Shopping malls look set to become a key part of Ghana’s landscape as retailers and developers move to meet rising demand, which is being triggered largely by an emerging middle class.
Modern retail space in Accra is expected to more than double over the next two years, as major companies open outlets in the capital, according to a report by real estate company Broll Ghana, published at the end of November.
The rise in retail supply is set to to push down rental rates, spelling good news for retailers and producing what some experts see as a necessary market correction.
Supply of space to double
The capital currently has around 93,000 sq metres of modern retail space, including more than 20,000 sq metres of gross leasable area at the Accra Mall, Ghana’s first purpose-built shopping development.
An additional 100,000 sq metres of retail space is expected to come onto the market in the near term. Among the new developments is the $93m West Hills Mall project, which will be the country’s biggest shopping centre when it opens its doors. Scheduled to begin operating in October 2014, the mall, will include two supermarkets as anchor tenants, 65 brand shops, a five-screen cinema and a range of food and beverage outlets, set out over 27,000 sq metres. Several South African retailers, such as Shoprite, Mr Price and Truworth, are down to open outlets at the development.
The West Hills project is a joint venture between Delico Property Developments, owned by the South African firm Atterbury Africa, and Ghana’s pension fund, the Social Security and National Insurance Trust. Construction work is being carried out by the Johannesburg-based firm, WBHO.
Ghana’s retail growth is generating business opportunities for a wide range of companies, particularly South African retailers and developers, which are increasingly looking to invest elsewhere in the continent to offset slower growth and market saturation at home. Other international retailers, including France’s Carrefour and Casino Group, are also reportedly eyeing the market.
Eric Abu, a portfolio executive at Broll, said rising demand in Ghana had led to an “upsurge” in investment, with major international players, such as Korean electronics firm, Samsung and Edcon, South Africa’s largest clothing retailer, among the companies planning to open outlets in the West African country.
Several new retail projects are expected to be rolled out in the coming year, including One Airport Square, an office block containing a mall with 2000 sq metres of retail space, and the Octagon, a similar-style development on a 6500-sq-metre plot in Accra Central. The recently opened 13-storey Oxford Street Mall, which was developed by Ghana Libyan Arab Holding, brought 5580 sq m of retail space and 650 sq m of restaurants and food courts to the busy thoroughfare.
Easing of rental rates
The expansion of retail supply could help rein in soaring rental rates. The price of retail space in Ghana has rocketed by around 50% this year, reaching between $60 and $65 per sq metre and edging closer to that found in larger economies, such as Nigeria, where rates average around $80. Experts see a flattening out of rents as better representing Accra’s relatively modest, low-to-middle income market. Lower rents could also provide more opportunities for smaller retailers and outlets to enter the market.
Ghana’s impressive economic growth rates, which rank among the highest in the world, have attracted significant volumes of foreign investment. Budgetary forecasts put GDP expansion at 8% in 2014, while the IMF anticipates a rise of 6.1%, down from 7.9% this year.
However, risks to the economy, including a budget deficit of 10.2% and high inflation, which stands at 11%, could have a knock-on effect on the retail sector. Inflation erodes real incomes and affects consumer spending, while soaring prices also present retailers with cost and margin management headaches.
The government has moved to address the challenges it faces, seeking to reduce the deficit to 8.5% under its 2014 budget, and looking to limit inflation, which has been fuelled by high growth, to around 9.5%.
Retailers and developers will keep a close eye on the market’s downside risks. However, with the choice of available stores likely to become more diverse, and rising incomes buoyed by the oil industry, Ghana’s retail sector looks set for a bright year.