Rethink the concept of shopping malls in Kenya
| Feb 28th 2020 | 4 min read
It’s not a secret that a majority of the newer malls in Kenya are losing tenants and finding it hard to maintain 90 to 100 per cent occupancy. This can be attributed to a sluggish economy, reluctance by tenants to open outlets in new premises where the customer traffic is not assured as well as the high costs required to open new outlets.
However, some of the older malls are thriving and have added new wings that tenants are eager to occupy. This raises the question; why this difference yet both the old and the new malls operate in the same business environment? What have the older mall owners identified as key factors in operating successful malls? Why are malls in countries such as South Africa and China doing well, yet they are in close proximity to each other?
It is worth noting that these older shopping malls were not always the success story that they are today. Most were on the brink of collapse in the late 1990s and early 2000s and have had large supermarket chains as anchor tenants, which have folded up leading to a drop of 50 to 80 per cent of the customer traffic.
All of these malls were constructed using bank loans and the rate of default on payments was high. All these factors notwithstanding, the malls have reinvented themselves and are now standing strong. Several stages have been involved in getting to this point.
First, mall owners realised that they need to attract the right mix of tenants to succeed. In-depth feasibility studies have been done to target the type of businesses needed in malls and have a healthy mix of tenants; tenants who serve the different tastes of clients but not cutting into each other’s share of the business.
Such tenants give shoppers alternatives and at the end of the day, all shops make sales sufficient to sustain their businesses. With the advent of online and mobile banking services, it is noticeable that most banks are now taking up smaller spaces compared to the large banking halls a few years back. Most malls still have supermarkets as anchor tenants, but the value of other businesses such as food courts, bookshops, and school uniform stores play a major part in keeping customers flowing into the malls.
Second, mall developers appreciate the value of having professional property and facilities management firms run the shop leasing business. These firms determine the location of various shops within the malls so that they can complement each other’s business. For instance, a fitness centre does not need to be located on the ground floor and similarly, a supermarket, which relies heavily on walk-in traffic, cannot thrive on higher floors. These property firms are in touch with potential tenants and are able to send them online brochures of upcoming malls so that by the time construction is completed, at least 75 per cent of the shops have tenants ready to occupy them.
Third, rental concessions or rent-free periods are now given to tenants to allow them time to set up their business premises. This, in turn, means that mall owners, for the first six to eight months, should not expect to use rental income to pay construction loans as this would be putting undue pressure on the tenants. Such rental concessions allow tenants to settle into malls and get their businesses up and running.
Last, sustained marketing campaigns are organised by the landlords or property managers so as to boost the mall traffic and assist the tenants in making sales. The value of marketing and advertising for businesses cannot be understated. Most of these sustained marketing campaigns run through festive periods with most shops in the malls offering product or service discounts. These promotions attract walk-in shoppers who may come to see the offers in one shop but end up visiting several other stores and make purchases.
Why then do we see malls in other countries being close to each other yet they still thrive? Is it perhaps the right time for mall developers and property managers to look into having malls that sell exclusive products? Is it possible to have malls like the ones in Guangzhou and Bangkok that have an entire floor with shops selling handbags only and other floors for shoes only? Would this model work in Kenya?
The malls in Nairobi CBD have adopted a form of this model in exhibition stalls and most are fully occupied. Can we then combine the format of traditional mall set-up with exhibition stalls so that we have a larger variety of products for shoppers to choose from? These are worthy considerations for malls that are not thriving and the need to reinvent themselves is imminent if they are to continue to operate as successful businesses.
Ms Waithanji is a facilities management consultant. [email protected]
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