East Africa’s Growing Middle Class Demands For More Shopping Malls

East Africa’s Growing Middle Class Demands For More Shopping Malls

A growing middle class and an increasing number of expatriates working for multinationals in East Africa has injected impetus in property scene with the number of shopping malls constructed in the region rising as the new breed of consumers demand for more imported high quality brands and better services at one stop shops.

In Kenya’s capital, Nairobi, new malls have spout all over the city. This includes largest Thika Road Mall that opened it doors late last year about 15 minutes drive from the city center. There are three more malls under construction in the same suburb including the $150 million Actis (private equity firm) Garden City Shopping Complex with 50,000sqm and the Mountain Mall an investment by Kenyan retailer Naivas.

Other investors that are undertaking on such constructions are Centum Investment, a Nairobi Securities Exchange listed investment firm, that is constructing Two Rivers development in Uganda and British born Ugandan billionaire, Ashish Thakkar of Mara Capital Group plans to construct a mall in Dar es salam Tanzania, the region’s most populous city.

Mara group has already invested $270 million in the project, that will include the largest shopping mall in East Africa, covering about 3.5 million square feet. The project will also include two internationally branded hotels, modern convention centre, modern medical tourism hospital, modern business park, residential compound, modern police station and 300 residential units for the Police.

“We have been encouraged by the strong demand shown by both local and international retailers, who like us see Garden City as a landmark destination in Nairobi and the East African region. The inclusion of the central park and our commitment to green building measures will burnish Actis’s reputation as sub-Saharan Africa’s most experienced private equity real estate investor,” said Actis Head of East Africa Michael Turner in a statement regarding the construction of the Garden City mall.

It is estimated that there are over 40 malls coming up in Kenyan alone with more than half of then located in the capital city, while the rest are distributed across the major towns in the country.

Higher purchasing power

Author and real estate expert Kariuki Waweru says the cost of putting up a shopping mall in Nairobi will range from in excess of $12 million for a midsized shopping mall while a large shopping mall will cost in excess of $36 million with Westgate valued at $80 million according to its insurer Lloyds market.

He says the growing middle class is always looking for places where they can find luxurious goods and services to “spoil themselves”  and malls are usually the available option.

“Think of it Kenya is quickly headed to the middle income economies league meaning people now have higher purchasing power and manufacturers and bringing in things to target this class. With this the next factor is accessibility to this class and hence the coming up of this malls in very many places,” Kariuki told AFKInsider.

The same story replicates in Uganda where  expansion of retailers regionally has created demand for malls. Two of Kenya’s largest retail giants Nakumatt and Uchumi supermarkets have expanded to Kampala and set up outlets in shopping centers including Oasis mall and Garden City mall respectively.

International brands have also set shop in this malls including: Shoprite, Game, Mr Price, KFC, among others and they have all received good response particularly from the young generation of Africans who are more willing to experiment and try out new and exotic goods or services.

High tourist numbers visiting Tanzania’s Dar es salam have also contribute to the increase in mall construction in that country.

According to Uganda’s Hima cement general manager Daniel Pettersson, the increase in malls in the region could also be linked to the booming economies in the region buoyed by growing intrastate trade, increased infrastructural development and the recent discoveries of oil and gas.

“Uganda is a significant market in the region and has a lot of potential in the medium and long term. There are still many untapped opportunities especially with the oil production coming in to picture, increasing demand for housing and significant infrastructure projects underway,” Petterson  said an interview with the AFKInsider.

He added that the cement industry has seen increased growth and more new entries as players anticipate a boom in property and infrastructure construction around the region.

Proceed with caution

“Even Lafarge Group’s philosophy now is building better cities. As Hima we have positioned ourselves to provide innovative solutions and technical expertise to our customers, contractors etc and offering high quality products to the market,” he added.

James Hoddel, the CEO at Mentor Management — an international development and project management consulting firm –however says that real estate investors should exercise caution  in deals they engage in by conducting proper due diligence before committing on such huge projects

“There is a likelihood of investors to be lured in the real estate sector due to the huge gains seen in this industry. It is however provident that such investors carry out the proper research before putting up any big malls in various localities as this will determine how fast they can recoup their money,” Hoddel told AFKInsider.

He also said that despite the region making strides in retail trade, it was still far from reaching a level where consumption patterns could support large scale shopping malls found in more developed countries since there are not enough enterprises to fill such large complexes.

Hoddel added that there is also a lot of South African influence on the East African market and this growing trend could be hurt by any slowdown in economy in the southern Africa country.