Distribution Warehouses Identified As New Property Sector In African Markets Driven By Urbanization

Distribution Warehouses Identified As New Property Sector In African Markets Driven By Urbanization

As retailers grow their presence on the continent, North, East and West Africa are emerging as areas where efficient distribution facilities are needed.

The growing middle class and its spending power are hastening urbanization in Africa, and retailers need places to store their merchandise, according to Belinda Clur, managing director of Clur Research International, a South Africa-based company that does business on the continent and internationally.

Warehouses are trending as a new property sector in Africa, Clur said in an article in SA Commercial Prop News.

Clur specializes in strategic economic, property, retail and shopping center research, according to an article in Entrepreneur South Africa. Her company started in 2010.

This trend will likely grow with North African markets emerging as a new investment frontier after a heavy focus on expansion into West and East Africa, particularly Nigeria, Ghana, and Kenya – regions where efficient distribution facilities are clearly needed, Clur said.

Clur said in the article she identified this trend based on business feasibility studies she conducted in Africa and interviews with retailers, shopping center and hotel investors, wealth managers, shopping center service providers, stockbrokers and research houses with interests in Africa.

Clur spoke at a conference in London held by the International Council of Shopping Centers and Thompson Reuters. She is a member of the North American and European research advisory boards for ICSC.

The need for distribution warehouse space rises out of retailers’ need to plan for and manage efficient supply chains, especially in light of expansion plans, she said in SA Commercial Prop News.

With red tape shackling movement of goods in ports around Africa, it can take up to three months for South African retailers to get stock from Cape Town to Lagos, Clur said. “Ports…do not necessarily release goods easily. There are also often unbudgeted expenses. It is tricky to find suitable local suppliers who accord with your brand.”

Clur cited RMB (Rand Merchant Bank’s) Global Markets Research Report, “Where to Invest in Africa 2012,” saying in the article four of the 10 most attractive investment countries on the continent, based on market size, market growth and operational ease, are in North Africa – Egypt, Tunisia, Morocco and Libya.

“In response to the great demand for formal retail, the best formats in Africa currently are convenience centers with small lifestyle components ranging from 10,000 square meters to 30,000 square meters, and a focus on basic needs – food, furniture and clothing,” she said in the article. “Some markets are seeing an increasing introduction of leisure components – fast foods, family entertainment, bars and gambling – and luxury offerings as consumers become wealthier, more sophisticated and tastes evolve.”

As African consumers move from traditional markets to formal retail, some shopping centers are installing people-counting systems to measure visitor numbers.

She cites Headcount Systems information, where a small sample of African centers shows the highest headcounts in Nigeria and Angola, two to three times South African levels.

The Lagos Eko Atlantic mixed-use development being built on land reclaimed from the Atlantic Ocean is an example of the type of advanced schemes being planned and developed, Clur said in the article.

Clur’s advice to businesses entering the market for the first time: “Tailor their offering according to an understanding and tolerance of conditions and culture. Rather start small, test the market response, get the mix right based on experience and trading knowledge, and then expand once you have sufficient patronage.”