Is China Town Changing the Game for Retail Space?

 

The retail sector has been vibrant this year, with several buildings receiving fresh coats of paint, new shelves, and flooring to accommodate new tenants. Notable improvements and stores have opened along major routes like Jinja Road, where retailers such as Beko, Dr. Mattress, and many others have launched outlets.

An intriguing new player, China Town, entered the market earlier this month and quickly became known for its low prices on appliances and accessories. The excitement was so great that the store had to close temporarily due to an inability to manage the large crowds.

As landlords, we are always seeking retailers and anchor tenants to boost the value of our properties, especially in terms of revenue. While the exact rent China Town is paying the Lugogo Mall owners remains undisclosed, one thing is certain—the volume of people the store has attracted is enormous, and when tenants make money, landlords make money. So, in this article, we explore what the buzz around China Town could mean for other landlords in the market.

Over the years, the debate has persisted: Will online shopping replace physical stores, decreasing demand for retail space while increasing demand for warehouses and storage? This trend gained momentum during the pandemic, but many have since settled on a hybrid model, utilizing online marketplaces like Jiji and Jumia as well their physical stores especially for small retailers.

Hypermarkets like Chinatown could force smaller retailers to adapt or shut down due to their ability to command lower prices at scale. However, for landlords with large spaces, this model increases demand for bigger commercial properties as other stores want to be where the traffic is, with the potential upside of higher rents.

Landlords need to remember that for a retailer, the best place for a retailer to open a shop is where they can engage most effectively with customers. Industrial property landlords also benefit, as hypermarkets often have a strong online presence, increasing the demand for warehousing space to support e-commerce operations.

For landlords weighing their options, the challenge lies in understanding the relationship between the property and the retail business and how it affects their returns. Retail is growing, consumer spending is rising, and retailers are performing well, so landlords expect the same. This model definitely provides an opportunity for many but we need to be cautious as these occupiers often have stronger bargaining power and ask for lower rates on rent, which increases traffic but potentially causes congestion along with noise and dependency on them as the anchor tenant.

Hypermarkets aren’t the only opportunity out there. While we haven’t yet seen many luxury brands open shop here, neighbouring Kenya has shown that high-end brands can drive up returns for landlords in ways we once thought were exclusive to the elite. You too can position your space strategically to attract high-end brands like Rolex, Apple, and Ferrari.

So, let us know what you think: Will this model expand further? Will it create a new trend, and how will it impact Uganda’s economy and society in the long run?