The Evolution of The Retail Sector In Uganda
Shopping within Kampala and Entebbe have evolved from experiences driven by necessity in downtown local markets and shops to leisure experiences, as evidenced by the growth in formal retail shopping centres, marking the emergence of a more international level of retail offerings.
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Furthermore, the retail sector in Uganda is experiencing a significant transition driven by technological advancements, changing occupier trends, consumer behaviour, urbanisation trends, investment patterns, and increasing emphasis on environmental, social, and governance (ESG) initiatives.
Expert insight from Hillary:
The retail sector has exhibited sustained growth over the past decade, evidenced by rising occupancy levels, increased turnover, and positive footfall growth across Knight Frank-managed malls. Like all sectors, it registered negative growth during the COVID-19 pandemic due to prolonged lockdown periods and restrictions on social interactions, negatively affecting categories seen as "non-essential" together with the global supply chain disruptions.
Notably, the sector has exhibited remarkable resilience, achieving a near-complete recovery to pre-pandemic levels as of 2023, as evidenced by a 14% surge in general retail turnover and a 3.79% rise in occupancy levels across Knight Frank-managed Malls.
Rising disposable incomes
The economic backdrop in Uganda has also improved over the last few years, with GDP growth rising to 5.2% in 2022/2023, up from an average of 3.6% between 2019-2022 (Bank of Uganda). This has helped to lift disposable income levels as has been reflected in rising consumer spending.
Perhaps unsurprisingly, developers are capitalising on this, with 30,000 sqm of formal retail added to the market in Uganda and Entebbe over the last 3 years, taking total retail supply in these two cities to more than 300,000 sqm.
The fashion and food and beverage categories remain the highest contributors to retail demand. The cinema entertainment offering continues to be a strong drawcard.
*Rates are for ground floor space in prime Kampala shopping malls, but do not take the shopfront-to-depth ratio into account and excludes any service charges.
And retailers have responding to the evolving consumer behaviour. With a burgeoning middle class and rising urbanisation, there is a growing appetite for convenience, with retailers vying for locations that offer adequate parking and easy access. Retailers are also increasingly targeting high-traffic areas in urban centres to capture footfall and drive sales. Additionally, the integration of technology and innovation is reshaping the retail landscape, with retailers embracing omnichannel strategies and digital solutions to enhance shopping experiences.
Three trends to monitor
- Demographic trends play a pivotal role in shaping retail demand. With Uganda's young and growing population – 77.5% of the population is aged under 30 (Uganda Bureau of Statistics) – there is a significant consumer base driving demand for retail goods and services. Retailers and developers are tailoring their offerings to cater to the preferences and aspirations of different demographic segments and households.
- The presence of renowned anchors such as Carrefour, Uhome, Woolworths, LC Waikiki, Hummel, Café Javas Regional Branch, Optica, Adidas, Puma, KFC, and Mr Price, among others, signifies not only established demand but also act as a magnet, attracting further investment.
- With the growing awareness of ESG considerations, there is increased emphasis on green building practices and sustainability initiatives. Developers are incorporating energy-efficient design features and using eco-friendly materials to reduce carbon footprints and enhance the environmental performance of retail properties. Sustainable retail developments not only appeal to environmentally conscious consumers but also contribute to long-term cost savings and market competitiveness for retailers themselves. A prime recent example is Arena Mall, Uganda's first certified green building, which obtained a 4-star green certification in 2019 from the Green Building Council.
Retail market opportunities
- Growth of mixed-use developments: Developers are capitalising on the synergies between different asset classes with developments that embrace a ‘live-work-play’ mantra. These developments cater to the preferences of modern consumers who seek convenience, accessibility, and a sense of community in their retail destinations.
- Expansion of shopping malls: Shopping malls, particularly in Jinja, Masaka, Mbarara, Fort Portal, Arua, Lira, Mbale, Hoima, and Gulu, are attracting investment. With the growth in the middle-class population and changing consumer patterns, there is a growing demand for modern shopping destinations, hinged on offering experiences, entertainment, education/edutainment and well-being services.
- Rise of neighbourhood retail centres: In addition to large-scale shopping malls, there is a growing demand for neighbourhood retail centres and convenience stores in residential areas and suburban locations. These smaller-scale retail developments cater to the daily needs of residents, offering a mix of grocery stores, pharmacies, cafes, and other essential services.
- Embrace of retail technology and innovation: Developers and retailers are leveraging digital tools, such as augmented reality (AR), virtual reality (VR), mobile applications, POS (point of sale) technology, and self-checkout technology systems, to enhance the shopping experience, drive foot traffic, and increase sales. From interactive digital signage to mobile payment options, technology is being integrated into retail spaces to create engaging and immersive environments that resonate with tech-savvy consumers.
- Focus on experiential retail: To attract consumers in an increasingly competitive market, retailers are moving away from traditional transactional models towards experiential concepts engaging all five senses. Memorable shopping experiences are created through interactive pop-up shops, themed entertainment zones and experiential retail offerings to drive foot traffic and enhance the overall appeal of retail destinations.