We are pleased to announce the release of the 2020 Africa Retail Report which provides an analysis and outlook of the retail sector performance in the continent. The report highlights market dynamics that have been prevalent in the wake of the COVID-19 pandemic, the opportunities available to Africa’s retail sector and key influences that will impact the sector going forward.
As a result of the economic challenges, some stemming from and others exacerbated by COVID-19, we have seen 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 and attract new tenants.
Across Africa, retail rents have softened by 6% in the six months to September 2020. This trend has been underpinned by retailers’ seeing demand levels soften on the back of a weaker economic climate largely caused by the pandemic and restrictions in mobility. Harare, Lagos and Luanda are the most notable with prime rental declines of 50%, 40% and 31%, respectively.
A number of notable retailers’ exits such as Spurs exiting Zambia, PEP and TFG exiting East Africa and Shoprite exiting Kenya were recorded during the period.
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. 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.
Knight Frank Research recorded shopping centre space per capita at 0.31 square metres on average across the nine cities studied, which is significantly lower compared with 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 report, Africa’s growing population and subsequent rising middle class is set to continue to underpin future demand for formal retail space.
The report also highlights key trends that will impact the retail sector in the short to long term, characterized 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 increase in demand for entertainment amenities; Rethinking Design, with a greater emphasis on sustainability and flexibility; and Living with The Disease, with Omni channel offerings set to become critical to the new normal of safe shopping.
"Across the continent, 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." Tilda Mwai, Researcher for Africa notes.
