Urbanisation, undersupply of formal retail space driving growth in the retail sector across Sub-Saharan Africa

Posted On Tuesday, 08 September 2015 09:30 Published by
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Rapid urbanisation, population growth and an undersupply of formal retail space continue to drive growth in the retail sector across Sub-Saharan Africa.

Elaine_Wilson

In the past three to 10 years, the retail sector across Sub-Saharan Africa has seen growth with many markets starting to develop formal retail for the first time while others continue to expand or refurbish existing centres.

According to Broll Property Group Research, rapid urbanisation, population growth and an undersupply of formal retail space continue to drive growth in the retail sector across Sub-Saharan Africa. 

Other drivers include changes in consumer needs and behaviour, access to credit, rising income levels, retailer demand, investor confidence and the promise that after a while, assets will achieve better yields is driving new developments in some markets. 

Elaine Wilson, Divisional Director for Research at Broll Property Group says in Nigeria for example, as the country progresses economically, investors seek opportunities to provide residents in established cities like Lagos and Abuja access to formal retail, while in second-tier cities they want to establish a first mover’s advantage in a city where little or no formal retail exists.  

“Although GDP growth has slowed down considerably, oil-dominant economic growth in excess of 8% and growing urbanisation in recent years has provided the dynamic for retail developments to thrive and spurred the growth of formal retail,” she says. SADC Region  Over the past 10 years, the Namibian retail sector has seen substantial growth.

Although this growth has been experienced mostly in strategic locations within the central and northern regions, the coastal towns will also see major investments into retail developments within the next 12 – 24 months, notes Marco Wenk, Broll Namibia Managing Director.

Preston Gaddy, Divisional Director for Strategic Retail Leasing at Broll Property Group explains that in South Africa, landlords and developers’ focus has shifted to refurbishment and redevelopment of existing centres in an attempt to unlock further value and realign these centres to the changing demographics in their respective catchment areas.

Apart from two major developments, the Mall of Africa and the Mall of the South, opportunities for super regional centres in metropolitan areas are somewhat limited while opportunities  for developing convenience centres (5,000m2 to 12,000m2) with grocery anchors still actively seeking space in this sector, he says. 

According to Robert Broll, Lease Consultant for Retail Projects and Developments for the Broll Property Group, Zambia is still seeing retail active with the much anticipated Solwezi Mall of the North located in Solwezi scheduled to open in December 2016. 

Solwezi Mall of the North measuring 12,000m2 is strategically situated on the main T5 road which links Solwezi to the surrounding towns such as Kitwe and a further 10,000m2 planned expansion.  Solwezi located on the north-western province of Zambia and bordering the Democratic Republic of Congo (DRC), has been described as a modern day African boom town.

It is home to the world’s 5th largest copper mine and the town has seen a boom on the back of mining activity.  Further afield in Mauritius, Rhoy Ramlackhan, Managing Director for Broll Indian Ocean says after a slump in the last four years, the retail market is expected to regain momentum with the development of an expected eight smart cities across Mauritius offering tax incentives to occupiers. 

Ramlackhan explains that shopping centres in Mauritius range from 10,000m2 to 45,000m2 noting that recent refurbishment of malls such as Trianon Shopping Park and the Caudan Waterfront have seen an increase in footfall and spending.  Bagatelle Mall of Mauritius is being extended with a new decor store measuring 7,718m2 expected to start trading in November 2015 while a new 26,000m2 mall opened in June 2015 on the east coast of the island with Super U as the main anchor tenant, he says. 

The west and south coast will also see new developments in the short term with the Medine Smart City and Omnicane’s Mon Tresor projects expected to break ground later this year.  “Mauritian consumers prefer European brands which is a challenge for South African retailers entering the market as competition increases.

“It is expected that in the short to medium term, additional high quality international brands will enter the Mauritian market,” according to Ramlackhan.  East Africa  In Kenya, Betty Musyoki, Director: Portfolio Management and Client Services at Broll Kenya says the retail market in the country is stable with a few new malls to open.

These include The Hub and Two Rivers in Nairobi. However, she points out that while the opening dates of some malls were pushed further due to construction

delays or tenant fit-outs, they anticipate a positive outlook for the retail sector for the remainder of 2015. 

“Local tenants continue to take up the majority of space in malls and international retailers enter the market mainly as corporate stores,” says Musyoki.

She points out that Westgate Mall in Nairobi, which came under attack in 2013, reopened in July with major stores now trading. Vacancies at the mall are reportedly under 5%, an indication that tenants are positive about the market.

West Africa  In the past decade, the Nigerian retail sector has distinguished itself as a sector with considerable growth potential, according to Bolaji Edu, Broll Nigeria CEO. 

Investors find this sector particularly appealing as seen in the number of new developments such as Jabi Lake Mall, Delta Mall, Owerri City Mall and Festival Mall among others.

These new developments, he notes, are located mainly in Abuja, Lagos and the oil rich cities around Port Harcourt where significant commercial activity takes place.

“Growing disposable incomes, increasing urbanisation and a rising population have helped to fuel the demand for retail in Nigeria,” says Edu.

He says investors in this sector are a mixture of private equity funds and South African property funds with major retail brands in the market including the likes of Shoprite, Game and Mr Price and international brands including Lacoste, Swatch and Mango. Local brands such as Health Plus, Essenza, Gene Bendi, House of Tara, Casa Bella and Montaigne Place also have a strong presence in the market.

“While local fashion designers are increasing their footprints in various states, international brands are still a popular choice among Nigerians, who remain keen on shopping globally,” he says.

Kofi Ampong, Broll Ghana CEO says the Ghana retail sector is still dominated mostly by informal trading, however, the opening of the Accra Mall in 2007 has created growth opportunities for new developments. In 2014, two malls opened, namely Junction Mall and West Hills Mall in Accra measuring 11,500m2 and 27,700m2 respectively. 

“Ghana’s modern retail potential is no longer a hidden secret as Accra alone now boasts six malls excluding retail space in mixed-use developments with more projects in the pipeline (approximately 60,000m² within the next 24/36 months),” he explains. 

Although supply is growing, demand currently is decreasing due to the country’s current economic challenges which have put a dent in the momentum gained in 2013/2014. Existing malls tend to target high and middle income Ghanaians (a minority of the population), and expatriates which represent less than 20% of the population and in Accra middle income earners account for 32% of the population. 

While foreign exchange, inflation and competition remain risk factors, Ghana’s lowpenetration of the modern retail market remains an opportunity for new entrants into the market. 

Ampong says major investors in the supply side of the formal retail sector include Atterbury, Actis, RMB Westport, Mobus, BGI and some private investors with retail brand such as Shoprite and Game having presence in almost every existing mall. Other SA retailers include the Foschini group trading with American Swiss, Markham, Sportscene, Foschini, Woolworths, Truworths, Identity, Edgars, Jets and Mr. Price.

International brands in Ghana include Springfield, Bata, Lego and the Azadea Group trading with five different brands – Mango, Mango kids, Payless, Violeta and Sunglass hut, according to Ampong.

Last modified on Tuesday, 08 September 2015 12:33

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