"Sustainability" is becoming as well-worn a word as "flexibility", both thrust into the commercial language spotlight by lockdowns, one of the more disruptive consequences of Covid-19.
Hyprop was already evolving an environmental sustainability strategy before Covid-19 struck and reimagining its shopping centres as the early blush of e-commerce in South Africa suggested where consumers might prefer the online world – and certainly where they needed the offline or real world.
But the pandemic changed both the pace and prioritisation of change. Retail property has been in the eye of the Covid-19 storm, with centres going from bustling places of activity to eerily quiet shells where fewer shoppers hurried to and from "essential" goods stores.
The third retail revolution – from physical to digital – gathered pace as the pandemic shut down shopping centres and high streets. The dominance of the retailer and manufacturer is giving way to the customer as digitalisation of shopping changes the way consumers buy goods on an increasing scale – and challenges the purpose of the physical store in a way unthought of a decade or so ago.
The shifting mood around sustainability in its broadest sense has also put once powerful brands on notice and created space for new brands which have embraced a more caring, inclusive and sustainable philosophy.
For Hyprop, sustainability is important in at least two spaces… the more commonly embraced environmental sustainability, and then the sustainability of retail property itself.
Environmental sustainability requires the rebalancing of nature and economic activity. For shopping centres, the core part of this rebalancing relates to energy, water, waste, GHG emissions and the use of renewable energy. This environmental stream is a work-in-progress and is guided by international and local targets – and the increasing expectation of especially younger stakeholders, from consumers to investors.
We are one of only a handful of REITs in South Africa to undertake to report against the Global Real Estate Sustainability Benchmark and are pleased that Canal Walk was the first super-regional mall in the country to achieve a 5-Green star rating by the Green Building Council of South Africa. We are introducing energy, water and waste initiatives to make our centres more environmentally sustainable. They include:
- Energy – we are installing remote energy meters, LED lighting, solar PV plants in six Gauteng centres, and upgraded facades and skylights to maximise natural light and reduce heat gain.
- Water – introducing remote water meters, waterless urinals and low flush volume toilets, installing aerators on all taps, using grey water in some centres, and migrating from water cooled HVAC systems to air-cooled systems.
- Waste – reducing waste being sent to landfills by improving recycling standards (77% recycled by volume in 2020) and rebuilt the Canal Walk waste yard to include an in-vessel composting system to help composting wet-waste and organic material.
- Indoor environmental air quality – improving air quality by increasingly using clean chemicals in terms of the GBCSA
While the physical shopping mall of the future is being reimagined from an environmental perspective, digitalisation is challenging it from many other perspectives, most simply utility. Is it necessary in a world of online shopping? And Covid-19 raised other concerns too, such as design and the ideal number of people using indoor spaces at a time.
Of course, no market is homogenous, and that’s certainly true of SA. There are consumer categories with the time, money and internet access to make the best of online shopping. But for most South Africans this isn’t the case and offline shopping will remain dominant for some time to come.
Online retailers themselves have been transitioning to physical space. Yuppiechef and Amazon Books are two obvious examples, while our own SOKO District at Rosebank Mall is evidence of the phenomenon in our centres. People want experiences and there is space for both online and offline – in truth, despite the growth of e-commerce, shoppers returned to centres as lockdown restrictions eased.
As The Economist pointed out in a recent report, "the data-driven shopping upheaval is unstoppable. It will change the nature of stores, so that physical and digital shopping seamlessly interact." The "third retail revolution" is creating "a consumer’s "pull" system rather than a producer’s "push" one."
Yet none of this necessarily spells doom for shopping centres – in fact the opposite.
"…even in China, the ultimate goal is not to leapfrog the store. Alibaba, China’s biggest e-commerce firm, has brought the latest digital razzmatazz, such as cashier-free shops and video promotions, to its supermarkets in the biggest cities. Along with jd.com and Pinduoduo, its closest rivals, it is working with grocery shops in the farthest-flung villages to make distribution of goods cheaper and more efficient. Daniel Zipser of McKinsey, a consultancy, says 374 large malls were opened in China last year. Prices for retail property in city centres have shown no meaningful fall."
Hyprop will continue to evolve its environmental sustainability strategy and fulfil our obligation to mitigate our carbon emissions. In so doing we will meet our commitments to our stakeholders and create more pleasing physical environments in which to work, shop and invest.
Importantly, we know we must keep adapting our assets to be resilient to rapid social, environmental and economic changes and to create assets in the future that have sustainability embedded in their DNA. Research in the US* suggests that by 2025, ESG investing is projected to reach $53 trillion in assets globally, approximately one third of all assets under management.
The drivers behind ESG investing in 2020 are revealing: to help manage investment risks (64%); clients/investors demand it (59%); fiduciary duty (43%), my firm derives reputational benefits (41%) and to improve financial returns (35%). They are hard, real reasons and businesses which don’t keep up with these stakeholder demands will fall away. In fact, the research says 47% of investors of any age group invested in ESG to "express their personal values or focus on companies that were making a positive contribution to society and the climate".
Our shopping centres are ecosystems which mirror not only the physical demands and prevailing value systems which guide socio-economic development, but they provide enabling environments for some of the world’s best known, most demanding brands and are places where people come together to have authentic and meaningful experiences.
Our journey to sustainability has entered a new phase and we are reimagining each of our centres as a modern village or town square where communities connect, where relationships grow, and where the digital and physical shopping worlds integrate.