Following my article on shopping malls in Nairobi, I got an invitation to have a chat with the mall manager of one of the most prestigious malls in the country. We sat at a coffee shop in his mall and he went direct into what my article was missing – an understanding of the real estate business and the set up of malls. So, we sipped on mango juice as he delivered wisdom from decades of real estate experience acquired all over the world.
Before a mall is set up, the first order of business is to determine the profile of the target customer. The favored choice of indicator among real estate developers is the Living Standards Measurement (LSM). Pioneered by Nielsen in 2006, the LSM index captures a customer’s behavioral and psychographic profile, hence providing an indicator of a consumer’s lifestyle. Example, if a person earns Kshs 1 million and never spends it and another person earns Kshs 500,000 but spends most of it, then the latter has a higher LSM classification. The index gives more weight to spending rather than earnings.
The LSM classification ranges from 1 to 10, with LSM 8-10 reflecting affluent customers while 6 and 7 represent the middle class, and the lower scales representing the poor/working class. His mall targets LSM 8-10 customers. Prior to building the mall, interviews were conducted with 1,500 LSM 8-10 customers in Nairobi to ascertain the experience they would seek for in a mall. This informed the design of the mall, choice of anchor tenant and location. In Nairobi, the highest number of LSM 8-10 consumers are found in Westlands, followed by Karen, then Gigiri.
We then got into the meat of my article – parking. There is an industry standard for the ideal number of parking lots per square foot of retail space. A good figure to use is 1 parking bay for each 300 square foot of retail space. Using this as a benchmark, we could calculate which malls are underserved with parking. Example, The Junction Mall has 256,000 square feet of retails space, they require a minimum of 853 parking lots, hence the decision to acquire Riara parking lot and boost it from the previous 750 parking spaces. Westgate Mall has 350,000 square feet retail space; it would then require 1,100 parking lots but currenetly has 700.
Parking is paramount to all mall managers. In India, several malls have failed due to inadequate parking space since it affects customer experience. When a consumer spends more time at a mall, they are likely make more purchase but at the same time hold up parking spot than should be used reused by another customer. So I asked, what’s the ideal time spent by a customer in the mall. 3 hours is good; this goes back to the interviews conducted. The mall is built with the theme EAT.PLAY.SHOP.
“If you spend 1 hour in traffic trying to get to the mall, you need to reward yourself with at least an hour at a restrauant” he said. Then you spend another hour “playing” (doing something engaging), and finally shop for the last hour before heading home. At his mall, this number is being realised mostly on the weekend when the footfall peaks at 12,000 people on each day. The number of parking lots in the mall is sufficient to handle the “3 hour shifts”. He also told me a fun fact about Kenyans, they normally fill up parking lots to the left first. The favorite parking spot in his mall is to the left of the entrance gate.
The last part of our conversation was on defining a mall. According to him, I did mix-up a few things. First, I needed to separate mixed-use properties and malls. Mixed-use property segment part of a building for different use. Examples include a mix of office blocks and retail space or residential and retails. Using the aforementioned examples, Adlife Plaza and The Greenhouse are therefore not malls rather mixed-use development. They dedicate the lower part of the building to retail and the upper section to offices.
In the same light, Garden City is not a typical mall since it has residential units within the shopping complex. The reason for separating these types of developments is because they have different parking demands. The parking demands can be defined by two types of malls, a destination mall and a choice mall. A destination mall is one which the customer makes use of the facility due to its proximity or being embedded to a utility e.g airport, hospital, office et cetera. A choice mall is one which a consumer decides to go to for personal reasons.
Therefore, you’d expect destination malls to have a certain number of parking lots always occupied while choice malls have a varying parking occupation. Finally, I asked how they charge tenants. In his mall they don’t use footfall to determine rent, they have two options – either straight rent or a revenue share if it is greater than the rent.
Good luck guessing the mall I was at 😉
Cover photo by: http://leonarddesignarchitects.com