Two mega shopping malls opened in Kenya’s capital Nairobi last year – Westgate, which was re-opening following the 2013 terror attack – and the newly built Garden City mall owned by London-based private equity firm Actis. More centres are under development in Nairobi and the new additions will further increase options for shoppers and retailers.
The first phase of the US$540m Garden City project, which includes 33,000m2 of shop space, residential units and a parking area, attracted leading retailers such as locally-owned Nakumatt Holdings and South African supermarket chain Game. The mall is located along the Thika highway, a multi-million dollar road completed in 2012 that connects Nairobi with the town of Thika.
Dinfin Mulupi speaks to Koome Gikunda, director of Actis Kenya, about how Garden City has been received by shoppers, security in malls, opportunity for developments outside Nairobi, and exit options for investors. Below are excerpts.
How would you describe the last few months since Garden City opened in May 2015?
The response to the mall has been very good, particularly now that virtually all the stores are open and trading. We had approximately 500,000 people visit in December alone, which I suspect is a record for the region. The feedback from visitors has been very encouraging. The consistent message has been: “Wow, it’s very quick and easy to get to, the tenant mix is unique, and the architecture is amazing.” Parents in particular appreciate the many leisure activities available for their children.
Equally, the response to the Garden City Village has been excellent. We have pre-sold over 70% of apartments and villas and will have the first group of homeowners move in early this year.
The other good news is that Safaricom (Kenya’s largest mobile network operator) has acquired five acres of land within Garden City for the development of their new head office.
I understand you are putting up a new business park at Garden City. Tell us more about this project.
Yes, encouraged by the success of the mall and the residential component, Actis acquired additional land adjacent to Garden City. On this land we are developing the Garden City Business Park comprising a private hospital, a four-star hotel and grade-A offices, which will have the highest parking ratios in Nairobi. All these uses complement and support each other. We are very encouraged by the demand from corporates looking to move their head offices from more congested parts of Nairobi to Garden City, which is only 9km from the CBD and faster to get to given its adjacency to the eight-lane Thika highway.
In recent years there have been a number of other investments in shopping malls in Nairobi. How will Garden City stand out in the midst of increasing competition?
Garden City Mall will continue to stand out for its location, its hip design and tenant mix as well as the green space dedicated to family-friendly leisure. Yes, there are many retail centres, but very few retail ‘destinations’. Kenyans want something modern, fun, convenient and green. Garden City is all of these. Because of the eight-lane highway it is very quick to get to; the design is open, bright and airy; and there are over 120 diverse and fun shops to visit. It has a huge range of restaurants, all overlooking a green park. One of the comments I heard from a shopper in December was how refreshing it was not to be dining in a box overlooking a parking lot.
Security is a key concern since the Westgate attack. What measures have you put in place at Garden City to protect shoppers and your tenants?
We incorporated enhanced security features during the project’s design phase. We focused on both hard and soft security infrastructure. I’d prefer not to divulge the details of the hard infrastructure, but it is extensive and well thought out. Equally important is our investment in soft infrastructure: the calibre of staff and their training, as well as our links to, and communication with, the government security apparatus.
What is your view of Kenya’s retail industry – from a real estate perspective?
Kenya’s retail industry is relatively formalised and sophisticated. There are a number of retailers who operate at a very high level and can compete with the best in the world. Many of them are growing fast, opening multiple stores across Nairobi, Kenya’s counties and the East African region. At the same time, international retailers are waking up to the opportunities and either setting up shop in Nairobi or have tangible plans to do so. So tenant demand is growing. However, it is fair to say tenants are far more discriminating in their selection of trading environments. The bar for what constitutes a well located, designed and managed mall is now much higher.
Do you see opportunities for retail property projects outside Nairobi?
Yes we do. Retail is driven by consumer and tenant demand – we are constantly looking at emerging nodes within and outside of Nairobi where there is opportunity to make respectable risk-adjusted returns.
What about the greater East African region? A city like Tanzania’s Dar es Salaam badly needs new investments. Is Actis eyeing opportunities in these markets?
Yes. Actis has previously invested in Dar es Salaam and would do so again. Dar is ripe for one, and possibly more, malls and we are actively looking to invest there. As a pan-African real estate private equity investor, we plan to invest in a number of African cities, including Dar es Salaam, Nairobi, Addis, Lagos, Accra, Abuja, Abidjan, Maputo and so forth.
Actis is yet to exit some of its real estate projects in Africa. How easy, or difficult, is it to exit investments here?
There are both local and international options for exit. Actis has exited a number of real estate investments, not just in Nairobi but also in Dar es Salaam, Lagos, Accra and Lusaka. Each of these exits had its unique set of challenges. However, challenges notwithstanding, the exit thesis has borne fruit – which is to say there is demand for well located, well built, well tenanted and well managed commercial property in Africa.