Property entrepreneur Hamed Ehsani talks about his business journey
When Iran-born entrepreneur Hamed Ehsani arrived in Kenya shortly after the Iranian revolution, business was the last thing on his mind.
When Iran-born entrepreneur Hamed Ehsani arrived in Kenya shortly after the 1979 Iranian Revolution, business was the last thing on his mind. Ehsani and his family were visiting his brother, a lecturer at the University of Nairobi, after which they planned to travel to Australia. Their Australian visas delayed, they fell in love with Kenya and decided to stay.
Today Ehsani is managing director of The Village Market, a large shopping centre located in Gigiri, one of Nairobi's top neighbourhoods. The shopping centre neighbours the UN headquarters in Africa, the US embassy and a host of other diplomatic missions.
In 1992, as Ehsani and his brother Mehraz drove to a golf course through Gigiri, which he tells me was then under a coffee plantation, the idea of constructing a shopping and recreation facility in the area hit them.
Having grown up in the Middle East and studied in the US, Ehsani had been exposed to large shopping centres and malls, a concept that was fairly new in Kenya at the time.
“One of the arts of entrepreneurship is to see an idea and try and adapt it for a different environment,” said Ehsani.
“When we started there were one or two shopping centres already build, but they were very – I could say – rough. They met the requirements and they are still ongoing and they are doing beautifully well, but we felt there was room to add a little more style and a little more beauty and texture,” he recalled.
The Ehsani brothers instructed architects to come up with 30 shops and a small supermarket.
“We needed US$1.5 million to start the project. The land was bought at a very nominal cost. At that time it was cheap. We went out to a bank and we borrowed three quarters of that amount,” said Ehsani.
The Village Market has since expanded and now has 150 shops, and the 137-room luxury Tribe Hotel. The Village Market is currently under expansion that will see an additional 70 shops constructed. A $1.5 million budget hotel will also be established to capture increasing demand. According to Ehsani, this is the fifth expansion since the establishment of the shopping centre.
“The expansion is going to be quite large. It is a $50 million expansion to make room for retail brands. We have bookings and enquiries from European and American [companies],” said Ehsani.
Dealing with the sceptics
In 1992, not everyone was optimistic about the prospects of a shopping centre in a secluded, far-off part of town.
“We met huge resistance at the beginning and scepticism from many people; ‘this is not going to work, it’s too far, who is going to go there’ and all that,” said Ehasani. “People didn’t understand it. But, we could see that the area would grow. We kept at it, refined the concept and we expanded it. The whole idea was that we didn’t give up.”
When the US embassy came into the area, other diplomatic missions followed transforming the neighbourhood into a diplomatic zone. The Village Market became the ‘to go' place for Nairobi’s diplomatic community, tourists and the middle class for high-end shopping and entertainment.
Demand for shopping centres on the rise
The Village Market managing director explained that external and internal forces are driving demand for more shopping malls in Nairobi and other urban centres in Kenya.
“Internally, the development of the middle class in Kenya has been a major force. Maybe about ten, fifteen years ago, out of an office of 20, only two of my staff drove a car. Today out of twenty, 18 have cars. It has completely changed,” he said. “With that mobility... now they can eat in different places, shop in different places, visit different people.”
He argued that the increasing purchasing power among Kenya’s middle class is also creating demand for brands that need retail space.
“That demand is also changing from the very preliminary and primitive supply... now it has become more and more complex to the point that we are at the verge of seeing the mid and high-end brands coming to Kenya,” he said.
According to Ehsani, brands coming into the Kenyan market face a big challenge in accessing retail space.
“There is a shortage of retail space. Most malls here are 100% full. There is a wait list. For the newcomers, you really need to make room for them to be able to have multiple locations. When the brands come, they don’t look for one location, they need several locations.”
He added that the economic downturn in the US, the Eurozone crisis and saturation in far-eastern countries have diverted the attention of investors towards Africa. However, not all African countries are appealing to investors, yet.
“Northern Africa, because of the Arab Spring, is still a 'no go' area. There are uncertainties for investors; Egypt is sill volatile, people are trying to see what will happen there. Then you go all the way south and South Africa, with the union issues and labour issues, at the moment have created a bit of unrest in the mind of investors. They are looking for another safe haven. Kenya has emerged as the next possible place to invest. It has many good things going for it.”
Although many shopping centres and malls have opened-up in Nairobi over the last decade, Ehsani is optimistic that there is still a market for more facilities.
He noted that the increasing number of foreign investors coming to Kenya will ultimately push demand for housing, shopping and recreation facilities.
“It is going to be very interesting trying to provide for the growth that is coming in,” he said.
The changing face of Nairobi also makes the city an attractive destination for investment and tourism.
“Nairobi was never a destination for tourists, they would even try and skip Nairobi, to go to the Maasai Mara or the coast. But now it is becoming a destination; it can very soon claim its place as a shopping hub for the area. People from surrounding countries could come here for shopping. It is not a boring place,” he said.
Challenges
One of the biggest challenges The Village Market faces is poor infrastructure.
“There is no sewage line in this area, so we have to maintain a sewage treatment plant. We have to employ technicians and specialised people to make sure that it is healthy and is always in a good condition,” said Ehsani.
Due to inefficient supply of water and electricity, The Village Market has boreholes and generators on standby.
“One of our biggest expenditures here is to make sure that because of the diplomatic community, we have high security. We have about seven different levels of security,” said Ehsani.
Nevertheless, Ehsani is optimistic about the shopping centre, which he said "has grown quite nicely".
So, if I came with a briefcase of dollars, how much would Ehsani take in exchange for The Village Market?
“It has to be probably a suitcase, not a briefcase,” he quipped.