East Africa’s appeal to
regional and international retailers appears to have increased as the
fast growing, middle class consumer fuels a demand for convenience,
variety and competitive pricing. While this does present a wide range of
opportunities in every market for retail developments of significant
scale, do developers really understand the nuances of East Africa’s vast
and widely differing regions?
Facilitating the right
space to answer this question, and more, the EAPI summit is proud to
announce the introduction of the Future Retail Forum which will be take
place on day 2 of the conference. EAPI will be host to 5 in-depth and
exclusive retail discussions where leading retailers, developers,
professionals and industry experts will share their insights and advice
on how best to approach each of the identified sweet spots for retail in
East African region.
While some have been quick
to point out the oversupply of retail offerings in East Africa, others
are finding opportunity with a long term view for decent economic growth
in regions like Kenya, Uganda and Rwanda in mind, all countries where
this oversupply could quickly be absorbed.
According to Gordon Bell,
Director for Broll Property Group East Africa Operations, there is
currently some concern due to the relatively small tenant base resulting
in shopping centres and landlords competing for tenants. “The market
is still maturing and so it will take time for the current stock to be
absorbed, and there are a number of new malls due for completion this
year which will only add to the current stock,” he says.
“Our Broll Kenya H1 2017
report, which will be launched at the EAPI Summit next month, has also
highlighted that local retailer expansion plans are unable to match the
current increased supply space in Nairobi and its environs, largely due
to spending power not yet reflecting within the retail space”.
In this region, however,
retail opportunities may still present themselves in the form of smaller
retail convenience stores, well located in areas with efficient
transport systems, as the fad of new and big centres quickly approaches
its peak.
Following the delivery of
the new phases of Village Market and Sarit Centre, as well as the
Waterfront Karen which is under construction, other new, iconic malls in
the pipeline include Montave in Upperhill area and Britam’s mall in
Kileleshwa, both of which have been designed to cater for their
respective neighbourhoods rather than the wider catchments.
“Considering the traffic challenges experienced in the city that
hinder movements, Kenyans have developed an affinity towards convenience
retail such as ABC place, Muthaiga Shopping Centre and Valley Arcade.
This is a trend that we shall continue to see even with smaller malls in
place,” says Betty Musyoki, Director at Celer Retail.But the “build it and they’ll come” model does not necessarily apply to all countries in the region.
In Uganda, the high cost of land and construction materials have not allowed for formal retail to take off at the same rate as Nairobi. Nevertheless, despite these costs and the pervasive presence of informal retail - even in the bigger cities like Kampala and Entebbe - local developers have proved their deep understanding for the market dynamics.
With the likes of leisure based malls like Acacia, Village, Metroplex and Victoria driving the transition of local consumers from less formalized retail outings into a more aspirational leisure retail environment, there is still scope – particularly in Kampala - for more retail developments.
According to Marc du Toit, Head of retail at Knight frank Uganda, retail developments in Kampala have seen initial first year yields of between 10.5 and 13%, proving that even local developers have managed to overcome a number of challenges posed by the current business environment, including the exorbitant cost hurdle of developing shopping centres in a landlocked country where the costs of acquiring land is still high.
“And they have managed to
overcome this challenge simply by building multilevel developments on
small footprints in upmarket primary catchment nodes. Other new
developments in the pipeline include Kingdom Kampala at 42000m², Ggaba
Mall at 7500m² and the Arena Mall, a 14,000m2 shopping centre in Nsambya
which is being developed for Chestnut Uganda Limited by Stanlib with
Knight Frank as leasing agents, and is set to open in late 2018,” he
says.
Looking to Rwanda, bigger
does not mean better. Here, the relative scale of the market has meant
that a Westgate or Victoria Mall simply would not work, and astute local
developers – many of whom are increasingly supported by local and
international capital - are fully aware of this.
Instead of creating
A-grade, stand-alone malls, Kigali has rather made retail spaces
available as part of mixed use developments, like the newly opened
Kigali Heights, where the scale and offering is smaller, and attached to
an office tower.
“In a market place where
brands have struggled to find suitable sites, developers are now being
pushed to provide them. In addition to Kigali Heights there are other
interesting developments in the pipeline such as Amarembo City, Nobelia
and Vision City Town Centre. The scale of both Amarembo and Vision City
will definitely, I think, be a game changer for retail in Kigali,” says
Charles Haba, Managing Director of Century Rwanda.
Overall it is abundantly
clear that, despite the differences in approach across countries, the
real success of retail in East Africa will rely heavily on a deep
understanding of each country’s unique circumstances. And, unlike the
mostly consistent, international-driven retail landscapes of West and
Southern Africa, where the same investors, developers and brands reign
supreme, the various cities of East Africa clearly require a very
different approach.
For more information around
East African retail, and to hear from directly from these voices as
well as the local developers making it happen, join us at the fourth
annual East Africa Property Investment Summit (EAPI) (hyperlink to register page on live link),
taking place from 5 – 6 April in Nairobi, Kenya at the Radisson Blu
Hotel. EAPI is the largest retail gathering in the region, hosted by the
organizers of the Africa Property Investment Summit, as well as the
West Africa Property Summit and ZAMReal.
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