JSE- and A2X-listed retail-focused real estate investment trust (Reit) Hyprop is adjusting its South African operations by reducing the size of traditional anchor tenants, introducing new and differentiated tenants and expanding experiential offerings in its malls.

These measures reflect a strategic response to evolving consumer spending patterns and market conditions, as indicated by the group’s results for the year ended June 30, says Hyprop CFO Brett Till.

“Things are tough. People don't seem to have disposable incomes. I think inflation is running far higher than the published inflation rates. Maybe that's some of what we see in the growth in tenant turnovers.”

“From all of our stats, we are certainly seeing turnovers in the malls growing. People are spending more money. Perhaps it's a result of the tenant mix that we've worked hard on, getting the right tenants in place – a combination of Shoprite, Checkers FreshX, Woolworths and Pick n Pay – to cater to different consumer needs,” Till told Engineering News on September 16.

Hyprop’s financial results show that tenant turnover in South Africa increased by 5.5% compared with the previous year, while trading density grew by 6.8%, despite footfall remaining largely unchanged. These figures indicate that the changes in tenant mix are contributing to higher spend per visitor.

Part of this strategy involves downsizing large anchor tenants.

“At Canal Walk, Edgars had a two-floor store of about 11 000 m^2. We reduced that to half, with the downstairs level occupying about 5 500 m². Edgars achieved the same turnover in the smaller footprint. The upper level was then let to multiple retailers, including Hi-Fi Corp and Sleepmasters, demonstrating strong demand from other tenants,” Till explained.

Pick n Pay has undergone a similar rightsizing process at Rosebank Mall and Woodlands. Smaller line shops have been introduced around these anchors to improve rental yields.

“The increase in vacancy is giving us flexibility to adjust the tenant mix, bring in new tenants, and potentially introduce entertainment options. We are selecting the right combination based on what we believe will meet customer demand,” Till said.

Hyprop is also introducing non-traditional and experiential tenants. At The Glen, Omoda operates as a motor dealership within retail space, and Workshop 17 provides flexible office space at Hyde Park Corner.

Following year-end, Checkers FreshX opened at Hyde Park Corner, with early trading data showing a 10% increase in foot and vehicle counts. Hyprop said it was incorporating these types of tenants to adapt to changing consumer behaviour and create new revenue streams.

The R350-million Somerset Mall Phase 2 expansion represents a significant element of Hyprop’s strategic adjustments. The project will add 5 500 m² to the total lettable area, increasing the number of stores from 180 to 230.

The expansion includes an athleisure and affordable luxury retail section and a family entertainment and food court section, reflecting a move toward mixed-use and experience-driven retail environments. The athleisure and affordable luxury section is scheduled to open at the end of November, and the family entertainment and food court section is expected by July next year.

Hyprop’s South African portfolio comprises nine centres, four in the Western Cape and five in Gauteng. Average monthly footcount remained at 7.2-million, while retail vacancies increased to 4.2%, primarily owing to the rightsizing of Edgars and Pick n Pay. These vacancies provide opportunities to introduce new brands and offerings that better align with current shopper preferences.

The portfolio continues to attract well-known brands and new concepts. South Africa’s first JD Sports store opened at Canal Walk, while Somerset Mall added Lego, Anta and Napapijri. The combination of international, local, and experiential tenants is intended to diversify offerings and maintain relevance in a changing retail environment.

Capital investment in South Africa totalled R506-million, including the Somerset Mall expansion, retiling and bathroom upgrades.

“When we initially considered the Somerset Mall project, we set a minimum pre-letting hurdle before proceeding. That hurdle was achieved relatively easily. To date, all new shops in the expansion have been let, and rental rates are slightly above feasibility projections,” Till noted.

Operational challenges, including pressure on consumers and municipal infrastructure issues, remain.

“A lot of our risk is mitigated because the proportion of rental income based on turnover is relatively small. Total turnover rent in South Africa is R78.5-million out of total rental income of R2.2-billion. Most rental income is fixed, so consumer pressure does not significantly impact income,” Till said..

Hyprop has also invested in infrastructure resilience and environmental, social, and governance initiatives. Backup water tanks have been installed at all Gauteng centres to provide three days of water in the event of disruptions, with Western Cape centres to follow in the 2026 financial year. Hybrid energy systems at Rosebank Mall now provide backup power and allow for better energy management.

Meanwhile, Woodlands and Clearwater Mall have begun replacing outdated R22 air-conditioning systems with eco-friendly R410 refrigerant systems, and water-cooled condensers at Woodlands have been converted to air-cooled, thereby saving water.

In addition, five Gauteng centres achieved net-zero waste status, and recycling rates across Hyprop’s South African centres improved from 68% in in the 2024 financial year to 77%, diverting 1 130 t of organic waste from landfills.

Hyprop is also continuing with its community engagement efforts through the Hyprop Foundation and other corporate social investment initiatives, contributing R16.6-million toward education, skills development, and enterprise support.

While the Reit’s South African operations are the primary focus, Hyprop also noted ongoing performance in Eastern Europe, where tenant turnover rose 6.6%, trading density increased 6.1%, and vacancy remained low at 0.1%. These operations, however, are secondary to the group’s South African strategy, which is centred on tenant mix adjustments, experiential offerings, and mall upgrades.

Liquidity and capital management underpinned these strategic changes. At financial year-end, Hyprop held R1.2-billion in cash and R2.5-billion in undrawn bank facilities, following a successful R808-million capital raise. The proceeds are earmarked for debt reduction, asset management initiatives, the Somerset Mall expansion, solar PV projects and other operational priorities.

Hyprop also said it would continue with its previously announced sale of 50% of Hyde Park Corner, with the remaining 50% subject to a two-year put-and-call arrangement.

“For some time, we've said that our preference in South Africa is to be invested in the Western Cape, where we see better opportunities. The municipality certainly operates better. The infrastructure seems to be better maintained than in Gauteng. It's certainly not our plan to divest of all of our Gauteng assets, but recycling capital is something we've spoken of for some time. Sometimes you've got to let an asset go so that others can create more value out of it,” Till said.

Looking ahead, Hyprop expects continued operational improvement in South Africa. Hyprop anticipates distributable income per share growth of 10% to 12% in the 2026 financial year, driven by the strategic reshaping of tenant mix, expansion of experiential offerings and operational efficiencies.