I had the pleasure of attending the Shopping Centres Association of Kenya (SCAK) launch event in Nairobi. These events are for me an opportunity to interact with Industry players, network and occasionally get a view of “Government position” on certain sectors. The SCAK launch event did not disappoint and offered these opportunities.
The launch is an actualization of a journey that started in October 2011. The organisers and officials presented the audience with the journey and growth of retail in Kenya and used the opportunity to share their concerns. The association brings together different players in the retail space: developers, retailers, service providers including mall managers.
- Creating influence by providing a platform for advocacy and lobbying government on issues of common interest
- Education by establishing channels for retail specific and mall management courses and/or lobby local Universities to offer these
- Research on how to utilise the information available from them to the benefit of future malls in various respects such as design to ensure holistic experience by shoppers, identify “hot spots” etc.
Some of the concerns articulated by both investors/owners of malls and retailers have been the subject of debate in other Real Estate forums.
- A representative of the mall owners raised a concern on an issue that is one of my “pet peeves” which is the legislated commercial term of five (5) years; with no provisions for termination by notice. This is particularly frustrating when a retailer does not perform well, would like to close shop but and is locked in to a five year term of lease. While various market mechanisms have evolved as market practise to deal with such instances, these come at a cost and it may be preferable that lease terms be more flexible to be supportive of business. The matter of lease terms legislated at a minimum of 5 years in historical legislation may have been well intended and was aimed at safeguarding the interest of both landlords and tenants but is one that should be reviewed.
- Does Nairobi have the demand and capacity for all the retail stock presently delivered and in the pipeline? This was a matter raised by both the mall owners and retailers. Considering the journey from 1983 when the first formal retail mall, Sarit Centre opened its doors with 12,000 sqm and the current stock in Nairobi is 390,000 sqm and with the pipeline projects growing these by a further 120% to 860,000 sqm by 2018.The brokers active in retail admit that malls are letting slower and to the same retailers, and this therefore alludes to this being genuine reason for concern. There seemed to be a sense of hope that as the economy continues to do well and the middle class grows, the uptake of retail stock will improve. There also seems to be consensus, and I agree, that developers need to look at opportunities for Retail Malls outside of Nairobi, which is saturated. To this end, Government was urged to look at infrastructure in the Counties and taking lessons learnt from Nairobi, strictly focus on land use zoning and planning (and enforcing existing legislation).
- How do mall owners invest in attracting “new retailers”/International retailers into the market and ensuring that the experience in malls is one that encourages thriving trade? There has been concern that mall owners & managers limited their involvement to rent collection without effort to ensure that the malls thrive and remain attractive investments for both the owners and retailers.
- Two representatives of retailers expressed frustration at research available in market noting that these was either inadequate and/or what they consider research by foreign firms who do not have full appreciation of some local market specific issues such as impact of informal traders, second hand goods, hawkers etc. on formal trade.
The launch of the association, associated with other similar bodies in South Africa and London is definitely a welcome initiative that will potentially bring transparency to the retail industry, to the benefit of all investors, mall owners & retailers and ultimately with benefit to the customers.