In a depressed economy such as SA is going through at present, casualties become a reality. (Stores close for a number of reasons. )
Some examples below…..
1. National retailers close marginal profit stores when lease expires.
2. Independent businesses not financially viable to renew a rental agreement when lease ends.
3. Brand pulls out of country and closes all stores, i.e. Mango/Nine West.
4. Business fails, i.e. Stuttafords.
When a small store closes in a regional centre it is usually not difficult to find another tenant to take up the space often at higher rental than before. However when a major player closes shop, such as Stuttafords in Canal Walk, it becomes more difficult to find a replacement tenant.
Local mature retailers such as TFG, Edgars, Truworths etc already have adequate space in the mall and certainly don’t want to take on a store site the size of a Stuttafords.
Maybe the landlords could tempt H&M to take the whole site as this brand is not represented in Canal Walk, but at what rental sacrifice, as H&M know it won’t be easy for Canal Walk to find an alternative brand.
The landlord could cut the site into many smaller stores to make it easier to lease. Once you take that decision it is difficult to go back to a large site if a new retailer arrives in the future.
As the ressession bites with more and more retailers reducing exposure the mall owners face the issue of finding new tenants that are willing to pay top rental rates. This could be very costly both in revenue and brand image if a mall has too many stores sitting empty.
I have a concern the malls could have another curved ball on its way with regards to Edgars. We all know Edgars are fighting for survival and are trying desperately to make a come back.
One significant hurdle they have to face made from a previous massive judgement error, is the amount of space they have taken in most of SA Regional malls.
let me explain that statement…….
The Edgars store could be close to 5000 M2 in size and could have recently been enlarged to accommodate TopShop and River Island as shop in shop with own entrance from the walkway.
In the same mall Edgars could also have a Red Square store selling duplicate product which they are selling in the Edgars store. (Makes no sense to have more mall exposure with another rental to pay along with more salaries for store manager and team selling product identical to the main Edgars store)
Also in the same mall could be an Edgars Active store, Kelso store, and possibly a Calvin Kline or Dune store all selling replica merchandise to what is on offer at the Edgars store.
Now it was announced River Island is leaving South Africa and Edgars, so what does Edgars do with that space. It would be reasonable to suggest when leases come up in the satellite stores Edgars need to close them and concentrate on the main Edgars business saving all the rental and salary costs on the various small stores scattered across the malls.
That in turn gives the landlords more empty stores to find new tenants for.
enjoy your shopping