South Africa’s retail property market showed resilience in the second quarter of 2025, with smaller malls outpacing their larger counterparts and consumer foot traffic providing a mid-year boost. Yet, storm clouds are gathering on the horizon as vacancies creep higher and tenants face the squeeze of rentals rising faster than sales.
This is according to the latest South African Property Owners Association (SAPOA) Retail Trends Report, compiled by MSCI, which draws on data from 152 shopping centres and more than 20,000 tenants nationwide.
The headline number was an average trading density (ATD) growth of 4.1%inQ22025, up from 3.5% in the first quarter. Small regional centres led the charge, while larger malls— including the iconic super-regionals that dominate South Africa’s retail landscape—lost momentum, particularly in June after a strong April and May.
“Food has been the steady anchor in this market,” said Eileen Andrew, VPat MSCI Real Estate. “Consumers continue to prioritise essentials, and that has supported trading densities across grocery and fresh produce categories. But affordability risks are mounting, with rental growth overtaking sales growth. That creates pressure on tenants, particularly in discretionary segments.”
The affordability crunch
SAPOA’s retal Trends Report shows that rental growth is running ahead of sales growth, creating a double bind for retailers still battling a tough economic market. The national vacancy rate rose to 5.1% in Q2, compared with 4% a year earlier, reflecting both retailer caution and the challenges of sustaining profitability in a tougher consumer environment.
While smaller-format centres benefited from their proximity and convenience, several merchandise categories showed signs of weakness. Sportswear and outdoor retailers remained under pressure, and apparel and food service operators reported little to no real growth in the quarter.
At the same time, consumer momentum is shifting. Foot traffic rose through April and May, buoyed by holiday and back-to-school spending, but slowed sharply in June. This easing has been particularly pronounced in super-regional malls, which rely heavily on destination shopping trips.
“Convenience is becoming a defining driver,” Andrew explained. “Smaller centres closer to where people live and work are capturing spend. For larger malls, the challenge is to reinvent the experience and right-size their tenant mix to meet evolving shopper expectations.”
A shifting retail landscape
The report also points to space rationalisation as an important lever. Since 2022, many super-regional malls have right-sized stores to stabilise trading density, with some success.“Retailers are having to think carefully about format and footprint,” Andrewsaid. “Right – sizing is no longer a defensive move, it’s a strategy for long-term sustainability.”
Food categories remain resilient, but discretionary categories are more vulnerable to household income pressures. Inflation in essentials has outpaced wage growth, forcing many families to cut back on fashion, dining out, and non-essential spending.
The challenges South Africa is facing are not unique. Internationally, retail property markets are also grappling with structural shifts in consumer behaviour. In the United States, mall operators have reported steady foot traffic but declining spend per visit, as inflation and e-commerce reshape the landscape. Many U.S. landlords are investing heavily in mixed-use developments — combining retail, residential, and entertainment —to secure new revenue streams.
In Europe, smaller convenience-driven centres are also outperforming, while larger malls are under pressure to adapt. Analysts in the United Kingdom note that rising interest rates have made affordability a central concern for both tenants and landlords, echoing the trends seen in South Africa.
“What we are seeing here is part of a global pattern,” Andrew noted. “Convenience, affordability, and adaptability are the critical watchwords. South Africa’s market is deeply competitive, and the centres that thrive will be those that balance landlord returns with tenant sustainability.”
Looking ahead
Despite affordability pressures, the SAPOA report underscores that trading density growth remains ahead of inflation by roughly 100 basis points. This suggests the market is still managing to generate real growth, albeit modest.
However, SAPOA cautions that sustaining this trajectory will require collaboration. “Landlords and retailers must work together to manage costs and adapt formats,” Andrewsaid. “The resilience of the sector is clear, but so are the risks. If affordability challenges deepen, we could see stronger categories pulled back and vacancy pressures intensify.”
For now, the data paints a mixed but cautiously optimistic picture. Smaller centres are winning share, food anchors are holding firm, and South Africa’s consumers continue to show resilience in the face of economic strain. Yet the affordability crunch —both locally and globally — is the fault line to watch.