African Real Estate developers learn from the mistakes made in the U.S.

African Real Estate developers learn from the mistakes made in the U.S.

Developed markets such as the U.S have continued to see shopping malls failing across the country, this is in part due to the growth in on line shopping and it is something retail developers in Africa are both watching closely and learning from.

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Developed markets such as the U.S. have continued to see shopping malls failing across the country, this is in part due to the growth in on line shopping and it is something retail developers in Africa are both watching closely and learning from.

Whilst retail shopping centers are still being constructed in parts of Africa, other vacant plots that would previously have been developed into large scale shopping malls are now being used to create mixed-use developments, these include; retail outlets, work space for small businesses, shared and flexible work space for entrepreneurs and remote workers, leisure facilities and accommodation.

Analysts believe that are still opportunities in Kenya

Whilst many commercial real estate developers believe that Nairobi already has a disproportionate number of shopping malls, others disagree stating that there is still an appetite especially in neighborhoods lacking adequate transport systems. South African developers are in fact currently actively seeking vacant land in Nairobi on which they can build some new large scale mixed-use developments.

A recent report from Knight Frank stated, “Among the new projects for Nairobi’s new malls there is a clear trend towards mixed-use, rather than pure retail, development as office, residential and leisure facilities have been incorporated into the schemes”, “Unlike shopping malls in the U.S., retail centers in (Kenya) have incorporated experiential marketing to attract millennial consumers who are seeking memorable experiences from their shopping, a factor that has been identified as one of the reasons for the demise of America’s malls … the future of retail fulfillment is no longer just about more stores or shopping centers…In Kenya’s case, the shopping malls are being developed as city hubs, where people can live, work, shop and play at the same time; thus appealing to consumers at a wider level.”.

 

Megacities will not be the major source of growth in coming years

According to a recent report there are a total of 7 megacities in Africa, these are; Accra (Ghana), Lagos (Nigeria), Johannesburg-Pretoria (South Africa), Cairo (Egypt), Kinshasa-Brazzaville (Democratic Republic of the Congo and Republic of the Congo), Khartoum (Sudan) and Nairobi (Kenya). The definition of a megacity is one with a population which exceeds 10 million.

Global growth is not expected to come from Megacities in the next 10 years, in fact many predict that their contribution could be as little as 10%. The majority of the growth in the next decade is instead expected to come from cities that are defined as mid-size cities, these are cities with populations of anywhere between 150,000 and 10 million, and there are currently 528 cities in Africa with populations of at least 250,000.

Nigeria’s economic recession is stalling the construction industry

Once described as the “Dubai of Africa”, almost 60% of all private and public construction projects are currently shut down in Nigeria. This slowdown is compounding Nigeria’s current economic challenges, due to part to their inability over recent years to adequately diversify their economy, continuing instead to rely too heavily on their oil exports.

Plans to expand and improve South Africa’s railway network

The planned expansion of the railway system is expected to start within the next 5 years and should be completed by approximately 2050. It is anticipated that the railway network expansion will encourage some of the larger corporations currently based in Johannesburg to ultimately relocate to the more western parts of the city, this in turn will encourage the construction of new mixed-use, business, leisure and residential developments.

Other parts of South Africa are continuing to buck the downward trend seen in some other parts of the country, in fact according to Andrew Golding, the Chief Executive Officer of Pam Golding Property group, house prices in the Western Cape have increased by approximately 4.2% in the last 10 months.

Pictures : tanzaniainvest.com and huffpost.com

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