'Buzzwords' drive African retail boom: urbanisation is driving huge investments in mall developments in Africa, but retailers may not have an easy ride in fragmented markets.

Author:Cross, Richard
Position:Sector Focus: Urban Infrastructure - Carrefour S.A - Statistical data

Set on the side of Nairobi's newly renovated Thika Road Garden City is a glimpse of East Africa's consumer future. The $250111 development, with 50,000 square metres of retail space, opens in May, and will soon be joined by three others. The Hub, a 30,000 square metre development, opens in Karen in September, followed by the 62,000 square metre Two Rivers mall in Runda in October. A second Runda mall, the 11,000 square metre Rosslyn Riviera, is expected to open in May 2016.

Carrefour, the world's fourth-largest retailer, has taken more than 9,500 square metres in two developments in (he city, while Walmart subsidiary Massmart is one ol the first tenants in Garden City. Others international players are circling, according to Mike Kingshott, director of Aspire, which is developing the retail part of Garden City.

This breathless rush into Kenya's retail markets is driven, as Kingshott says, by "all those buzzwords". The country's demographics look like a developer's dream--a young population that is rapidly urbanising, against a backdrop of sustained economic growth that is raising incomes and creating a new, consuming middle class.

"It's pretty much untapped by the European or more international brands. The local Kenyans and the South Africans have pretty much had it their way," he says. "Now you've got Walmart, their first store at Garden City, and Carrefour coming in. There are a lot of other brands assessing their position, and from an East Africa point of view, Kenya would be their first port of call."

Large new mall developments, built to a standard that retailers have become accustomed to in Europe, North America and the Gulf, are vital to developing the market--but the developers themselves depend on retailers' commitments.

"None of these new retailers in the market will look at it if there's no retail space, which is the issue. There's a lot of new malls coming up, and without those new malls there wouldn't be any retailers coming in," Kingshott says. "It is a finely balanced catch-22."

Urbanisation is one of Africa's most compelling socioeconomic trends. In 1950, less than a quarter of the continent's citizens lived in urban areas. By 2010, that was nearly 40% and accelerating. By the end of the decade, half of all Africans could live in towns and cities.

In parallel, average incomes have risen in the continent's larger conurbations, and a putative middle class - which could be as large as 300m people, according to the African...

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