An artist’s impression of Two Rivers mall in Nairobi. Mall owners are
seeking international retailers to boost income. PHOTO | FILE
By SCOLA KAMAU
In Summary
- Investors in the region’s mall business are struggling to boost their returns, despite the fact that the sector is growing, with a number of new developments coming up.
- Retailers prefer prime space in capital cities and their suburbs, but as the latter get saturated, developers are finding it difficult to entice anchor tenants, whom they rely on to buy space.
- Experts say that while Tanzania has a faster growing economy compared than its peers, presenting a huge market opportunity, the informal market will remain a preferred form of shopping for a long time to come, holding back investments in malls.
Investors in the region’s mall business are struggling to
boost their returns, despite the fact that the sector is growing, with a
number of new developments coming up.
Retailers prefer prime space in capital cities and their
suburbs, but as the latter get saturated, developers are finding it
difficult to entice anchor tenants, whom they rely on to buy space.
According to retailers and sector advisory firms, Nairobi is
headed for saturation point, while Kampala, Dar es Salaam and Kigali are
still in the early stages.
Thiagarajan Ramamurthy, regional operations and strategy
director of Nakumatt Holdings, said that mall development is growing
fastest in Kenya, followed by Uganda, Rwanda, and lastly Tanzania.
Joseph Kamau, a commercial retail expert at Dunhill Consulting
Ltd, said that in Kenya, rent for prime retail space has been stable at
Ksh5,000 ($48) per square metre per month, an indication that the market
has been cooling off.
Grade A malls
James Karoki regional retail manager, Knight Frank Kenya, said
developers are now eyeing First World class (Grade A) malls that can
attract international retailers as anchor tenants.
“In six years, the Nairobi suburbs are expected to grow to a
point of saturation as developers eye world class malls,” said Mr
Karoki.
Kenya has 1.8 million square feet of shopping malls coming to the market, according to a report by Knight Frank— Global Cities: The 2016 Report — launched in November last year. Knight Frank Kenya has 250,000 square metres in the pipeline for mall development in Nairobi.
According to Dunhill Consulting Ltd, international food, fashion and entertainment are major attractions at the malls.
“We have new entrants in the Kenyan market such as Zuchinni,
Foschini Group, Landmark Group (Dubai) and News Café. Many more are
expected to flock into the country,” said Mr Kamau.
Upcoming malls in Kenya include Ridgeways Mall and the Rosslyn
Riviera on Kiambu Road; and the Two Rivers Mall on Limuru Road. At Two
Rivers, almost half the total space on offer is expected to go to
international retailers. Key tenants will include Austrian jewellers
Swarovski and French supermarket firm Carrefour.
South African retailer Massmart, has opened its first store in East Africa at Garden City Mall on the Thika Superhighway.
In Karen, the Hub is due to open in February while the Waterfront Karen Mall has been proposed
“In high end places like Karen, not everybody goes to work,
because residents run businesses with a lot of flexible time, therefore,
a chance to shop all through the day,” said a source familiar with the
malls’ establishment deals. “The malls around such places could offer
luxury products.”
“Other malls in Nairobi are in the Grade B and Grade C classes;
we may see an upgrade in coming years as owners seek international
retailers in fashion, design and food,” said the source.
Other malls that have been proposed are the General Motors Mall,
Next Gen Mall, Bellevue Mall and South Fields Mall on Mombasa Road; the
Point Mall (off Jogoo Road) and further ahead on the Kangundo Road is
the proposed Laxcon Mall.
Other urban centres across the country where malls have been
developed include Buffalo Mall in Naivasha, Westside Mall in Nakuru and
the proposed Buffalo Mall in Eldoret.
Uganda
Upcoming malls include Kingdom Mall, a 40,000 square metre
establishment whose construction is expected to be complete by 2017.
Knight Frank Kenya is part of the developing team. The company has
almost 100,000 square metres in the pipeline for Kampala.
“The market is still underserved in terms of fashion, while
Ugandans prefer local food as opposed to fast food in lucrative points
like the malls, said Karoki.
At Ntinda, a suburb in the northeast of Kampala’s central
business district, a new mall where Nakumatt will be an anchor tenant is
being set up. Capital Shoppers City, the largest locally-owned
supermarket chain in the country has opened shop at Ntinda.
Tanzania
Experts say that while Tanzania has a faster growing economy
compared than its peers, presenting a huge market opportunity, the
informal market will remain a preferred form of shopping for a long time
to come, holding back investments in malls.
“Dar es Salaam has not attracted huge investments, implying it
will take time to spread to other areas,” said Mr Karoki. “There is a
huge gap between the low and high end classes, meaning the middle class
demand for shopping for food, beverages and clothing from a formal
setting does not exist; the target is the wealthy, who at times prefer
going abroad for shopping.”
Milimani Shopping Centre in the suburbs of Dar es Salaam is
being expanded by an additional 10,000 square metres by 2017, from the
present 18,000 square metres.
Most of the establishments in Dar es Salaam are stand alone supermarkets, including Nakumatt.
.
The Peninsular Shopping Centre, a 30,000 square metres
retail centre at Masati in Dar es Salaam, is expected to be ready by
2018. Masati is the equivalent of Kenya’s Muthaiga or Uganda’s Kololo
areas where people have upmarket tastes and preferences and want to have
a complete experience under one roof.
A 45,000 square metres mall, the equivalent of Kenya’s Hub in
Karen is being developed at Mbezi, some 2 kilometres from Dar es Salaam
on 25 acres.
Sources said Carrefour and Nakumatt are in discussions with
developers as possible anchor tenants at the mall which is located next
to the American Embassy. It will be ready by 2018. Tanzania’s National
Housing Corporation has invited investors in its Morocco Square which
has a projected size of 110,000 square metres (gross floor area), office
space of 47,793 square metres and 28,827 square metres for commercial
space.
It also includes 8,456 square metres of hotel spaces. Experts
said the developments in Tanzania compare to Nairobi in 2002, with the
advantage of modern world class designs instead of starting from a low
grade and then upgrading.
“The wealthy in Dar are expected to continue shopping abroad . A
diversified choice abroad will still pull a sizeable market,” said Mr
Karoki.
Rwanda
In Rwanda, Nakumatt will be the anchor tenant in an upcoming mall at the Remera Area near the airport, which is expected to be ready by 2018.
In Rwanda, Nakumatt will be the anchor tenant in an upcoming mall at the Remera Area near the airport, which is expected to be ready by 2018.
Recently, Simba Supermarket Rwanda signed a lease agreement with
Kigali Heights Development Company that will allow the former to rent
at least 1,500 square metres of space at the Kacyiru-based modern mall
that is under construction.
The mall will host international brands, among them the Australian retailer Woolworths and Java House coffee shop.
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