrest (KwaZulu-Natal); and
  • Loch Logan (Bloemfontein).

The group intends to open stores in the next year in numerous centres, among them the following new centres:

  • Zevenwacht (Western Cape);
  • Westwood (Westville);
  • Wonderboom (Pretoria North);
  • Richards Bay (KwaZulu-Natal);
  • The Reds (Pretoria);
  • Jeffreys Bay (Eastern Cape);
  • Klerksdorp (North West Province); and
  • Kathu (Northern Cape).

Some 30 new stores are scheduled to open within the first few weeks of the new financial year.

Growth in trading space

Despite the Eskom power shortages and the current subdued retail conditions the construction of new retail buildings in South Africa is continuing apace. The group intends to take advantage of new opportunities which are emerging and will increase its trading space by approximately 10% in the next year, as against a rate of approximately 7% in preceding years.

The current phase of construction will thus provide the group with a welcome opportunity to raise its activity in space acquisition and marks a departure from acquisition levels that prevailed in the corresponding phase of previous business cycles. The programme for the immediate future will be undertaken on a highly selective basis, with a view to enabling the group to benefit fully from the upturn when the business cycle changes.

Factors influencing current property policy decisions

The division continuously assesses trading performance in relation to the location of its stores and naturally pays particular attention to sites where it has a very large presence. Among these are Menlyn (Pretoria East), Gateway (Umhlanga), Canal Walk (Cape Town), Sandton (both Sandton City and Sandton Square), Eastgate (Johannesburg East), Montana (Pretoria North-East), Mitchells Plain (Cape Town), Westville Pavilion (KwaZulu-Natal), East Rand Mall, Cresta (Johannesburg) and Tygervalley (Cape Town). This assessment process will be particularly intense in the current weak economic climate.

A trend in shopping centre design which is on an upward curve internationally at present is that of so-called “open” malls, which are generally low-rise buildings configured around parking areas. For developers this style of design is substantially cheaper than monolithic multi-storey “closed” complexes, with a benefit of lower rental to tenants. Two types of these “open” malls have emerged. One attracts value-based traders and is not of primary interest to the group, although some of its divisions are represented in these centres. The other is what may be called “lifestyle” centres accommodating stores that sell homeware and furniture and other specialist retailers, and also providing social gathering points such as restaurants and coffee bars. The group is well represented in complexes of this design.

Another trend which is emerging overseas but has yet to make a significant appearance in South Africa is “green” architecture for shopping centres, involving eco-friendly features to save electricity, water and other resources. This trend could have significant benefits for tenants and the group will press for these measures at sites where they are appropriate.

Effects of electrical power outages

Retailers have a particular aversion to power outages since history shows that sales lost during hours when trading cannot take place are never fully recovered. (This is perhaps a reflection of the fact that some shopping is done on a “want” basis rather than a “need” basis.)

There have been inevitable losses in the group as a result of the power breakdowns suffered throughout South Africa in recent months, and much thought is being given to possible solutions. The cost of installing fully satisfactory backup generating power in a large shopping centre may exceed R100 million, and the extra capital to be invested, with dubious returns, is a factor of great concern to landlords. Partial solutions which provide adequate if lowish lighting, some air movement falling short of air-conditioning and retention of power to retailers’ computerised tills, are a compromise which large retail chains may have to accept. Even these solutions are not always attainable. At present, therefore, the outages remain a problem in search of a solution. The national public authorities to whom traders and trade associations have turned for remedies which are essentially within their sphere of responsibility have so far not come forward with a convincing action plan.

Security against crime

The past year has seen a shift in the patterns of crime experienced by retailers, at least to the extent that gang-type incursions at shopping centres are on the rise. These incidents invariably involve firearms and usually cause loss of high-value stock on a substantial scale. There have also been undue numbers of hold-ups of store personnel at gunpoint. Traditional security precautions at shopping centres have been unavailing against the bulk of these incidents and improved strategies are called for. This topic is receiving close consideration.