Does South Africa have too many malls? A per-capita check says Gauteng does

Writing after Famous Brands CEO Darren Hele's remarks on the company's results call and the reaction they drew on X, Moneyweb columnist Keith McLachlan set out to test whether South Africa really has too much shopping centre space. He notes that JSE-listed Reits carry a collective market capitalisation of roughly R350 billion to R400 billion, with retail the largest single exposure at about 38 per cent of listed property assets, or as much as 60 per cent when only South Africa-focused Reits are counted.

Using published Reit data and analyst workings, he divided shopping-centre space by population for each country and split the results between developed markets, where richer consumers can support more retail space, and emerging markets, where the opposite is more likely. On that measure South Africa sits above the regression line, appearing overtraded relative to its income level.

The national average conceals a dual economy. At 0.72 square metres of retail space per person, Gauteng would rank alongside Japan at 0.75 and South Korea at 0.62 if it were a country, while the lower-density provinces are clearly underserved outside the areas around their larger cities.

McLachlan's conclusion for investors is to be careful about which listed retail space they hold. Marginal malls are likely to become more marginal over time, he warns, so there could be downside in parts of the more overtraded sections of the sector, a point he says Reit management teams will not concede because every team argues its own retail space is not marginal.

He argues that the large informal market is the real opportunity, but that it will not be unlocked the way Johannesburg's malls unlocked urban retail. Whether the answer is a fleet of subsidised buses that extends catchment areas, e-commerce with a delivery fleet, or something else, he writes, is unresolved, but the solution would open a large undertraded market.