Nairobi leads in shopping centre projects in sub-Saharan Africa

Two Rivers Mall on Limuru Road, sits on 102 acres and integrates the retail mall with two office towers with a total of 215,000 square feet, residential apartments, hotels, and recreational space. The property boom and devolution of services to rural areas have made it easier for retailers to take up prime locations near residential areas for customer convenience.

ILLUSTRATION| FILE

What you need to know:

  • According to London-based market research company, Euromonitor International, the growing property boom and devolution of services to rural areas have made it easier for retailers to take up prime locations near residential areas for customer convenience.

  • This has the expansion of retail outlets nationwide.

Kenya’s retail market has taken the number one spot in mall development in sub-Saharan Africa. According to Knight Frank’s Shop Africa 2016 report, Nairobi stands out as a major focus for

shopping centre development, and is ranked as the largest market by existing shopping centre floor space. It also has the biggest mall developments in the pipeline, among the cities covered by the

report, namely  Accra, Lagos, Lusaka, Luanda, Kampala, Maputo, and Dar-es Salaam, although it excludes South Africa, which has a large and mature shopping centre market. With Africa’s

property markets attracting increased interest from regional and international investors, the retail sector has become a major focus for development.

The report estimates that the 47 countries covered by the study have a combined  three million square metres of shopping centre space in malls, with a minimum size of 5,000 square metres gross leasable area (GLA). This also includes older and poorer quality centres alongside the more recently developed malls.

Given that South Africa alone is estimated to have about 23 million square metres of shopping centre space — which is more than seven times the rest of Sub-Saharan Africa — there would

appear to be room for considerable further retail development across the region. At present, the largest shopping centre market is Nairobi, with nearly 400,000 square metre of shopping centre

space, the report states. 

According to London-based market research company, Euromonitor International, the growing property boom and devolution of services to rural areas have made it easier for retailers to take up

prime locations near residential areas for customer convenience. This has the expansion of retail outlets nationwide.

Improved infrastructure, lower transport costs for businesses and a rising middle class with high disposable incomes were key in promoting retail growth. Backed by increasing foreign investment,

stable political leadership, as well as a growing focus on the development of youth entrepreneurship, the Kenyan economy has also continued to grow. Its strong GDP forecast of 6.5 per cent for

2015, as well as inflation remaining at a single-digit level of 5 per cent, contributed to growth in the retail sector in 2015. 

Shopping complexes have been a feature of Nairobi since the 1980s, when the Sarit Centre, regarded as the city’s first formal mall, opened. In subsequent decades, Nairobi’s retail landscape has

been populated by other successful schemes such as Yaya Centre, The Village Market and The Junction.  

NEW STANDARDS IN SIZE AND QUALITY

However, the current wave of development is creating modern malls that are setting new standards in size and quality within the market, says the report. 

The 33,000-square metre GLA at Garden City Mall is currently the most prominent, as it introduced the first phase of mixed-use development in the Kenyan real estate market in 2015.

Developed by private equity firm Actis, which invests exclusively in Africa, Asia and Latin America, Garden City Mall incorporates residential house, offices and a hotel. It is expected to be

completed in 2017, by which time it will have been expanded to 50,000 square metres.

In the pipeline is the keenly awaited Two Rivers Mall being developed by Centum, which is expected to open this year. The 62,000-square metre mall will be delivered is the first phase of a major mixed-use scheme being built on a 100 acre site on Limuru Road.

Another key project expected to begin operating this year is The Hub, which will be constructed in the upmarket Karen neighbourhood. It will have 30,000 square metre of retail space, and is being

developed by Azalea Holdings, a consortium of local investors.

Reflecting a trend being e elsewhere in Africa, there is growing interest in the market from South African investors. Other developers and landlords of these shopping centres are local Kenyan

property owners, the report states.  

According to the report, these malls have leased well and the rents that they have achieved compare favourably with the city’s more established centres. Among the new projects, there is a clear

trend towards mixed-use, rather than pure retail development as office, residential and leisure facilities have been incorporated into schemes. In the face of increased competition from Nairobi’s

new malls, some of the city’s established centres are in the process of expanding or refurbishing as they seek to protect their market share.  Sarit Centre, for instance, is an additional 23,000

square metres of retail space. 

The Kenyan retail market is still dominated by local operators, despite growing interest among international chains. The market leader is Nakumatt, which has more than 20 supermarkets in Nairobi,

with other major players being Tuskys, Naivas and Uchumi. Largely due to the strength of the local competition, South African chains have been relatively slow to enter the Kenyan market in

comparison with some other Sub-Saharan countries. However, Game, which is operated by South Africa’s Massmart, made its Kenyan debut in 2015 as one of the anchor stores at Garden City

Mall.

Other retailers from outside of Africa are also taking a growing interest in Kenya, and the most high profile imminent market entrant is the French supermarket chain Carrefour, which will be an

anchor tenant at both Two Rivers and The Hub. The Turkish fashion retailer LC Waikiki will also be entering the Kenyan market with a store at the Two Rivers Mall. 

Other international retailers are considering entering Kenya, but the difficulty in sourcing appropriate local partners is rcited as a major obstacle to market entry, the report indicates.