Despite the challenging economic climate, South Africans are spending big money on luxury items, outperforming all other retail segments.

The inaugural Clur Luxury Brands Index – part of the Clur Shopping Centre Index – showed trading density at R356,851/sqm – outperforming the All Centres Index by a monstrous 795%.

According to the report, growth in the sector stood at 15.8%, which was 7.4% better than that for all centres.

“South Africa has the largest luxury brand market in Africa, and together with the weak Rand and a significant spike in the cost of international travel, the expansion of luxury brand purchasing has found fertile ground in the country,” Theresa Terblanche from Broll Property Management said.

“Technology, too, has impacted this growth by facilitating online markets. And since Africa hosts the largest percentage of middle-class consumers, who have aspirations of self-improvement, acquiring luxury brands as a status symbol underpins their drive to possess these top-shelf items.”

In addition, influencers and bloggers drive purchasing behaviour by promoting branded items as must-haves, whilst reality TV shows promote the glamour of designer wear.

In some South African shopping centres, although luxury brands only represent lettable areas of 18% to 20%, their contribution to the total turnover stands at 38% to 40%. This gives these luxury retailers major financial leverages.

“Commercial tenants demand an upmarket image; therefore, higher tenancy rentals are realised, and even surrounding residential properties retain market value better and also sell faster. Vacancies in regular commercial properties surrounding luxury brand shopping centres are also substantially lower,” Terblanche said.

“Centres that have existing luxury brands continuously aspire to increase these brands’ representation; however, should these landlords not have a lettable area available to accommodate brand expansion, then it can afford adjacent shopping centres the opportunity to entice these brands, especially in the same catchment area.”

“The investment landlords make to secure luxury brands in terms of tenant installation allowances is substantially higher than regular stores, but the higher turnover achieved usually justifies this investment.”

Luxury hubs

Due to tourism and its affluent markets, Cape Town is still the main hub for luxury retail.

That said, Gauteng also has a significant luxury brands retail market, particularly in more affluent areas.

KwaZulu-Natal is not far behind, with 16 new luxury brands opening in Oceans Mall over the last year, with another five coming soon. The Gateway Theatre of Shopping also has several luxury stores.

Terblanche said that luxury brands have seriously high expectations, meaning they will not be tenants in a mall or node that misaligns their identity.

“Therefore, urban development in these areas is a high priority. This, in turn, uplifts the area and raises property values,” Terblance said.

The Lipstick Index – a financial indicator of projected sales in a recession – shows that South Africa’s luxury brands market is performing well, with the aspirations of growing middle-class and cultural traditions boosting luxury sales despite the nation’s economic struggles.

“An interesting dimension in this trend is the study of demographic groups that are keen luxury-goods buyers. They are primarily members of South Africa’s fast-growing, affluent and influential black community, the emerging middle class, and women in urban areas with a high disposable income,” Terblance added.

“Certain cultures communicate their social status by flaunting their success, which leads to their placing importance on material possessions. They strongly desire unique styles and are admired for having expensive clothing, cars and houses.”

Interestingly, Terblanche said that during challenging economic times, the demand for luxury items increases as customers aspire to a greater life.