New developments in the retail sector over the past ten years have increased the supply of A-grade shopping centres and contributed to increased rental rates in local currency over this time. However, sharp currency devaluations have caused rental rates to decline in USD-terms, which has negatively impacted international investors into the sector in countries such as Nigeria and Egypt.
The largest malls in Africa remain in Egypt’s Cairo and most of South Africa’s large cities, with mall sizes ranging from around 100 000 m2 up to 267 000 m2, in the case of Egypt’s Mall of Arabia.
In Accra and Nairobi, a substantial increase in supply over the past five years has sparked concerns that the retail market may soon reach a saturation point, which is evident in slower lease-up rates and stagnation of rental growth. Vacancy rates in Nairobi, Lagos and Accra ranged between 15-20% in 2018. This compared to the seven-year high vacancy rate published by Forbes for the US of 9.1%, and 7.8% for European shopping centres in the same year.
As a measure of the relative supply of retail space, we look at gross lettable area (GLA) of shopping centres per 1000 people in African cities. This varies greatly among countries worldwide and is influenced by culture, wealth of the population, even the weather, amongst others. Despite obvious differences in all the above-mentioned factors between African cities and those in developed and developing Europe, there appears to be space to increase the supply of shopping centres further.