By Londiwe Buthelezi for News24
The owner of Canal Walk, Rosebank Mall and Hyde Park Corner is bracing itself for lower rental rates when tenants’ leases come up for renewal. This comes at a time when landlords are already bleeding from loss of tenants who have been forced to close their shops during the lockdown, leaving malls half-empty.
“While the rate of new Covid-19 infections is declining, we remain wary of the possibility of a second wave and the long-term effects of the pandemic on what was already a weak local economy. We anticipate further negative rent reversions, although at a lower level than in the last two financial years,” wrote the property company in its results announcement on Monday evening.
Hyprop Investments published its financial results for the year ended on 30 June and called 2020 a year that will be recorded in history as “one of the toughest years”. The property group said Covid-19 reduced its distributable income by R434 million in the year ended in June, while the value of its property portfolio across the globe tanked by R4 billion. Almost all the erosion in Hyprop’s property values happened in SA where the combined portfolio was down R3.9 billion.
Commercial property values in SA have been falling because of rental discounts landlords were forced to offer their tenants, as well as lower property income forecast in future. Hyprop also had big tenants like Edcon and Dion Wired closing shop this year.
The company said it successfully reduced its exposure to Edcon from 59 000 square metres to 50 000 square metres. It was able to secure three new Checkers FreshX stores as anchor tenants at The Glen, Rosebank Mall and Woodlands. It said that the space vacated by the Dion Wired had been let to new tenants at Somerset Mall, Hyde Park Corner and Canal Walk, which will now have a flagship PEP store while it was previously dominated by high-end fashion retailers.
Hyprop saw retail vacancies in its malls increase from 0.8% in June 2019 to 2.4% by 30 June 2020. The company also said that its rental revisions declined by 14.5% in the first three months of the lockdown. This means that Hyprop had to accept much lower rental rates on leases that expired during the lockdown. Before the lockdown, its retail rental revisions were already down 13.1% for the eight months ended February 2020. But Hyprop was able to retain 91% of tenants whose leases had expired, and for other tenants, it was able to increase annual rental rates by 7.1%.
“Notwithstanding the relaxation of lockdown conditions post 30 June 2020, rental rates remain under pressure as tenants look to rebuild their businesses. We will continue to assist key tenants, where appropriate, to ensure we have functional malls and acceptable occupancy levels,” wrote the company in its results booklet.
Hyprop said it is looking at introducing of storage facilities and collection points for online retailers among other things to attract new tenants.