Buoyed by the forecast growth of consumption in Africa, retail property appears to be booming on the continent.
In a report on sub-Saharan Africa released by Deutsche Bank in July, author Dr Claire Schaffnit-Chatterjee wrote that consumer spending accounted for more than 60% of sub-Saharan Africa’s gross income.
Schaffnit-Chatterjee said private consumption in Africa rose by $568 million (R5.5 billion) from 2000 to 2010 and was higher than in India or Russia.
“From 2012 to 2020, consumer-facing industries are expected to grow by $410 billion, with apparel, consumer goods and food accounting for $185 billion.
“Indeed, more than half of African households are forecast to have discretionary income by 2020 – almost 130 million compared with 85 million today,” she said.
Broll Property Group chief executive Malcolm Horne said retailers were responding to increased demand from consumers in Africa, and expanding beyond South Africa.
“In sub-Saharan Africa, growing customer demand is coupled with an increasingly well-informed customer base, making it easier to position retailer brands, especially as far as fashion, supermarkets and electronics are concerned,” said Horne.
South Africa is still home to a mushrooming retail property sector. According to the Investment Property Databank, about 21 shopping centre plans were approved between January and June this year.
Neil Gopal, the chief executive of the SA Property Owners’ Association, said: “Between January and July 2013, shopping centre plans with a total area of 599 021m² were passed. The average size of the proposed shopping centres or centres under construction currently being developed ranges from 25 000m² to 31 000m² – most of the proposed shopping centres are small regionals.”
Gopal said the total amount of floor space available to be let in shopping centres under construction or proposed between this year and 2015 is about 1.99 million square metres.
Even though many of South Africa’s big property-development companies have ventured into the continent for expansion owing to its increasing purchasing power and the growth of the middle class, Gopal said there was still huge potential growth for rural development in South Africa.
And several challenges facing expansion into Africa remain.
“There are a significant number of challenges to overcome as those (other African) markets don’t operate the same as South Africa: (poor) logistics, dilapidated infrastructure, lack of strong governance in financial markets, land tenure issues and so on. And one has to understand the market before entering,” cautioned Gopal.
Horne said that, in a nation such as Kenya, rapid middle class growth had created a gap between the consumer and retailer, with insufficient mall retail space.
He said: “In east Africa, certain categories of experiential and mainstream retail are missing. Retailers that fill this gap will flow into the country once it is evident there are more new well-designed malls ready to receive and accommodate them.”
Horne also said for youthful developing economies, it had proven successful to position tenants under the umbrella strategy of “eat, play, shop”.
“In setting our tenant mix strategies accordingly, we ensure high trading densities for retailers, high revenue-share rentals for mall owners and higher value malls for investors,” he said.
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