In spite of the challenges of the past two years, the retail property market managed to recover reasonably well in 2021, according to the latest Rode’s Retail Report 2021:4. However, the report also notes that real sales, that is after inflation, during the first eleven months of 2021 still remained slightly below the pre-pandemic levels of 2019.
Looking ahead, property valuer and economist, Erwin Rode of Rode & Associates also warns against both expected and possibly unexpected headwinds, the former being the rising of both interest rates and inflation.
“Inflation and higher interest rates will continue to dampen real retail sales, in line with the subdued income levels experienced in many consumer households,” says Rode.
Consumer spending will be particularly impacted by the rising cost of essential items such as fuel, food and electricity, which further causes downward pressure on any other disposable household income, where this even exists.
On the positive side, caution exercised by consumers over the past two years is being reflected in higher national savings for households, which have averaged 2,7% of GDP since the start of the pandemic – up from the 1,9% averaged between 2017 and 2019.
In the light of uncertainty about job security and the general economic outlook, consumers have in turn been wary to become more indebted, with the uptake of credit having visibly slowed.
Notes Rode: “While real credit granted to households increased by 1,8% year-on-year in the first 11 months of 2021 – picking up from the 0,8% growth recorded in 2020 – it was still well below the recorded growth of 3,8% in 2019.”
There has also been normalisation in the shopping patterns of consumers, with the ‘stay-at-home’ categories (such as hardware, household furniture and appliances) having shone during the first months of the pandemic, but with trends now starting to slowly revert to pre-pandemic spending.
Turning to retail space, “it is a fact that South Africa still has too much space to fill,” concludes Rode. “A slight positive for this sector is that new supply is expected to remain low.”
*This article was originally published on Rode’s website.