Nairobi, Luanda, Lagos, Dar es Salaam and Maputo are the cities with the five largest shopping centre development pipelines in Sub-Saharan Africa, outside of South Africa, according to fresh research by Knight Frank.
The Shop Africa 2016 report, an inaugural review of Sub-Saharan Africa’s retail markets by Knight Frank, shows Nairobi is the largest mall development hotspot with around 470,000 square metres of shopping centre space in the pipeline.
The report notes that the top five cities fit the profile currently targeted by investors in Africa; that is, large, fast-growing cities in economies that have seen rapid expansion. Luanda in Angola, which has the second largest shopping centre development pipeline, expects to add more than 350,000 sqm, albeit that some of the long-standing large scale projects have seen significant construction delays.
Lagos in Nigeria has the third largest mall pipeline, followed by Dar es Salaam in Tanzania, where development is currently accelerating having previously trailed Nairobi. Maputo in Mozambique completes the top five hotspots for mall space development, helped by a construction boom being driven by recent offshore gas discoveries.
At a national level, Nigeria has the largest shopping centre development pipeline in the region, spread out across its many other large cities besides Lagos.
Nairobi has an existing mall space of 391,000 sqm which is denoted by malls such as The Junction, Sarit Centre and Garden City. Already, this ranks the city as the largest retail market in the region by existing shopping centre floor space. Key mall space in the pipeline includes the iconic Two Rivers Mall in Runda and The Hub in Karen, which opened on February 4. While Nairobi has had shopping centres since the 1980s, the current wave of development is creating modern malls that are setting new standards for the market in terms of size and quality.
Also, among the new projects, there is a clear trend towards mixed-use development – as opposed to pure retail – as office, residential and leisure facilities converge. Ashmi Shah, Retail Portfolio Manager at Knight Frank Kenya, said: “The developers of Nairobi’s modern malls are building new city hubs, where people can live, work, shop and play, all on the same site, in locations near key transport links.”
Notably, most of the developers and landlords of shopping malls in Nairobi are Kenyan. In addition, the new malls have generated good interest from prospective tenants and have achieved rents that compare favourably with the city’s more established shopping centres.
The Kenyan retail market remains dominated by local operators, the Shop Africa 2016 report notes, but international chains have assumed a growing interest. For instance, French retailer Carrefour will be an anchor tenant at both Two Rivers and The Hub. Turkish fashion brand LC Waikiki will also enter the Kenyan market with a store at Two Rivers.
Major international retail groups have developed an interest in the wider Sub-Saharan region, the Shop Africa report states, adding that most international brands enter the region either through partnerships with local operators or franchise agreements.
The variety of retailers seeking to expand their footprint in the region has helped the newly developed malls to absorb demand. Such include regional chains like South Africa’s Shoprite, Pick n Pay, Game and Woolworths, which are venturing into other markets, and home-grown retailers such as Nakumatt, Tuskys and Uchumi in Kenya.
Peter Welborn, Head of Africa at Knight Frank, said: “The shopping centre sector currently provides many of the most eye-catching examples of commercial property development in Sub-Saharan Africa.
“Even though retail construction activity has accelerated, nearly all of the region’s major cities remain hugely undersupplied by global standards. Shopping centre development is set to continue apace, and it will play a major role in shaping the future landscapes of Sub-Saharan African cities.”
In Nairobi, for instance, despite the high levels of retail construction activity across the city, there are still opportunities for developing well-located, well-positioned malls. However, as the retail sector grows and competition intensifies between retail schemes, developers and investors in the region are also expected to increasingly look for opportunities outside the current hotspots in major cities and turn attention to second- and third-tier cities – such as Naivasha, Nakuru, Nanyuki, Eldoret and Kisumu in the case for Kenya.