The Dynamic Landscape of Retail Development in Africa
The retail landscape in Africa is undergoing significant transformation, driven by a combination of challenges and opportunities. Millions of small, independent shops are fundamental to African commerce, with traditional retail dominating despite the growth of modern formats. Studies of small retailers in Egypt, Kenya, Morocco, and Nigeria, support a view that the traditional retail sector will remain at the heart of African commerce going forward. While this may be seen as limiting the scope for retail development in Africa, the market is, however, undergoing significant changes. These changes provide opportunities for innovative African property developers.
The Current State of Retail Development in Africa
Traditional retailers in Africa are highly resilient due to their flexibility, convenience, and proximity to their communities. They also are often willing to offer credit to customers with limited incomes. These characteristics are an indication that of bricks and mortar retail space will continue to dominate the market.
African shopkeepers are typically young, educated, and digitally adept, making them well-suited for modern digital business systems, so a move to more online retail offerings is inevitable. In addition, the digital ecosystem in Africa is growing rapidly, enabling small retailers to offer new online solutions for payments, purchases, and last-mile delivery.
Challenges to Retail Development in Africa
The retail sector in Africa has faced economic challenges, some of which were exacerbated by the COVID-19 pandemic, that led to subdued performance. Retail rents across Africa softened, driven by reduced demand due to a weaker economic climate caused largely by the pandemic.
Some retailers left certain markets or scaled down operations due to economic challenges presented by decreases in demand. Retail landlords were obliged to offer lease concessions, including rent deferrals and discounts, to retain and attract tenants in response to weaker economic conditions.
Opportunities for Retail Development in Africa
Formal retail development has grown rapidly in sub-Saharan Africa over the past decade, with ‘mall culture’ gaining ground across the continent. The fact that informal retail continues to dominate in most markets creates opportunities for innovative retail development in Africa. While shopping centre space remains low compared to developed markets, as Africa’s population and middle class grow, the need for this type of retail space will too. Despite continuing income inequality, Africa’s middle class is expanding, and they have more disposable income than ever before. Middle-class Africans are increasingly looking for modern retail shopping experiences, including supermarkets and shopping malls.
Rapid urbanization is creating opportunities for retail development in Africa as more people move to cities, seeking access to a wider range of products and services. This trend is driving the development of shopping malls and modern retail formats.
The COVID-19 pandemic accelerated the uptake of online retail platforms, with retailers investing in online shopping offerings. While penetration remains relatively low compared to global standards, online retail is growing.
Invest with Experienced Property Developers in Africa
To present a successful retail development in Africa, it’s crucial to have a deep understanding of the unique market dynamics in the region and adopt a practical approach to overcoming specific challenges. GREA, the development arm of Grit Real Estate Investment Group, the largest income-focused real estate group across Africa, specializes in creating customized turnkey projects in various African countries. We offer attractive high yield, investment opportunities in African real estate. We are an award-winning developer with a portfolio of award-winning projects that highlight our expertise and capability. Feel free to get in touch with us today to explore investment opportunities in retail development in Africa.