There is no shortage of shopping malls in Kenya’s capital Nairobi. Over the last decade, malls have been built on almost all major highways, and the construction of new facilities is ongoing in emerging suburbs and along new roads. Leading local and international retail brands, such as coffee shops, supermarkets, high-end fashion, pharmacies and cinemas have occupied space in shopping centres to expand their footprints across the city.
However, there are very few such outlets in other towns across Kenya. In Naivasha, 90km northwest of Nairobi, a new mall is being constructed, the first in the town.
The 22,210m² Buffalo Mall is expected to host retail and leisure outlets on an 18ha site.
“I realised that [Nairobi] was a market that was already established with shopping centres,” says Mike Lloyd, principal and the chairman of Lloyd Capital Partners, the real estate investment and development firm behind the project. “There were some quite big players in the market. I felt that in the retail business you either had… to have the best site in the town or the first mover advantage.”
Lloyd says Naivasha has a “disorganised retail market”. Many leading brands do not have a presence there because they cannot find space in appropriate locations.
Like many other towns in Kenya, Naivasha has changed a lot over the last decade. The agricultural town, famous for its fresh-cut flowers and vegetables that are exported to Europe, has recently become a popular tourist destination.
It is common for residents of Nairobi to take the one-and-a-half hour drive to Naivasha over weekends to visit game parks, Lake Naivasha, entertainment clubs, and to enjoy the landscapes of the Rift Valley. This is made possible by recent road improvements and the fact that Naivasha is closer to the capital than other tourist hotspots such as the Maasai Mara (a six hour drive) and Mombasa (eight hours).
Lloyd says Naivasha’s first shopping mall will affect how people view the town and how residents shop. He illustrates this using his experience as a franchisee for Swedish furniture retailer IKEA in Romania.
“Traditionally, the Romanian retail market was a little bit disorganised like Kenya right now. [You found] funny shops in funny places with no order, no organised parking [and] no security. When we brought IKEA into Romania we realised that the retailer changed the way people lived their lives. People would come and spend all day in the store. I think the shopping mail in Naivasha would also change the way people shop.
“If people find a safe, secure environment that is a pleasure to be in and meet your friends in, retailing becomes more of a pleasurable and leisure activity. Of course, you have to have sufficient excess cash… to buy something that is not a necessary [item].”
But will it work?
According to Lloyd, the scores of people who visit Naivasha over the weekends will find Buffalo Mall an attraction as a place to have coffee, shop, get banking services and so forth.
“There are 650,000 people living in the Naivasha Basin. That is an awful lot of people. Obviously, not all those people are wealthy but all those people can afford to spend money in a retail centre buying basic stuff like food.”
He adds that the mall, alongside other developments such as good schools, hospitals and housing projects, might also encourage more people to live in Naivasha.
Building in phases
However, Llyod points out that “it is very difficult to assess how strong the retail market is at the moment”. It is for this reason that Buffalo Mall will be constructed in three phases. The first phase will bring in banking outlets, ATMs, leading coffee shop brand Java House and Kenya’s second largest supermarket chain Tuskys.
Buffalo Mall has approached other local and international brands to take up space in the mall when the second and third phases are complete. According to Llyod, retailers are keen to expand their reach beyond the capital city to secondary towns in order to spread their risks, leverage distribution and get more customers.
He says he would like to eventually replicate the project in other emerging towns in Kenya but escalating land prices are worrying.
“The land prices are, to my mind, completely out of sync with reality in terms of profitability. I think land prices are very high [and] very fluid so land owners [do not sell] unless they are desperate to because they expect the prices to go up the next year.”