The Africa Retail Report which provides an analysis and outlook of the retail sector performance on the continent has today been released.
The report highlights market dynamics that have been prevalent in the wake of the COVID-19 pandemic, the opportunities available for Africa’s retail sector and key influences that will impact the sector going forward.
Africa Retail Rents
As a result of the economic challenges, some stemming from and exacerbated by COVID-19, we have seen the performance in Africa’s retail sector remain subdued throughout 2020 with retail landlords across the continent adopting a range of lease concessions in a bid to retain existing tenants and attract new ones.
Retail rents have softened across Africa by 6% in the six months to September 2020. This trend has been underpinned by retailers’ seeing demand levels decrease on the back of a weaker economic climate largely caused by the pandemic and restrictions in mobility.
The Africa Retail Report shows that Harare, Lagos and Luanda recorded the most notable negative rental changes with prime rental declines of 50%, 40% and 31%, respectively.
Retailer Exits and Expansion
Several notable retailer exits were recorded during the period such as Spurs exiting Zambia, PEP and TFG exiting East Africa and Shoprite exiting Kenya.
Whilst some retailers have scaled-down operations, others have used weaker market conditions to expand. Carrefour, for example, has grown its presence in Kenya, Tanzania and Uganda, with further expansion expected in five countries in the near term.
Editors of the Africa Retail Report noted that Shoprite is also set to expand store numbers in Uganda and Zambia, whereas LC Waikiki is also set to expand into Zambia and Uganda and increase its presence in Kenya.
Ashmi Shah, Knight Frank Kenya Retail Portfolio Manager said: “Even as the pandemic caused an economic slump in 2020, in Kenya, the anchor tenants in Malls did not trade too badly as Kenyans still visited Malls for their essential items. There was an increase in online shopping as traditional retailers adopted a digital marketing strategy and trading on online platforms to keep up with changing consumer behaviour.”
According to the research, shopping centre space per capita on the continent stood at 0.31 square metres on average across the nine cities studied, which is significantly lower compared to other countries such as the US and cities like Dubai where per capita retail space is 2.4 square metres and 1.2 square metres, respectively.
Lagos had the lowest shopping centre space per capita at 0.01 with Gaborone recording the highest shopping centre space per capita at 1.34 according to the Africa Retail Report.
Africa’s growing population and the subsequent rising middle class is set to continue to underpin future demand for formal retail space.
The Africa Retail Report highlights key trends that will impact the retail sector in the short to long term, characterised by;
- Turnover Based Rents, a trend anticipated to have a long-term influence on retail rent models across the continent;
- The New Age Consumer, anticipating a shift in consumer spending patterns as Africa’s population continues to grow;
- Leisure Boom, anticipating an increase in demand for entertainment amenities;
- Rethinking Design, with a greater emphasis on sustainability and flexibility; and
- Living with The Disease, with Omnichannel offerings set to become critical to the new normal of safe shopping.
Tilda Mwai, Researcher for Africa said that the pandemic has prompted something of a power swing towards the tenant, with rent deferrals, lease re-gears and a push towards turnover rents increasingly commonplace.
“The retail sector will continue to be only as strong as the occupier base that underpins it. Covid-19 has therefore provided a timely reminder as to the value of effective landlord/ tenant collaboration, rather than counter-productive conflict,” she said.
Knight Frank’s Africa Retail Report provides an overview of the continent’s diverse retail markets with data drawing from different cities.