Big shopping mall in Pretoria in serious trouble

Brooklyn Mall’s vacancy rate has shot up over recent years, going from 3.6% in 2019 to 18.7% just five years later.

This was revealed in Growthpoint’s annual results, which were released on Wednesday for the year through June 2024. Growthpoint is the largest South African listed property company and owns 75% of Brooklyn Mall.

These results revealed a disappointing performance for the Real Estate Investment Trust, which saw its net asset value per share decline by 6.1% to 2,020 cents per share.

Its distributable income per share fell by 10% to 141.9 cents, compared to 157.6 cents per share in 2023.

The value of Growthpoint’s total property assets fell by 2.8% to R174.7 billion.

These results led the company to announce a dividend of 1,171.1 cents per share, 10% lower than in 2023.

Growthpoint has a portfolio of 525 properties in South Africa spanning the office, retail and industrial sectors. 

Growthpoint also holds a 65% majority stake in Growthpoint Properties Australia, which owns 53 properties in Australia. 

The company’s top five retail properties by value are the Festival Mall in Kempton Park, Waterfall Mall in Rustenburg, the N1 City Mall in Cape Town, the Vall Mall in Vanderbijlpark and Brooklyn Mall.

Brooklyn Mall is one of the largest properties in Growthpoint’s local property portfolio. It comprises the mall and the Brooklyn Design Square.

It opened in 1989 and is situated in the affluent suburb of Pretoria’s cosmopolitan area of Brooklyn. It is surrounded by established, upmarket residential homes, corporate offices, and a large number of embassies and diplomatic properties.

Growthpoint describes Brooklyn Mall as the “premier shopping destination in Pretoria”. 

“It offers shoppers a full complement of national retailers, specialist boutiques, restaurants and coffee bars and the best of home and décor shops,” the company said.

The mall spans 75,258.65 m² with a 5.2 million average annual footfall and 220 stores. This makes it one of the biggest malls in the country

However, in recent years, the mall’s performance has been on a significant decline, with vacancy rates rising every year.

The vacancy rate, which measures the percentage of unoccupied units in a rental property, is a vital metric for real estate investors.

This is because vacancies directly impact your rental income, meaning every unoccupied unit represents lost revenue. A high vacancy rate can significantly reduce a property’s cash flow and overall profitability.

Growthpoint’s financial statements from 2019 to 2024 show this correlation, as Brooklyn Mall’s gross rental income per square meter has declined as the vacancy rates have risen.

This has also resulted in the mall losing value year-on-year.

In its latest results, Growthpoint did not address Brooklyn Mall’s decline directly, but said that high interest rates are impacting the real estate sector and its domestic operations and offshore investments.

However, the company said the political landscape in South Africa is showing signs of improvement after the May elections. 

“Our strategic approach will be guided by our priorities: safeguarding the strength of our balance sheet and fulfilling our commitments towards environmental, social and governance (ESG) objectives,” the company said. 

“To this end, our focus will remain on improving the quality of our SA portfolio, with emphasis placed on capital allocation, proactive tenant retention strategies, strategic repositioning efforts, fostering green building initiatives, leveraging renewable energy solutions and focusing to higher growth sectors.”

In addition, Growthpoint said the prospects of imminent interest rate cuts, the introduction of the two-pot system for pension funds in South Africa and a reduction in fuel prices are positive news for South Africans, which will positively impact retailers and the retail sector. 

“This, together with no load-shedding since March 2024, will positively influence retailers’ operations and performance,” it said. 

Year	Vacancy rate	Gross rental (R/m²)	Value/m² (R)
2019	3.6%	306.87	37,716
2020	5.0%	313.34	35,337
2021	7.6%	272.02	31,781
2022	8.7%	251.90	29,465
2023	10.6%	N/A	N/A
2024	18.7%	260.56	N/A