14 November 2012

Kenya: Mall Developers Wary of Polls - Knight Frank

IT is unlikely that a new mall will be developed in the country next year, a research by real estate firm Knight Frank predicts. This is because mall developers are not sure of what will happen after the new elections expected to take place on March 4, 2012.

"No mall is set for opening in 2013, presumably due to the uncertainty expected from the forthcoming general election ," the research note released recently for the second quarter 2012 says.

However the retailing outlook in Kenya remains and continues to be positive with hypermarkets, convenience stores and specialty retail (destination retailing) expected to undertake massive expansions.

Big-box retail is also now gaining prominence in new developments currently under construction as stand-alone occupiers start to show interest in the malls.

The firm estimates that between 2012 -2014, Kenya will have additional seven ultra-modern retail centres of approximately 150,000 square metres located within the outskirts of Nairobi and Mombasa .

"The limited scale and positive macroeconomic conditions make it an appealing choice for retailers seeking more "contained" markets, in which they can exercise greater control and test concepts before entering other African markets," the study released recently notes. The company estimates that GDP will average 5.1 per cent through to 2014.

"Leading retail chains plan to increase their investment significantly," the study adds. For instance, KFC has opened three stores in recent months while Nairobi Java House which dominates the cafe and restaurant trade is undergoing an aggressive regional growth strategy. Knight Frank adds that major international chains such as Walmart's, Game Stores, Jet and Edgars plan to enter the market in 2014.

The reason for the new comers, according to the research note, is that consumers in urban areas are maturing as they have rising disposable incomes.

These consumers are becoming more discerning in their tastes trading up for more expensive higher quality products and are increasingly accepting global brands.

However, inflation continues to be a concern, diminishing disposal income and impacting anticipated trade levels. This heavily impacts on consumerism and the investment nudge required to tip over international retailers into the country, Knight Frank says.

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