Real Estate Investor Magazine South Africa October 2016

COVER STORY COVER STORY tenants typically occupy around 40% of the space in a traditional shopping centre format, which can rise to 70% when including hypermarkets/supermarkets and cinemas... So, if anchor tenants start to derive a greater proportion of sales online, or it becomes increasingly difficult to track what is online vs in-store, there is a clear risk to the sustainability of shopping centre revenue/profitability and the turnover rent model,” says the Colliers study. Furthermore, according to research by AT Kearney, the approximate split (based on US activity) of online vs in-store sales is: • Around 35% of shopping takes place in-store without an online component to the buyer’s journey. • Only 10% of shopping takes place online without an in-store component. • But 55% of shopping has some combination of instore and online. There is already some difficulty in defining which of the five stages of the purchasing process can be clearly attributed to in-store versus online. “With this in mind, there are clearly large implications for landlords using turnover rents, if: a 10% of retail sales will eventually be ‘lost’ to on-line retailing, and, more importantly: b there is ambiguity over 55% of retail sales when defining what can be attributed to online vs instore. Additionally, stores set up as showrooming are another example where a customer browses in-store but then goes home to purchase online – how do we attribute these sales?” it continues. Learning as we go and taking a broad perspective Even in retail markets which are far more sophisticated than ours in South Africa, there seems to be no currently consistent way of tracking what products are purchased in what manner, for the purpose of attributing sales to specific retail stores. Around the world, different landlords appear to be considering different approaches to the problem. It seems that in Australia, for example, some landlords are looking at models where major tenants (supermarkets, department stores and discount department stores) have a separate lease provision to capture online sales that are fulfilled in-store. This is calculated as 14 OCTOBER 2016 SA Real Estate Investor www.reimag.co.za

Real Estate Investor Magazine South Africa October 2016 | Page 16