AN INVESTIGATION INTO THE IMPACT OF INCREASED
DEVELOPMENT OF SHOPPING MALLS ON THE KENYAN
RESIDENTIAL REAL ESTATE MARKET
(CASE STUDY: THE JUNCTION SHOPPING MALL)
BY
MUANGE JUDITH NZILANI
B135/25388/2013
A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR THE AWARD OF DIPLOMA IN REAL ESTATE AGENCY
AND PROPERTY MANAGEMENT
DEPARTMENT OF REAL ESTATE AND CONSTRUCTION MANAGEMENT
SCHOOL OF BUILT ENVIRONMENT
COLLEGE
COLLEGE OF ARCHITECTURE AND ENGINEERING
UNIVERSITY OF NAIROBI
MAY 2014
i
TABLE OF CONTENTS
TABLE OF CONTENTS ..........................................................................................................................II
DECLARATION ..................................................................................................................................... VI
DEDICATION ....................................................................................................................................... VII
ACKNOWLEDGMENT ........................................................................................................................ VIII
LIST OF FIGURES ................................................................................................................................ IX
LIST OF TABLES .................................................................................................................................. IX
LIST OF CHARTS ................................................................................................................................. IX
LIST OF GRAPHS ................................................................................................................................ IX
ABBREVIATIONS AND ACRONYMS .................................................................................................... X
APPENDIX ............................................................................................................................................ XI
ABSTRACT .......................................................................................................................................... XII
CHAPTER ONE ......................................................................................................................................1
1.0
INTRODUCTION .......................................................................................................................... 1
1.1
PROBLEM STATEMENT ............................................................................................................... 4
1.3
OBJECTIVE OF THE STUDY ......................................................................................................... 7
1.4
HYPOTHESIS ............................................................................................................................. 8
1.5
RESEARCH METHODOLOGY........................................................................................................ 8
1.5.1
Data collection ................................................................................................................. 8
1. 5.2
Data analysis ................................................................................................................... 8
1.5.3
Data presentation ............................................................................................................ 9
1.6
SIGNIFICANCE OF STUDY ........................................................................................................... 9
1.7
JUSTIFICATION OF STUDY ........................................................................................................... 9
1.8
STUDY ASSUMPTION ................................................................................................................10
1.9
SCOPE OF STUDY ....................................................................................................................10
1.9.1
Conceptual scope..........................................................................................................10
ii
1.9.2
Physical scope/study area ............................................................................................10
1.10
DEFINITION OF TERMS ..........................................................................................................11
1.11
ORGANIZATION OF THE STUDY ..............................................................................................12
CHAPTER TWO: LITERATURE
LITERATURE REVIEW ............................................................................................13
2.0
INTRODUCTION ........................................................................................................................13
2.1
RESIDENTIAL PROPERTY MARKET IN KENYA .............................................................................13
2.2
FACTORS AFFECTING RESIDENTIAL PROPERTY PRICES IN KENYA ..............................................14
2.2.1
The effect of new road construction on the property prices ..........................................15
2.2.2
Property Prices and Interest Rates ...............................................................................15
2.3
THE EVOLUTION OF SHOPPING CENTRES. ..................................................................................16
2.4
TYPES OF SHOPPING CENTRES ................................................................................................23
2.4.1
Introduction ....................................................................................................................23
2.4.2
Neighbourhood Centre .................................................................................................23
2.4.3
Community Centre ........................................................................................................24
2.4.4
Regional Centre ............................................................................................................24
2.4.5
Super regional Centre ...................................................................................................24
2.4.6
Fashion/Specialty Centre ..............................................................................................25
2.4.7
Power Centre .................................................................................................................25
2.4.8
Theme/Festival Center ..................................................................................................25
2.4.9
Outlet Centre .................................................................................................................26
2.5
SHOPPING CENTRE DEVELOPMENT THEORIES ...........................................................................27
2.5.1 Central Place Theory ...........................................................................................................27
2.5.2 Congener Conglomeration Theory ......................................................................................28
2.5.3 The Bid Rent Theory ...........................................................................................................29
2.6
IMPORTANCE OF SHOPPING CENTRE DEVELOPMENT .................................................................30
2.6.1 Economic perspective .........................................................................................................31
2.6.2 Social perspective ...............................................................................................................32
iii
2.6.3 Urbanism perspective ..........................................................................................................33
2.6.4 Environmental perspective ..................................................................................................34
2.7
CASE STUDIES ANALYZING THE IMPACT OF SHOPPING MALL ON THE SURROUNDING RESIDENTIAL
PROPERTY VALUES AND SUPPLY ...........................................................................................................36
2.7.1 Introduction ..........................................................................................................................36
2.7.2 Case study of Bugis Junction and Suntec City in Singapore ..............................................36
2.7.3 The effect of Kasuwan Laushi Super Market on Surrounding Residential Accommodations
in Bauchi Metropolis, Nigeria ........................................................................................................37
2.7.4 Case of Wal-mart and its effects on residential property values .........................................38
2.8
FACTORS LEADING TO INCREASED DEVELOPMENT OF SHOPPING MALLS IN NAIROBI .....................39
2.8.1
Introduction ....................................................................................................................39
2.8.2 Economic Growth ................................................................................................................40
2.8.3 Growth of the middle class in Kenya ...................................................................................41
2.8.4 Increased Urbanization in Kenya ........................................................................................42
2.8.5 Improved transport network .................................................................................................44
2.8.6 Foreign Investment ..............................................................................................................45
CHAPTER THREE: RESEARCH
RESEARCH METHODOLOGY ............................................................................47
3.0
INTRODUCTION ........................................................................................................................47
3.1
RESEARCH DESIGN ..................................................................................................................47
3.2
POPULATION ...........................................................................................................................47
3.3
SAMPLE AND SAMPLING TECHNIQUE..........................................................................................47
3.4
RELIABILITY AND VALIDITY OF DATA INSTRUMENTS .....................................................................48
3.5
INSTRUMENTATION ..................................................................................................................49
3.6
DATA ANALYSIS .......................................................................................................................49
iv
CHAPTER FOUR: DATA ANALYSIS AND PRESENTATION
PRESENTATION.............................................................50
4.0
INTRODUCTION ........................................................................................................................50
4.1
THE INCREASE IN SUPPLY OF HIGH END RESIDENTIAL UNITS........................................................50
4.2
THE EFFECT OF THE JUNCTION MALL ON RESIDENTIAL UNITS PRICES ..........................................54
4.3
RESIDENTS RESPONSE ON THE INCREASED PRICES FOR RESIDENTIAL HOUSING UNITS .................56
4.4
RESEARCH OBSERVATIONS. .....................................................................................................58
4.4.1
The Plot ratio reduction. ................................................................................................58
4.4.2
Increase in the number of storeys. ................................................................................58
4.5
HYPOTHESIS TESTING ..............................................................................................................59
CHAPTER FIVE: CONCLUSIONS
CONCLUSIONS AND RECOMMENDATIONS
RECOMMENDATIONS ........................................................61
5.0
INTRODUCTION ........................................................................................................................61
5.1
CONCLUSIONS .........................................................................................................................61
5.2
RECOMMENDATIONS ................................................................................................................63
5.3
AREAS OF FURTHER RESEARCH ................................................................................................64
BIBLIOGRAPHY ...................................................................................................................................65
APPENDIX1: QUESTIONNAIRE TO REAL ESTATE DEVELOPERS AND PROFESSIONALS IN
REAL ESTATE FIRMS..........................................................................................................................68
APPENDIX 2: QUESTIONNAIRE TO THE RESIDENTS CLOSE TO THE JUNCTION MALL ............70
APPENDIX 3: SECTIONS OF THE JUNCTION MALL ........................................................................72
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DECLARATION
I, Muange Judith Nzilani hereby declare that this project is my original work and has
not been presented for a degree in any other university.
Signed: ............................................Date: .......................................................
The research project has been submitted for examination with my approval as the
University Supervisor.
Signed: ............................................Date: .......................................................
Mr. Peter Njeru
Lecturer, University of Nairobi
vi
DEDICATION
This research project is dedicated to my loving mum Mrs. Annah Muange for her
unconditional support and constant encouragement throughout my entire period of
study.
vii
ACKNOWLEDGMENT
I thank God Almighty for being with me since commencement of this course for his
guidance and protection on my sojourns to and from University, my employer Knight
Frank Kenya Limited for according me the opportunity and time to undertake this
course.
I wish to express my sincere gratitude to my supervisor Mr. Peter Njeru who never
failed to consistently offer valuable guidance, suggestions, criticisms and
encouragement on the research work. God bless you.
I owe a lot of thanks to my informants and especially all the real estate developers
that were interviewed for all their cooperation.
I also owe special thanks to my colleagues Charles Macharia, Vivian and Cosmas
for their contributions.
viii
LIST OF FIGURES
Figure 1: Types of shopping Centres……………………………….............….…...26
Figure 2: Bid Rent Curve………………………………………………………...…...30
Figure 3: Residential Completed 2005-2011………………………………….….…58
Figure 4: Residential completed 2012-2014…………………………….….…..….59
LIST OF TABLES
Table 1: The number of residential units ejected in the market…………..…...…51
Table 2: Price shift over time .……………………….………..……………...……...55
LIST OF CHARTS
Chart 1: Presentation of the distribution of respondents……………..…....….....50
Chart 2: Presentation on the residents characteristics…………………….….….53
Chart 3: Presentation of the supply of residential units……………..…….……….54
Chart 4: presentation of the factors affecting choice of location………………….56
LIST OF GRAPHS
Graph1: The residential units ejected in the market……………………..…….….52
Graph 2: presentation of price shift over time………………………………........55
Graph 3: The residents’ willingness to pay a premium…………….…….…….…57
ix
ABBREVIATIONS AND ACRONYMS
GDP
-
Gross domestic product
EAC
-
East African Community
COMESA
- Common Markets of Eastern & Southern
Africa
AFDB
-
African Development Bank
ICSC
-
International Council of shopping Centres
HNWI
-
High net-worth individuals
PIRI
-
Prime International Residential Index
HCV
- Heavy Commercial Vehicles
GHS
-
General Household Survey
AFDB
-
United Nations
x
APPENDIX
Appendix 1: Real estate developers/professionals questionnaire
Appendix 2: Residents questionnaire
Appendix 3: The Junction shopping mall Photo
xi
ABSTRACT
This research study deals the increased shopping centre development and how they
have impacted on the Kenyan residential property market. The Kenyan residential
market is characterised characterized by a large demand and a chronic undersupply
of formal housing.
The paper investigates the relationship between shopping
centres (as a whole) and the price of neighbouring residential properties as well as
the supply of residential housing units in terms of proximity factor effect, of a modern
shopping centre. The study was guided by the following objectives; to document the
factors leading to increased development of shopping Mall in Nairobi; to investigate
the effect of increased shopping Mall development on the supply of residential
property market and to investigate the effect of increased shopping Mall
development on the prices of the residential property market. There was also
extensive and exhaustive review of literature on the related studies about the
research project. The data collection methods used was questionnaires and
interviews. The population studied was the professionals working in real estate firms,
developers and residents living within one kilometer radius from The Junction
shopping centre. The sample size chosen for the study was sixty (N=80)
respondents and the sampling technique used was convenience sampling.
The study found that, residential units that have proximity to shopping centres
generally command a premium. Notwithstanding the negative externalities of
xii
shopping centres. Residential properties within one kilometre-metre radius of
shopping centres command a higher premium than those farther away.
Furthermore, the results of the study show that the demand for residential properties
a shopping centres leading to increased supply by the real estate developers. These
findings will be of interest to investors in public housing, real estate firms and policy
makers. The study recommends that future development of shopping centers in
Nairobi should be well planned and strategic bearing in mind their development
affects the neighbouring residential market.
xiii
CHAPTER ONE
1.0
Introduction
Real estate can be defined as land plus anything permanently fixed to it, including
buildings, sheds and other items attached to structure. Real estate can also refer to
the rights and interest inherent in ownership of real property. Real estate can be
grouped into four broad categories based on its use: residential, retail, commercial
and industrial. Examples of real estate include: un-developed land, houses,
condominiums, townhomes, office buildings, retail store buildings and factories.
Real estate or property market is the interaction of individuals in exchange of real
property rights or interests for other assets such as money. The property market is
one of the largest economic sectors in any country. In Kenya, the market has
continued to witness substantial growth over the last 10 years and this is expected to
continue in the medium term. According to a report by Knight Frank (2012), in the
year 2010 and 2011, the sector recorded a growth of 4.5% and 4.3% respectively.
Major indicators of a vibrant property market area increase is consumption of cement
over time, sustained demands for high end office, residential and retail properties
and an increase in the number of residential building plans approved and reported
completed buildings.
The government of Kenya has indentified the retail sector as one of the real estate
category as having rapid growth and development. The sector has largely
contributed to the Gross Domestic Product (GDP) due to increased trade, particularly
1
within the East African Community (EAC) and the Common Markets of Eastern and
Southern Africa (COMESA). For the fifth year running, the National Economic Survey
(2013) has identified the retail and wholesale trade sectors as key growth drivers of
Kenya's economy. In 2011, the wholesale and retail trade sector showed a growth of
7.3%, outdoing the manufacturing, building and construction, agriculture, transport
and communication sectors. The sector’s contribution to the GDP increased to
10.6% in 2012 (Economic Survey, 2013).
A recent survey by City Group shows that Kenya’s retail market is the second most
formalized in the sub-Saharan region after South Africa which has 60% of its market
formalized. The Kenyan Market is said to be experiencing retail penetration of about
30% which is dominated by: chain stores and supermarkets like ‘Nakumatt’ with 37
stores, ‘Tuskys’ with 37 stores, followed by the upcoming ‘Naivas’ that has
established 19 outlets and ‘Uchumi’ with 18 outlets. The penetration is attributed to
the presence of strong brands of local outlets, a broad middle – income class, an
elaborate transport network and generally good governance in the country.
According to IPSOS Synovate (2012), the evidence of a growing appetite for
shopping space in Nairobi is shown by the high take up rates and occupancy levels
of almost 98%, by the time a shopping mall development is completed. A shopping
mall can be defined as a large retail complex containing a variety of stores, services,
parking areas, restaurants and other business establishments housed in a series of
connected or adjacent buildings or in a single large building. Shopping malls hence
form a part of the retail real estate property. Despite the relatively higher capital
2
costs and longer construction period, shopping malls are returning rental yields of
between 10% and 13.5% in Nairobi, which is a good incentive compared to other
forms of real estate such as residential and commercial property whose rental yields
are 6% and 9% respectively (Knight Frank Africa Report, 2013). The high returns on
retail investment in Nairobi have lead to increased development of shopping malls.
Bearing in mind of the foregoing, this research takes on an investigation on the
impact of increased development of shopping malls on the residential real estate
market. The research project will be organized in five chapters.
3
1.1
Problem Statement
According to Kitoto (2006), by the year 2001, Nairobi city had only 3 regional
shopping centres, namely: Sarit Centre, Village market and Yaya Centre, all of which
were developed in 1980’s and 1990’s. However, in the recent past, the real estate
market in the region has shown a tremendous increase in development of shopping
malls. According to IPSOS Synovate (2012), the demand for retail space in Nairobi
has grown in the last five years, spurred by a resurgent economy. Property
developers and investors have subsequently responded by developing more
shopping malls in order to keep up with the demand. This is evident by the shopping
centres that have been developed within the last 10 years which includes Kiambu
Road Shopping Centre in Kiambu, Westgate Mall in Westlands, The Junction Mall on
Ngong Road, Prestige Plaza on Ngong Road, T-mall in Langata, Capital Centre on
Mombasa Road, Ridgeways mall in Kiambu, Sarit Centre in Westlands, Yaya Centre
in Kilimani, Westlands mall in Westlands, Green span mall in Dohlnom, ABC Place
on Waiyaki way, Lavington Mall in Lavington, Galleria Mall in Karen and The Thika
Road Mall on Thika Road which have tremendously boosted the Nairobi retail
market.
In addition, Nairobi has within the last one year experienced proposals of new
shopping malls which include Two Rivers Mall in Runda, Garden City Mall on Thika
Road, Roselyn Riviera Mall in Rosslyn, The Hub in Karen, Lunga-Lunga Mall in
Industrial area, Nextgen Mall on Mombasa Road and Sun City mall in Koma Rock.
4
Studies have been carried out in this particular area, for instance, Kutswa (2008)
discussed the effects of the increased shopping centres on retailers, while Mugo
(2008), in her study, investigated the impacts that large retail developments have on
the small and medium size business enterprises. Also, Mwanzia (2009) investigated
the impact of increased development of shopping centres in Buru Buru estate. In his
study, Mwanzia established that increased development of shopping centres in the
Buru Buru estate has led to increased property values, traffic, congestion and lack of
parking. He also recommended for the future studies to be conducted in other areas
where shopping centres have been developed.
However, many studies have been conducted in this area, and it has been
established that there is need to investigate on the impact of increased development
of shopping malls on the Kenyan residential property market. The Kenyan residential
market is characterized by a large demand and a chronic undersupply of formal
housing. Eventually, this situation has greatly impacted prices. AFDB (2013), “In
Kenya, it is estimated that 234,000 new housing units are required every year, yet,
only 20,000-30,000 units per year are currently being produced and a mere 20% of
these are affordable to low and moderate income families”.
The deficit in the supply of housing units in Kenya is as a result of the increase in
demand due to increase in population.
The African Economic report by African
Development Bank in 2013 stated that, as of 2012, Kenyan population growth was
estimated at 4.2% per annum. Based on this growth, the rate of urban migration and
5
the annual increase in demand for housing in Kenya, leads to a shortfall in formal
housing.
The first implication of this shortfall in formal housing is that populations which are
not catered for or cannot afford to be given prevailing prices have to turn towards
self-built and informal housing. In urban areas, this translates into the growth of
shanty towns. According to the Kenyan 2009 population census, over 30% of the
country’s population lives in slums. In Nairobi alone, it was estimated that over 1
million out of a city population of 3.2 million lived in slums, with only 3% of the
population living in a house with permanent walls, water and electricity (World Bank
2011).The second implication of a shortfall in supply is the continuous increase in
house prices.
In order to deal with the short-fall issue of formal housing, a number of initiatives
have been adopted. The most notable one being: The Kenya Slum Upgrading
Program. In 2003, the Kenyan Government and UN-HABITAT entered into a
Memorandum of understanding to upgrade slums and informal settlements starting
with selected areas in Nairobi. Secondly, there is the Civil Servant Housing which
was introduced by the Kenyan Government in 2004. The Civil Servants Housing
Scheme Fund which the government of Kenya has been running aims at providing
housing loan facilities to civil servants for the purposes of either purchasing or
constructing a residential house and developing housing units for sale or for rental by
civil servants. Lastly, there is the Kenya Informal Settlements Improvement Project
6
which is spear headed by the World Bank. The program aims at improving conditions
in informal settlements.
As many initiatives have been adopted to bridge the demand-supply gap in the
Kenyan residential real estate market, it still remains unsolved. With this background
this research takes on an investigation on how the increased development of
shopping malls has impacted on the residential property market. The study will
specifically focus on how the increased mall development has affected the supply of
residential housing units and consequently the price and rental rates.
1.2
Research Questions
i.
What factors have influenced the increased Shopping mall
development in Nairobi?
ii.
How has the increased Shopping Mall development influenced the
supply of Kenyan residential property market?
iii.
What is the impact of shopping Mall development to the prices and
rental rates of the Kenyan residential property market?
1.3
Objective of the Study
The main objective of this study to investigate the impact of increased shopping Mall
development on the residential real estate market (The case of The Junction Mall).
Specific objectives
objectives
i.
To document the factors leading to increased development of shopping
Mall in Nairobi.
7
ii.
To investigate the effect of increased shopping Mall development on the
supply of residential property market.
iii.
To investigate the effect of increased shopping Mall development on the
prices of the residential property market.
1.4
Hypothesis
The increased development of shopping Mall has impacted on the Kenyan
residential property market.
1.5
Research Methodology
1.5
1.5.1 Data collection
The research will be undertaken by use of both primary and secondary data. Primary
data will comprise of information collected from the field survey. The primary sources
will comprise oral interviews with residents of the target area, developers, real estate
professionals as well as the members of the public. Questionnaires will be
administered to the different correspondents, while interview schedules will be used
for interviews. On the other hand, Secondary data will be collected from literature
review sourced such as books, journals, official public documents, published and
unpublished research works, newspapers, magazine statutes and the internet.
1. 5.2 Data analysis
Mainly qualitative analysis method will be used in an attempt to employ objective
judgment on facts in order to form certain learned views on the different concerns.
Quantitative analysis will also be used at the basic level. The data received will be
analyzed using statistical methods like percentages, mean and variance.
8
1.5.3 Data presentation
Data presentation mainly depended on the type of data to be presented. However,
commonly used data presentation tools like graphs, tables and pie charts will be
used.
1.6
Significance of Study
Owing to the fact that there has been an increased development of shopping Malls in
Nairobi and at the same time the residential property market is experiencing a shortfall in the supply of formal housing, and there is no information or in-depth study that
has been carried out on the effects of the increased mall development on the
residential property market, this study will therefore be helpful to real estate
participants like investors, developers, real estate professionals, researchers, real
estate lecturers and students and even real estate consumers. It will be helpful to the
real estate participants in assessing or analyzing the effect of the proposed or
existing shopping malls in reference to the neighbouring residential property market.
1.7
Justification of study
Kutswa (2008) investigated the effect that the increased mall development has on
retailers only and didn’t concentrate on the other aspects like tenant mix, shopping
centres management that would be affected, while Mwanzia (2009) in his study
investigated the impact of increased development of shopping Malls in Buru Buru
estate. In this study, Mwanzia established that increased development of shopping
centres in the Buru Buru estate lead to increased property values, traffic, congestion
and lack of parking. The findings in his study were limited to Buru Buru estate; hence
9
Mwanzia recommended studies to be conducted in other areas where shopping
malls have developed.
While the retail market in Kenya is experiencing an increase in suppy of the
shopping malls, the residential property market is characterized by a shortfall in
supply of formal housing. Therefore this study will investigate the impact that the
increased shopping mall development would have on the residential property market,
a case study of The Junction Mall on Ngong Road which is an entirely different
market from Buruburu.
1.8
Study assumption
Because some of the data will be collected from secondary sources, it will be
assumed that the data from those surveys were accurate and hence reliable
1.9
Scope of Study
1.9.1
1.9.1 Conceptual scope
The study deals with instances where shopping malls have developed. In order to
decisively discuss the problem issues of the study, the research focuses on the
impact of mall development on the supply of formal housing and the residential
property rental rates and prices in Kenya.
1.9.2
1.9.2 Physical scope/study area
The study is based on a case of The Junction mall along Ngong Road which is
located 17 kilometers from in Nairobi CBD. The research will be restricted to
shopping malls in general with particular emphasize to The Junction mall and the
surrounding residential market. The Junction mall is assumed to have a similar
10
structure, tenant mix, management etc to other shopping malls and the findings will
reflect on the rest of the mall in other areas.
1.10
•
Definition of terms
Shopping Centre/Mall:
Centre/Mall ICSC (1999) defined a shopping centre as a group of
commercial establishment, planned, developed, owned and managed as a
unit related in location, size and types of shops to the trade area the unit
serves. It provides on-site parking in a definite relationship to the types and
sizes of shops.
•
Real estate:
estate According to Wikipedia definition, real estate refers to land plus
anything permanently fixed to it, including buildings, sheds and other items
attached to the structure. Real estate can also refer to the rights and interest
inherent in ownership of real property.
•
Residential
Residential property: Realtors Commercial Alliance(2005) defines Single- or
multifamily housing units that are used, serve, or are designed as a place of
residence
•
Real estate or property market:
market CEM (2006) defined real property market as
the interaction of individuals who exchange real property rights or interests for
other assets such as money. The function of the real estate property market is
to establish a pattern of price so that given sufficient time, land resources are
allocated according to their most profitable (highest and best use) relative to
other land resources.
11
1.11
Organization of the study
Chapter 1: Observes the problem statement, objectives of the study, research
hypothesis, research methodology, justification and significance of the study.
Chapter 2: Literature review, discussing the residential property market in Kenya, the
evolution of shopping centres and the different types of shopping centres, case
studies exploring the effect of shopping centres on residential property market and
the factors that have led to increased development of shopping malls.
Chapter 3: Research Methodology.
Chapter 4: Data Findings, analysis and presentation.
Chapter 5: Involves the conclusions from the information obtained after the data
analysis and recommendations mainly derived from the conclusion.
12
CHAPTER TWO:
TWO: LITERATURE REVIEW
2.0
Introduction
A Shopping Centre/mall can be defined as a group of commercial establishment,
planned, developed, owned and managed as a unit related in location, size and
types of shops to the trade area the unit serves. It provides on-site parking in a
definite relationship to the types and sizes of shops. Shopping malls are becoming
increasingly popular throughout the world leading to increased development of malls.
Therefore it is important to know what factors influence their popularity and what
impact they have the residential property market. This chapter explains the factors
influence the increased development of shopping malls. It also explores relevant
literature on shopping centres and residential property market.
2.1
Residential Property Market in Kenya
Knight Frank (2012) stated in the quarterly report that Nairobi's luxury residential
market is expected to remain among strongest performers in 2012. The first quarter
report however showed prime residential property prices in Kenya's capital, which
remained unchanged between December 2011 and March 2012. The high-end
segment nonetheless recorded double-digit growth in the six months to March at
11.6 per cent. Knight Frank (2012) report stated that the value of prime property in
the world's key cities fell by 0.4 per cent in the first quarter of 2012, the first quarterly
fall of the index since the depths of the global recession. Some luxury buyers took to
the side-lines to observe their market's trajectory. Nairobi prime residential market
topped global cities with double-digit growth over a 12 month period alongside
13
Jakarta, Miami and London despite the index's overall sluggish performance. The
Kenyan capital recorded a 24.2 per cent in 12-month change to March. According to
the report the overall index will remain subdued in 2012 fluctuating between marginal
price falls and rises with London, Moscow, Jakarta, Nairobi and Singapore expected
to be strongest performers. Kenya's luxury homes market in Nairobi and the coast
were the best performing prime residential property markets in the world in 2011,
according to The Wealth Report 2012 released by the property services firm and Citi
Private Bank.
Prices in these two locations rose highest in 2011 compared to other global locations
considered safe havens for property investments by high net-worth individuals
(HNWI). Nairobi recorded the strongest growth with a 25 per cent rise in prices for
top-end residential as the coast followed with a 20 per cent price rise, out of 71
locations tracked by Knight Frank's Prime International Residential Index (PIRI).
Knight Frank (2013) in the Africa Report stated that rental values have continued to
climb, partly as a result of a shift away from the mortgage market, resulting in
improving yields across the sector. According to the report with interest rates slowly
falling and a relatively stable economy, a post-election recovery is expected in this
sector in the second quarter of 2013.
2.2
Factors affecting Residential Property Prices in Kenya
Kariuki (2012) the property market in Nairobi has in the last 10 years thrived to an all
time high. In 2010, Nairobi recorded the highest growth in luxury house prices in the
world. A study by Knight Frank found that the prices for real estate jumped by 25% in
14
2011. These prices can be explained by the fact Kenya is safer than its neighbours.
It is also attracting investment from international companies and from the diaspora.
According to Kariuki the growth in prices and number of developments can also be
explained by other factors such as discussed below.
2.2.1
2.2.1 The effect of new road construction on the property prices
According to Reader (2011), the effects of road construction on property values is
great. Both in the positive and the negative, road construction can have a large effect
on property values. Kariuki (2012) the two scenarios have been reflected in the
Kenyan market. Where, in 2010 to beginning of 2012 travel time to Kiambu, a town
about 15km outside of Nairobi was two or more hours during the peak period. With
the completion of the Thika Super Highway travel time has been reduced to half an
hour or 45 minutes at the most during peak time and 15 minutes off peak. While
places like Langata which is closer to the CBD and has road construction going on
can take two hours travel time.
The road construction can also have a negative impact on property values. This
effect, according to Casey (2012) was seen on single family residences. The key
factor here is the increasing volume of traffic, leading to environmental pollution. It
has however positive impact on multifamily residential and commercial properties,
where proximity to the road is one of the most important factors.
2.2.
.2.2 Property Prices and Interest Rates
Kariuki (2012), Interest rates affect an individual’s ability to purchase residential
property. They affect the cost of financing and mortgage rates which in turn affects
15
property. These rates also affect returns on substitute investments and price
changes. In the study Kariuki stated that during the 2008 and 2010 global property
meltdown, Kenya was warned that it was facing similar dire straits but these
predictions never scared off investors. However, the Kenyan property market
continued to thrive on low interest rates. In 2011, there were again predictions by
financial analysts that there was a looming property bust in Kenya and therefore the
likelihood of slowdown in the sector. This was because in 2011 and beginning of
2012, interest rates had increased from a low of 14% to more than 24%. This time
most real-estate players were in agreement that the boom time in the sector was
over and hard times beckoned, courtesy of the high interest rates.
2.3
The evolution of shopping centres.
centres.
In the ancient times trading activities took place in meeting and gathering places
(Coleman 2007, p.19). Agora was an open ‘‘place of assembly’’ in ancient Greek
city-states. Mumford (1961) states that the most important function of the agora was
a place for daily communications for formal and informal assembly. In the beginning,
the citizens would gather in the agora for military duty or to hear statements of the
ruling king or council, early in the Greek history in 900’s-700’s B.C. Later, the Agora
defined as an open-air, often tented market place of a city where merchants had
their shops and where craftsmen made and sold their wares (Mark 2009, p.1).
According to Rubenstein (1992, p.2), Agora was the genesis of modern urban space.
Trajan’s Market (MercatusTraiani) is another important milestone in the evolution of
shopping places. During the middle ages, the complex was transformed by adding
16
floor levels. Trajan’s Forum is likely to have been one of the first collections of
defined shops and was a magnificent arrangement of shared-use buildings. It was
the first example of the shops largely under cover and arranged on several levels
(Coleman 2007, p.20). Pevsner (1976, p.235) described Trajan’s Forum as having
about 150 shops on various levels. The upper levels were used for offices while the
lower part, had shops selling oil, wines, seafood, groceries, vegetables and fruit.
During Medieval period to 19 Century, after the fall of the Western Roman Empire in
th
5 century, Western Europe drifted into 500 years or so of dark ages, shopping
th
included. The large-scale retail environment of the Roman forum was not re-attained
until many centuries later. However, trading never ceased and barter became the
basis for exchange of goods rather than money. Following the dark ages, the Middle
Ages witnessed the first sustained urbanization of northern and western Europe. As
a result, towns began to proper again, alongside the castles and abbeys, eventually
broadening and developing into trading centres (Coleman 2007, p.20).
The market and town halls were the heart of trading and business activity of the city.
They were located along with the market square, in the center of the town. The early
market and town hall buildings combined the two uses; the first floor was
administration, the ground floor remained open between the columns and was used
as an extension to the market. The merchandises displayed on removable stalls.
After a while, the ground floors were arranged into a group of small shops. So, the
defined shop spaces in Northern Europe started. This format of outward facing
collections of shops would come to form the basis of shop-lined streets throughout
17
Europe in later centuries (Coleman 2007, p.20-21). Likely Morrison (2004, p.8) states
that, by 1300 permanent structures had began to intrude to on open market places.
These islands of buildings originated as temporary stalls arranged in narrow rows
devoted to particular trades. Later, the stalls were replaced by buildings with
domestic accommodation or storage above a stall or shop, and many were
eventually reconstructed as complete houses. By the 16 century, across Europe
th
market buildings were no longer combined with town halls. Instead, market halls
were built as large linear structures covering long nave-like spaces, with side aisles
lined with stalls forming collections of shops (Coleman 2007, p.22).
The bazaar first appeared in the Middle East, around the fourth century, along the
important trade routes as a reason of constant flow of foreign and exotic goods.
Special areas of cities were eventually designated as areas of trade for the
establishment of first bazaars. Bazaars were not only for trade, but they were also
the social, religious, and financial centers of cities. An Eastern Bazaar is a
permanent merchandizing area, market place, or street of shops where goods and
services are exchanged or sold. The bazaar is the precursor for the modern day
supermarket, flea market, and shopping mall, which originated from ancient
civilizations. More importantly, it has had a great influence on the economic
development and centralization in modern cities around the world.
An important detail in the evolution of Eastern bazaars, which is different from
European market and town halls is that, the bazaars were generally inward looking
with the shops facing into a covered street or interior space, while the European
18
market and town halls generally arranged the shops to face outwards on to the
squares and streets (Coleman 2007, p.25). According to Geist, the Eastern bazaar is
the reference model of the arcade, which has also an inward planning (Geist
1985,p.4). In late 16th century Europe, an exchange a new type of trading building
appeared following the town hall and market place. The exchanges combined
different activities, with open stands selling goods on the first floor and commodity
trading stalls on the ground floor (Coleman 2007, p.25). The first exchanges were
stock exchanges. In the early times of the Royal Exchange of London, the building
was the collection of stalls, which were tended to sell luxury items, in a large
interior space with public thoroughfares passing between the lines of stalls .The
format of selling luxury items under cover in enclosed spaces extending over two
floors influenced the shopping formats of arcades and department stores (Coleman
2007, p.26).
By the 18 century, as a result of rise of bourgeoisie, the shopping streets developed
th
in Europe (Koolhaas, 2001 p.30). Just before the Industrial Revolution the market
places in cities were no longer spatially sufficient for the evolving trade. As a result,
starting from Italy during the16 century, and in northern Europe in the 17 century,
th
th
the central streets of cities were lined with shops, pubs and coffee shops, where the
shops were organized by type into the same street -e.g. Bread Street, Milk Street,
Cordwainer Street in London (Coleman 2007,p.26). The shopping streets are very
important in the evolution of arcades. Also with the later separation of pedestrian and
vehicular traffic the concept of shopping street was made more comfortable and
19
safe, and has lead to our present shopping malls and pedestrian malls (Rubenstein
1992, p.14). Arcades are a highlight in the evolution of shopping. It was the first
European building planned primarily to accommodate a collection of shops
(Coleman2007, p.30). Amendola (2006, p.86) states that, arcade is a milestone in
the relationship between shopping and the city because they show that there is a
demand for experience and people are willing to pay for it. Thus they also indicate
that the public life reached its peak in the nineteenth century (Geist1985, p.1).
In the twentieth century, city planners and developers started to design large
enclosed shopping centers. As a result the nineteenth century shopping arcade had
become by 1970 a historic building type. However, it has never completely
disappeared, the corridors of shops have continued to utilize small areas of land
(MacKeith 1986, p.21, p.141). The department stores developed from the magasins
de nouveautes stores in Paris and the bazaar stores of London, originating in the
late-18 century (Coleman 2007, p.33). According to Sutcliffe (1993, p.132), between
th
the 1860 and 1900 it had become normal for department stores to have an open,
metal-framed interior with natural lighting which they shared this characteristic with
exhibition halls.
As a result of Industrial Revolution, between late 18 and early
th
19 century, Many technological inventions took place in department stores. The
th
department stores were first with the elevator and second with escalators, which
were both highlights of vertical movement in public buildings (Coleman 2007,
p.38).Starting from the middle of the 20 century, because of the success of the
th
shopping centre, the department stores became inward looking simple boxes. Many
20
of them closed but some of them refreshed and modernized interiorly and continue
to live (Coleman 2007, p.38, p.39). Around this time, from the middle of the
20 century while the shopping centers started to establish in the USA. According to
th
Pevsner (1976, p.271), a further development beyond the department store was the
chain store. Very interestingly, an instructive parallel to the chain store, first in the
USA, then extended to Europe, the chain of hotels started to develop (Pevsner 1976,
p.272). This was another inspiration for the architectural history from the retail
evolution. In the 1930’s, the self-service store concept, which was a precursor to
today's supermarkets was introduced. According to Coleman (2007, p.40), the
growth and success of the supermarkets was facilitated by new road systems, the
industrialization of food processing and packaging, networks and warehouses, and
the development of the refrigerator.
The supermarket concept born in the USA and it spread to Europe later with more
varied formats. The new larger formats developed in England such as ‘super stores’
and ‘hypermarkets’ in Europe. The hypermarkets have been used to anchor regional
shopping centers (Coleman 2007, p.40). Strip malls (also called mini-mall or
shopping plaza and often called a power center if it contains a ‘big box’ store),
defined as a collection of several stores located in the same building that share a
common parking lot, developed from the 1920s. The strip mall is often located at
major intersections in a town or city and easily accessed by car. They differ from the
larger shopping mall by containing fewer stores and are open-area planned where
the stores arranged in a row. The first unified shopping mall, the fore runner to the
21
suburban shopping mall, was the Country Club Plaza, founded by the J.C. Nichols
Company in 1922, opened near Kansas City of the USA (Koolhaas 2001, p.34).
By the middle of the 20 century in the USA, the population was growing and
th
urbanites were seeking to escape from the intolerable urban conditions. Luckily, it
was possible to settle down in suburbs by the abundance of available and accessible
land and universal spread of car ownership (Coleman 2007, p.42). Additionally,
Beddington (1991, p.3) states that, the evolution in environmental engineering –
ventilation, air-conditioning systems and advanced lighting systems – facilitated the
development of closed malls. The suburban malls are the beginning of the shopping
centers in modern sense. According to Coleman (2007, p.42), in 1945 there were
only 45 suburban malls across America and in 1958 they grew over to 2900.
At the end of World War II (1945), urban America was still the inner cities and there
were hardly any outer cities; the suburban movement was just starting (Rusk 1995,
p.5). On April 1950, the Northgate Shopping Mall opened at NE Northgate Way at
5 Avenue in Seattle, which was planned by developers Rex Allison and Ben B.
th
Ehrlichman and designed by John Graham. According to Koolhaas’ (2001, p.34)
evolution of retail types, it was the first open-air mall. Northgate shopping mall
established the principle of shops being arranged either side of a long linear
pedestrian walkway and it became the model for the other suburban malls.
Eventually, the suburban malls influenced the form of many successful regional and
super-regional shopping malls throughout the world. The two types of mall plans, the
dumbbell and the cluster, were established in the early 1950s with the suburban
22
malls. Today, most of the contemporary malls’ plan share characteristics of both
types (Herman 2001, p.462).
2.4
Types of Shopping Centres
Centres
2.4.1
2.4.1 Introduction
The term “shopping centre” has been evolving since the early 1950s. Given the
maturity of the industry, numerous types of centers currently exist that go beyond the
standard definitions. Industry nomenclature originally offered four basic terms:
neighbourhood, community, regional, and superregional centers.
However, as the industry has grown and changed more types of centers have
evolved and these four classifications are no longer adequate. The International
Council of Shopping Centers (ICSC’S) has defined eight principal shopping centre
types which include:
2.4.2
2.4.2
Neighbourhood Centre
This centre is designed to provide convenience shopping for the day-to-day needs of
consumers in the immediate neighbourhood. According to ICSC's SCORE
publication, roughly half of these centers areas are anchored by a supermarket,
while about a third has a drug store anchor. These anchors are supported by stores
offering pharmaceuticals and health-related products, sundries, snacks and personal
services. A neighbourhood centre is usually configured as a straight-line strip with no
enclosed walkway or mall area, although a canopy may connect the storefronts.
23
2.4.3
2.4.3 Community Centre
A community centre typically offers a wider range of apparel and other soft goods
than the neighbourhood centre does. The common anchors are supermarkets, super
drugstores, and discount department stores. Community center tenants sometimes
contain
off-price
retailers
selling
such
items
as
apparel,
home
improvement/furnishings, toys, electronics or sporting goods. The center is usually
configured as a strip, in a straight line, or “L” or “U” shape. Of the eight center types,
community centers encompass the widest range of formats. For example, certain
centers that are anchored by a large discount department store refer to themselves
as discount centers. Others with a high percentage of square footage allocated to
off-price retailers can be termed off-price centers.
2.4.4
2.4.4 Regional Centre
This center type provides general merchandise (a large percentage of which is
apparel) and services in full depth and variety. Its main attractions are its anchors:
traditional, mass merchant, or discount department stores or fashion specialty
stores. A typical regional center is usually enclosed with an inward orientation of the
stores connected by a common walkway and parking surrounds the outside
perimeter.
2.4.5
.4.5 Super Regional Centre
Similar to a regional centre, but because of its larger size, a super regional center
has more anchors, a deeper selection of merchandise, and draws from a larger
24
population base. As with regional centers, the typical configuration is as an enclosed
mall, frequently with multilevels.
2.4.6
2.4.6 Fashion/Specialty Centre
A centre composed mainly of upscale apparel shops, boutiques and craft shops
carrying selected fashion or unique merchandise of high quality and price. These
centers need not be anchored, although sometimes restaurants or entertainment can
provide the draw of anchors. The physical design of the centre is very sophisticated,
emphasizing a rich decor and high quality landscaping. These centers usually are
found in trade areas having high income levels.
2.4.7
2.4.7 Power Centre
A centre dominated by several large anchors, including discount department stores,
off-price stores, warehouse clubs, or "category killers," i.e., that offer tremendous
selection in a particular merchandise category at low prices. The centre typically
consists of several freestanding (unconnected) anchors and only a minimum amount
of small specialty tenants.
2.4
2.4.8 Theme/Festival Center
These centers typically employ a unifying theme that is carried out by the individual
shops in their architectural design and, to an extent, in their merchandise. The
biggest appeal of these centers is to tourists; they can be anchored by restaurants
and entertainment facilities. These centers, generally located in urban areas, tend to
be adapted from older, sometimes historic, buildings, and can be part of mixed use
projects.
25
2.4
2.4.9 Outlet Centre
Usually located in rural or occasionally in tourist locations, outlet enters consist
mostly of manufacturers' outlet stores selling their own brands at a discount. These
centers are typically not anchored. A strip configuration is most common; although
some are enclosed malls, and others can be arrange din a "village" cluster.
Figure1:
Figure1: Types of shopping centres
Source: International Council of shopping Centres (ICSC) 1999
26
2.5
2.5
Shopping Centre development Theories
2.5
2.5.1 Central Place Theory
Central place theory was formulated by Walter Christaller in 1933.It is the most
developed theory of retail location. Central place theory models the relationship of
retail trade between towns. The theory earns its strength through its general
structure and its ability to analyze complex locational problems under highly
simplified conditions. The theory was an attempt to explain the size, nature and
spacing of cities as central places supplying goods to the surrounding population.
Since this study is concerned with shopping centre development, some important
terms related to this area are covered. The first is threshold which refers to the
minimum population required to support a given function. The second is range which
is the maximum distance a consumer will travel to purchase a good.
Goods are classified on a relative scale from lower order to higher order goods.
Lower order goods are those goods which consumers need frequently and therefore
are willing to travel only short distances for them. Higher order goods are needed
less frequently so consumers are willing to travel further for them. These longer trips
are usually undertaken for not only purchasing purposes but other activities as well.
One result of these consumer preferences is that a system of centers of various
sizes will emerge over space. Each center will supply particular types of goods
according to its level on the hierarchy. Rodrique (1975) states that the layout of
centers never conforms exactly to the predictions of the theory. Numerous factors
affect the spacing and functions of centers. Johnston in his study of central places in
27
Melbourne found that age, purchasing power, and density affect the spacing of
centers and hierarchical arrangements. Sufficient densities will allow, for example, a
grocery store, a lower order function, to survive in an isolated location.
Economic status of consumers in an area is also important. Consumers of higher
economic status tend to be more mobile and, therefore, bypass centers providing
only lower order goods. The application of central place theory must be tempered by
an awareness of such factors when planning shopping center space location. The
central place theory assumes if consumer has only one shopping purposed then this
consumer will choose the closest relevant shopping center and retail destination to
do the shopping. This theory has described and explained how the retail market and
retail centers have formed up and what economical theory they have based on.
2.5
2.5.2 Congener Conglomeration Theory
Hotelling (1929) found out what attract consumer a lot is when two competing
stores who sell similar products exist in the same shopping center/area, this also had
explained why there are so many stores with similar concepts existing same time in
a shopping center. This is called congener conglomeration. The congener
conglomeration theory focuses on the customer needs. The theory provides
customers effective retail choices and minimizes the risks of consumer when they do
shopping in a shopping place. Consumer can compare, select and avoid missed
information on the market because there is more than one similar offer available
front of them. Winter (1994) in the Journal of real estate research that well-planned
shopping centers with a desirable tenant mix can also create agglomeration
28
economies for the non-anchor tenants. In fact, shopping center developers select,
through active centralized management, an appropriate set of anchor and non
anchor tenants for a given market profile.
2.5
2.5.3 The Bid Rent Theory
Alonso (1960) developed he bid rent theory. The theory states that Land users,
whether they be retail, office, or residential, all compete for the most accessible land
within the CBD. The amount they are willing to pay is called bid rent. This can
generally be shown in a "bid rent curve", based on the reasoning that the most
accessible land, generally in the centre, is the most expensive land. It is a theory
that states that people will fight more and pay more for land and real estate that is
closest to the part of the city that is most important or brings in the most profit. The
term for this part of the city is the CBD or Central Business District. The theory is that
the people who are able to pay the most for the real estate will be in the best position
to make it profitable for those involved.
Land rents payable by different users vary
with distance from some point in the market, usually the CBD. Since transport costs
rise with distance from the market, rents generally tend to fall correspondingly, but
different forms of land use i.e. retail, service, industrial, housing, and agricultural
generate different land rents. For example, retailers will be willing to pay high rents
for sites near the CBD where accessibility is of prime importance, but will be
unwilling to pay much for sites more than about 500 m from the peak land-value
intersection, because the distance shoppers are willing to walk is surprisingly short.
29
Land rents for industries are lower since manufacturers cannot afford the high rents
that retailers can but drops away less sharply because pedestrian access is not such
a key point. Bid-rent theory shows that each land-user will outbid the others at
certain points. At that point, the successful, highest competing land use will
predominate, and the theory posits a series of land-use rings around the CBD.
Figure 2: Bid Rent Curve
Source: http://en.wikipedia.org/
2.6
Importance of Shopping Centre
Centre Development
For the purpose this study, the importance of shopping center development will be
discussed from four angles to explain how the shopping center development could
help with social, urban, economic and environmental development.
30
2.6
2.6.1 Economic Perspective
Perspective
A shopping center benefits the community and creates local employment within retail
trade, services, construction and manufacturing. The majority of jobs created within
the retail sectors are local. People working in the retail sector, especially within the
retail service industry, also live close to their work place, paying income tax to the
city and region as well as sales tax with their purchases. These jobs actively
contribute to the development of the city and there gion.
Shopping centers create and support millions of jobs within the development,
building and operation. A single shopping center can offer employment for
approximately 2,000 people. (Tegner, 2009).The shopping center development often
acts as an engine for regeneration, investment and city growth. In order to succeed
with the development of new urban and sub-urban areas, initial investments in roads
and infrastructure must be made. These investments need to be financed by high
value land uses such as shopping centers, residential areas and offices.
A shopping center can deliver good value both directly and indirectly by making the
residential and office developments more attractive for developers and end-users.
Shopping centers are high value land use. This means that shopping centers offer
an important platform for the growth of the retail trade and can act as an engine for
regeneration of the town center and surroundings. Physical improvements to the
environment will lift the broader economy.
Peoples ‘wish to get the best value in any trade is as old as humanity itself. Most
people therefore need to compare goods and prices before deciding to buy. In this
31
case, shopping center could provide a very good platform for these needs. (Tegner,
2009).A new shopping center stimulates positive competition with other retail areas
including town centers and provides retail expansion possibilities the historical town
centers may not have room for. So the shopping center development acts as an
engine for regeneration, investment and city growth. A competitive environment
keeps prices low. Low prices benefit consumers individually which on an aggregated
level brings further macroeconomic benefits.
2.6.2
2.6.2 Social Perspective
(Wang, 2011) a well designed shopping center improves the image of any local area,
city or region and attracts residents, visitors and tourists. In the development of a city
and region, one of the key factors is the existence of a dynamic downtown area. A
good regional shopping center creates a new destination which strengthens the
identity and attraction of the region and its cities. The new hub can lift the whole
region and town center and also give an impulse for town center and area
regeneration. A good shopping center acts as a natural family friendly meeting place
for people in its primary catchments area. Today shopping center is also used as
meeting places. (Nordic Council of Shopping Centers, 2009) People are strolling
through the mall both to see other people and to be seen. Shopping centers are
market places for the primary catchments area. Offering different forms of events
has also become a more common element to attract more customers and deliver a
better shopping experience. It is comfortable to shop and stroll around in a shopping
center where “all” errands can be carried out under one roof. Barrier free
32
accessibility to the center and shops with wide alleyways and elevators and
escalators make it comfortable for customers and easier for disabled people and
families with kids to stroll around. In a shopping center you find resting places, baby
rooms, higher service level with a pleasant atmosphere, clean toilets, well
signposted directions and a safe and secure building.
A shopping center also can support social and cultural activities by containing or
connecting to cinemas, libraries, exhibitions, medical care and pharmacies.
Shopping centers not only provide retail and entertainment components, they also
offer public and private services. These are for example: banks, insurance
companies, health centers, libraries, citizens’ services, post offices, pharmacies and
medical care, but also Fitness centers, Kindergarten and educational training
facilities. A regional shopping center acts as a “second” town center for many and as
the town center for its primary catchments area. Here the customers have
possibilities to fulfill all their errands at one destination. (Tegner, 2009).
2.6.3
2.6.3 Urbanism Perspective
Perspective
(Wang, 2011) in his thesis on shopping centre development in China states that,
wider spreading opinion is that the existence of retail is required for major urban
density and frequency and is an important function for the town centers. Shopping
centers, in town and out-of-town, fulfill important urban functions for urban minded
people. As cities grow, their population starts to live and work further and further
away from city center. And with economic growth it becomes increased need for
retail space.
33
The ever-increasing demands on the town center of growing cities can only to a
certain degree be solved by higher density and infrastructure investments. Many
retailers have also started to specialize and widen their range of goods, demanding
larger shop-space and smarter logistics. Shopping centers, in town and out-of-town,
fulfill important urban functions for urban minded people who spend a lot of their lives
outside the city center. Urbanism is linked to a place where people live, work and
meet other people. If people live and work out of town, they also need retail out of
town to maintain an urban lifestyle. In many cases retail has developed as an
afterthought. As opposed to this, a regional shopping center outside the town can
offer preconditions for housing and work places and in that case act as an engine for
further urban development. (Tegner, 2009)
2.6.4
2.6.4 Environmental Perspective
Perspective
A well designed shopping center offers an eco-friendly and sustainable environment
in one technically advanced building. New shopping centers are designed and built
to the latest technical and environmental standards. (Tegner, 2009) Possibilities to
obtain new standards are the use of: Geothermal energy Solar energy, sorting and
recycling of waste, use of ecologically sustainable materials in the construction
process, use of heat exchangers and reuse of rainwater. A shopping center
accessible via a choice of transport offers environmentally sustainable consumer
travel. Carrying out many errands in one journey is more eco-friendly than a single
item purchase. There are different possibilities to reach a regional shopping center.
Besides the most common, car travel, it is often possible to use public transport
34
links, particularly when the regional shopping center is located close to residential
and commercial areas. If there is not an already installed public transport network in
an area, a shopping center can often contribute to public transport services by
investments and tax revenues.
A shopping center is often well located between
where people work and live. So it is also possible and convenient for the customers
to shop on the way home or to work. This reduces the transporting mileage, which is
economically and environmentally sustainable as well as time saving.(Tegner, 2009)
A shopping center with direct access to the national road network offers efficient and
environmentally sustainable goods distribution. Customers combine many purchases
in one visit and transport the goods straight to their homes. Even when the shopping
trip is done by private car, the overall environmental impact is kept to a minimum.
There will be less heavy load traffic in the town centers and fewer congestion
problems because fewer transporters get into narrow streets in crowded town
centers. There will be lower emissions with less noise, light and sound disturbances.
In a regional shopping center it is possible to store more goods. Huge delivery of
goods is needed more seldom, because of the storage possibilities. The customers
also benefit from the storage of goods; because they can be assured that the whole
range of goodsis available. (Tegner, 2009)
35
2.7
Case studies analyzing the impact of shopping mall on the surrounding
residential
residential property values and supply
2.7.1
2.7.1 Introduction
Emrath (2002) provided evidence that having satisfactory shopping within one mile
increased housing prices substantially inside metro areas. Others, including Sirpal
(1994) and Des Rosiers et al. (1995), have also found a positive correlation between
shopping centers and housing prices.
2.7.2
2.7.2 Case study of Bugis Junction and Suntec City in Singapore
In the early development of Singapore, the shopping belt was confined to the central
part of Singapore along Scotts Road and Orchard Road. Over time, more shopping
centres such as Bugis Junction and Suntec City were built in the fringe areas.
Moreover, with approximately 85% of Singapore’s population residing in HDB
housing estates (General Household Survey 2005), planned shopping centre is a
common feature in all estates as each public housing estate is planned to be a selfsufficient town to meet the day to day needs of the residents. (Addae-Dapaah,
2010) states that as Singapore developed, the shopping facilities in the town centres
slowly evolved from being housed in shop houses to integrated retail developments
(shopping malls) offering all sorts of services. Currently, the shopping areas in HDB
towns (i.e. neighbourhood shopping centre in planning terms) offer a ‘one-stop’
shopping experience and have become a focal point for neighbourhoods to enhance
community living.
36
Shopping centre is an externality that simultaneously exerts attractive as well as
repulsive effects which can impact household’s location choice. Addae-Dapaah in his
study used the hedonic pricing model to analyze 8627 sales to ascertain the
proximity effect of shopping malls on the price of HDB apartments. The results reveal
that homebuyers pay an average premium of 4.7% for shopping centre proximity
factor. However, the premium varies from estate to estate, ranging from 23.8% (in
Marine Parade) to 1.7% (in Bedok Estate). Furthermore, Flats within the 100m radius
from the shopping centre command the highest premium of 15%. The price premium
for this attribute decreases with increases in the distance from the shopping centre.
However, the decline in premium does not show a consistent pattern. The findings
also show that the price-distance relationship for the proximity factor to shopping
centre is likely to stretch beyond 500m. Flats within a town centre with a shopping
mall on the average, are considered more attractive. Homebuyers pay a price
premium of 6.1% for a flat located in an estate with a shopping mall as opposed to
one without.
2.7.3
2.7.3 The effect of Kasuwan Laushi Super Market on Surrounding
Surrounding Residential
Accommodations in
in Bauchi Metropolis, Nigeria
Aliyu et.al (2011), Kasuwan Laushi is a neighborhood shopping center, located at
2110 Wunti Road, Bauchi metropolis. The center has a lot area of 282,000square
feet and consists of ten small retail stores and one independent grocery store. Aliyu
et.al (2011) in their research adopted the Hedonic regression model which been
developed to explain the variations in property values before and after the
37
announcement of the proposed shopping center to investigate the effect of Laushi
Supermarket
on
residential
accommodations.
They
found
out
that
the
announcement of the proposed shopping center had both negative and positive
effects on the value of residential properties. At distances closer than 1,500 feet,
diseconomies appear to dominate. Beyond 1,500 feet, economies appear to
dominate. The trade-off between values proximate to the shopping center and
properties served by the center, but removed from its negative effects, would seem
to suggest there may be an optimal spatial frequency of these small shopping
centers.
2.7.4
2.7.4 Case of WalWal-mart and its effects on residential property values
Shulman (2009) examined the effect of a Wal-Mart’s entrance on residential property
values in five Colorado communities and found that proximity to a Wal-Mart
decreases residential property value. However, they also find evidence of the
possibility that the convenience of being in close proximity to the store may outweigh
the negative effect on property values in some instances. In addition several studies
suggest that the introduction of a Wal-mart store in a community has the potential to
lower housing prices through increased local crime, noise and light pollution, traffic
congestion, garbage accumulation, and loss of perceived visual aesthetics. These
disamenities are capitalized into housing prices. For example, Linden and Rockoff
(2008) and Pope (2008) have both recently shown that a discrete change in the risk
of a localized crime can have a causal impact on housing prices, Smith et al. (2002)
38
showed that freeway noise can have a negative impact on housing prices, and Lim
and Missios (1995) showed the negative impact of landfills on housing prices.
However Jaren and Devin (2013) in their research compared the areas very near the
Wal-Marts to areas slightly further away before and after the Wal-Marts opened. The
results from their primary difference-in-differences specification suggest that a new
Wal-mart store actually increases housing prices by between 2 and 3 percent for
houses located within a half mile of the store and by 1 to 2 percent for houses
located between a half and one mile from the store. For the average priced home in
these areas this translates into an approximate $7,000 increase in housing price for
homes within a half mile of a newly opened Wal-mart and a $4,000 increase for
homes between a half and one mile. Overall, the estimated capitalization effects that
they found suggest a revealed preference by many households to live near a Walmart and the stores that naturally agglomerate nearby. On average, the benefits to
quick and easy access to the lower retail prices offered by Wal-mart and shopping at
these other stores appear to matter more to households than any increase in crime,
traffic and congestion, noise and light pollution, or other negative externalities that
would be capitalized into housing prices.
2.8
Factors leading to increased
increased development of
of shopping malls in Nairobi
2.8.1
2.8.1 Introduction
Nairobi is located in Central East Africa. Nairobi is a strong developing city with
construction being one of the fastest growing industries in the market as a result of
the large number of real estate projects in the city. The major flight routes of the
39
world indicate clearly that Nairobi is centrally located in relation to the world trade
routes. Also, the country’s favourable location relating to time zones, makes Kenya
the ideal destination for call centres and offices for international companies. These
are the positive reasons for many international companies to invest in Kenya and for
more to follow in the future. Apart from the good location, this study will explore the
other factors that have influenced the increased development of shopping centres in
Nairobi.
2.8.2
2.8.2 Economic Growth
Fernridge Consulting (2012) in their research stated that, In an environment of global
turbulence and domestic shocks, Kenya recorded moderate economic growth of
4.4% in 2011. For the second consecutive year, the economy experienced positive
growth across all quarters and sectors, even though agriculture performed poorly.
Kenya’s economic growth for the last four years has been relatively modest. Since
the 2008 crisis, Kenya has been growing at an average of 3.5% per annum, well
below the average for Sub-Saharan Africa (5.5%, excluding South Africa) and
significantly slower than the East African Community (EAC) countries, some of which
are among the fastest growing developing countries in the world. The World Bank
maintains its growth forecast for Kenya of 5.0% for 2012 and for 2013, a moderate
rate that will be driven by consumption. Growth could reach 5.4% in a high growth
scenario, but it could also dip further to 4.1% in the low case.
40
Kenya’s economy is stabilising gradually. After sailing through rough waters in 2011,
the economy is back on track to achieve 5% growth in 2012. Three main factors
underpinned stabilisation:
First, the Government’s determined action to increase interest rates during the third
quarter of 2011 and prudent fiscal policies sent important signals to the markets and
this also helped to stabilise the exchange rate.
Secondly Inflation has started to decline sharply, due to the lower international food
and energy prices and thirdly Kenya’s service sector continued to expand strongly,
with very good results in tourism. GDP growth for Q1 2012 slowed to 3.5% as
compared to 5.1% in Q1 2011. Some of the factors behind the slowdown include the
delay in the onset of rains, frost in January, high inflation and tight monetary
conditions. The sectors that registered improved performance include Electricity up
10.8%, Transport and Communication (5.9%) and Agriculture (2.3%). Financial
intermediation and the construction sectors decelerated the most growing by 3.8%
and 3.2% against 12.6% and 7.0% respectively in the prior year.
2.8.3
2.8.3 Growth
Growth of the middle class in Kenya
The African Development Bank defines the African middle class as those spending
between US$2 and US$20 a day. Africa’s middle class has tripled over the last 30
years, with one in three people now considered to be living above the poverty line but not among the wealthy. The current trajectory suggests that the African middle
class will grow to 1.1 billion (42%) in 2060.
41
The major boom in population growth also generates a massive demand in the
middle class for goods and services. A typical African middle class family does not
generate an income from farming or rural activities. They generally live in urban
centres, have a higher level of tertiary education, and hold salary jobs to name a few
characteristics. Kenya’s middle class has grown to 10% of the urban population or
1.5 million people making Kenya home to one of the largest middle class populations
in sub-Saharan Africa.The AFDB estimates that about 16.8 percent or 6.7 million
Kenyans belong to the middle class, capable of spending $2 to $20 per day. The
World Bank estimates that less than 2 percent of Kenyans belong to the global
middle class, spending $10 and $20 a day. According to Kenya National Bureau of
Statistics, 1 in 5 Kenyans is in the middle class, which includes individuals spending
between $10 and $100 a day. That 1 in 5 Kenyans is the middle class is highly
improbable because only 12.4 percent, about 5.1 million Kenyans, work for a wage,
in the informal and the modern sector of the economy. This is according to figures
computed by the World Bank, based on the 2009 census and the 2012 Economic
Survey .Strong economic growth in the past two decades has helped reduce poverty
significantly and lift previously poor households into the middle class.
2.8.4
.8.4 Increased Urbanization in Kenya
Fernridge Consulting (2012) in their research stated that the Kenya Census 2009
highlights displayed Nairobi as the smallest area with the highest population density.
Overall 68% of the Kenya population is urbanised.
42
Recent UN estimates suggest that Kenya’s urban population will expand to 38 million
by 2030 and account for 62.7 percent of the national population. These projections
indicate that the annual urban population growth rate will average 5.2 percent up to
2010, 4.2 percent over the period 2010-20 and 3.2 percent during the succeeding
decade (UN, 2003). 64% of the total Kenyan population is below the age of 25. With
the continued investment in education and increased urbanisation, it is evident that
Nairobi will experience a wave of educated young professionals entering the active
economic market. Nairobi is without a doubt the focus point for development and
should also be the focus point of retail growth in Kenya. At this rate of urbanization
the majority of the Kenyan population will be living in urban areas within the next 20
years. Rapid urban population growth means an increasing demand for urban land,
particularly for housing, but also for various other urban uses.
In order to realize Sustainable communities in Kenya there has been increased
development of shopping centres in Nairobi’s suburbs. Sustainable communities are
places where people want to live and work, now and in the future. They meet the
diverse needs of existing and future residents, are sensitive to their environment,
and contribute to a high quality of life. They are safe and inclusive, well planned, built
and run, and offer equality of opportunity and good services for all.
Sustainable communities embody the principles of sustainable development that is,
balancing and integrating the social, economic and environmental components of
their community, meeting the needs of existing and future generations and
43
respecting the needs of other communities in the wider region or internationally to
make their own communities sustainable.
2.8.5 Improved Transport Network
Network
Transport is an important aspect of infrastructure of a country. According to World
Bank (2011) infrastructure contributed half a percentage point to Kenya’s annual per
capita GDP growth over the last decade. Raising the country’s infrastructure
endowment to that of the region’s middle-income countries could boost annual
growth by more than 3 percentage points per capita.
World Bank (2011) the length of the trunk network is more than adequate. Even if
Kenya’s road density indicators look relatively low by some standards, the trunk
network provides basic regional and national connectivity, linking the capital to the
coast, to international border crossings, and to provincial capitals in the interior
Kenya has established a sound system for funding road maintenance. The country
has made great strides with institutional reforms. The country’s road fund meets
most of the good practice design criteria. Moreover, the fuel levy is set at a level
(around $0.12 per litre) adequate to fund the country’s road maintenance
requirements, and the associated revenues are indeed being fully captured by the
sector. The Nairobi Bypass Project is a Ksh 41.3 billion road project which will see
the construction of 3 roads around the city to aid in the easing traffic snarl-up within
Nairobi. These 3 roads are the Northern Bypass, Southern Bypass and Eastern
Bypass.The entire length of the roads is 98 km or paved road. All the roads will be
single or double carriageway and will be able to accommodate 2 HCV (Heavy
44
Commercial Vehicles) on opposite directions.The 3 roads shall form a "ring" around
Nairobi and its environs with feeder roads, linking every part of Nairobi, making the
country a regional business hub. There is also The Nairobi-Thika Highway which
links downtown Nairobi to the suburbs and satellite towns. The former The Kenyan
President Mwai Kibaki officially inaugurated the superhighway connecting Nairobi
and Thika in November 2012. The superhighway is expected to boost the economy
of the East African Zone. The eight-lane highway is 50km long, starting from Nairobi
and running up to the outskirts of Thika. The Nairobi-Thika superhighway covers
several locations such as Marsabit, Lsiolo and Moyale. The route covered by the
project is a vital element of the Great North-Trans African Highway, which links Cape
Town and Cairo.
The improved road transport has lead to increased economic
activities along these major roads, shopping malls being one of them. Along the
Northern by pass, we have the Two Rivers Mall which comprising of 281,000sqm of
built up area coming up, along the Thika super highway we have the Garden city
mall which comprises of 50,000 sqm of built up area and along the southern bypass
we have The Hub which comprises of 35,000 sqm of built up area coming up.
2.8.6
2.8.6 Foreign Investment
Kenya’s economy is market-based, with a few state-owned infrastructure
enterprises, and maintains a liberalized external trade system. The country is
generally
perceived
as
Eastern
and
central
Africa's
hub
for
Financial,
Communication and Transportation services. As of March 2014, economic prospects
45
are positive with above 5% GDP growth expected, largely because of expansions in
tourism, telecommunications, transport, construction and a recovery in agriculture.
The Royal Danish Embassy (2011) in their research indentified the following as the
following as the main factors leading to increased foreign investment in Kenya;
A Stable Democracy, fully liberalised economy, transparent and predictable tax and
licence regimes, relatively well developed infrastructure, a deep pool of educated
and skilled manpower, an attractive and comprehensive package of incentives
offered to investors, a leading tourism, wildlife and safari destination and
Membership of regional trading blocs among others.
Synovate (2012) Kenyan retail sector has experienced penetration by many
international companies. Some of the popular international market brands include
Mr. Price, Truworths, Woolworths, while local brands include Java, Kazuri Jewellery,
Little Soles, Artcaffe’, Dormans Coffee, Johari,General Motors, Proctor & Gamble,
Microsoft, Ogilvy and Mather, Coca-Cola and Citibank command a huge retail
market presence in most of the leading shopping centres in Nairobi.Other
international retail brands such as Game and South African fashion group Foschini
are expected to enter the Kenyan market and hence the demand for retail space in
Kenya is expected to increase further hence increased development of shopping
malls.
46
CHAPTER THREE:
THREE: RESEARCH METHODOLOGY
3.0
Introduction
This chapter presents the research methodology. The chapter specifically presents
the research design, area of study, population, sample and sampling technique,
instrumentation, reliability and validity, data collection procedure, and data analysis
and presentation.
3.1
Research Design
Design
This study is a descriptive survey. Descriptive surveys portray an accurate profile of
persons, events, or situations (Robson, 2002). Surveys allow the collection of large
amount of data from a sizable population in a highly economical way. It shall allow
this study to collect data which will be analyzed quantitatively using descriptive and
inferential statistics (Saunders et al., 2007). Therefore, the descriptive survey is
deemed the best strategy to fulfill the objectives of this study
3.2
Population
The population of study will consist of professional staff and of real estate
companies, real estate developers and residents within one kilometer radius from the
Junction shopping centre. These are the people best placed to provide the required
information.
3.3
Sample and Sampling Technique
Technique
Sampling is that part of statistical practice concerned with the selection of individual
observations intended to yield some knowledge about a population of concern,
especially for the purposes of statistical inference. Since a sample will be selected
47
from real estate firms in Nairobi and residents around the Junction, it is assumed that
selecting one firm is the same as selecting the other. Thus, the sample size for this
study will be selected using convenience sampling technique.
Convenience sampling (sometimes known as grab or opportunity sampling) is a type
of non-probability sampling which involves the sample being drawn from that part of
the population which is close to hand. That is, a sample population selected because
it is readily available and convenient. This method is used when one is unable to
access a wider population, for example due to time or cost constraints. The sample
size will be 80 respondents which are considered appropriate.
3.4
Reliability and Validity of Data
Data Instruments
Instruments
According to Straight (1993), validity refers to the extent to which an instrument
measures what it intends to measure. In order to ensure the validity of these
instruments, the questions on the questionnaires will be constructed in a manner that
the responses only provide answers to the research questions. Piloting test will be
conducted with a sample of 5 respondents from 5 respondents who will not be part of
the final sample respondents for the study. The pilot study will be necessary to
determine validity of the instruments and enable the researcher to determine
whether the respondents understand the question. Reliability of measurements
concerns the degree to which a particular measuring procedure gives similar results
over a number of repeated trials. It also refers to the consistency of an instrument to
yield the same results at different times. The researcher will use test re-test type of
method in order to establish the reliability of the instruments. Test re-test method is
48
applied where a test is given to respondents then after some time given again, gives
the same results. The researcher will make a comparison between answers obtained
from the two groups of respondents and the responses will be consistent with the
instruments hence deemed reliable. A Pearson’s product moment formula for the
test – retest will be employed to compute the correlation, coefficient in order to
establish the extent to which the content of the questionnaires will be consistent in
eliciting the same responses every time the instrument is administered.
3.5
Instrumentation
Questionnaires will be used to collect data. These will be structured questionnaires
to address the study objectives. The questionnaires will be administered using drop
and pick later method. A period of two weeks will be given for data collection period
after which those who would not have completed will be given one more week for
completion. These will then be collected and sorted ready for analysis.
3.6
Data analysis
analysis
Before processing the data, the questionnaires will be edited for completeness and
consistency. This ensures the questionnaire is completed as required. (Nachmias,
1996) The data will then be coded to facilitate statistical analysis. The SPSS
(Statistical package for social sciences) computer package will be used to analyze
the data. Data presentation will be in form descriptive statistics such as pie charts,
bar graphs, percentages and tables. This is because information can be interpreted
very easily since the methods are easier to understand.
49
CHAPTER FOUR:
FOUR: DATA ANALYSIS AND PRESENTATION
4.0
Introduction
This chapter contains data presentation and analysis of the data collected from the
field through questionnaires, observations
observations and interviews. The respondents gave
their views which was analysed in order to achieve the objectives of his study.. The
following
g shows how data was analysed.
4.1
The increase in supply of high end residential units
Questionnaires were administered to real estate professionals and real estate
developers on the supply of residential units within 1 kilometer radius from the
Junction mall.
70% of the respondents were professionals in real estate firms while 30% where real
estate developers as presented in the pie chart below.
Figure 4.1.1: Pie chart presentation
present
of the distribution of respondents
Distribution of Respondents
30%
Real estate firm professionals
Real estate developers
70%
Source: Field Survey 2014
50
8% of the residential units within 1 kilometre radius from the Junction Mall were
completed prior to 2004, before the shopping centre was developed.
25% of the residential units within 1 kilometre radius from the Junction Mall were
completed between 2005 and 2011 a period during which the phase 1 of the
Junction mall has been operational.
67%of the residential units within 1 kilometre radius from the Junction Mall were
completed between 2012 and 2014 a period during which the phase 2 of the
Junction mall has been operational.
The analysis of this data is presented in the table below.
Table 4.1.2
4.1.2:
.2: The number of residential units ejected in the market
NO.OF
RESIDENTIAL PERCENTAGE
UNITS
YEAROF
COMPLETION
101
8%
BEFORE 2005
332
25%
2005 - 2011
869
67%
2012 - 2014
Source: Field Survey 2014
51
Figure 4.1.3 Bar graph Presentation of the residential units ejected in the market
The Number of units ejected in the market
950
850
750
650
No of
550
Units
450
Number of units
350
250
150
50
Before 2004
2005 - 2010
2011 - 2014
Year
Source: Field Survey 2014
In addition on the issue of increased supply of high end residential units
questionnaires were also administered to residents within 1 kilometer radius from the
Junction. The data collected is analyzed below.
52
Figure 4.1.4 Pie chart presentation
presentatio on the resident’s characteristics
Characteristics of the residents
12%
10%
Below 30 years
Between 30-40
30
years
30%
Between 40-50
40
years
Above 60 years
48%
Source: field survey 2014
62% of the respondents ranked proximity to The
e Junction mall as the number one
reason for the increased development of high end residential units within 1 kilometer
radius from the Junction.
25% of the respondents mentioned property boom in
Kenya as the reason for the increased supply of the high end residential units within
1 kilometer radius from the Junction mall.
13% of the respondents
spondents mentioned improved infrastructure at the reason for
increased supply of the high end residential within a 1 kilometer from The Junction
mall.
53
Figure 4.1.5 Pie chart presentation of the supply of residential units
Residential units supply
13%
Proximity to the Junction
Property boom
25%
Improved infrastructure
62%
Source: Field Survey 2014
4.2
The effect of The Junction mall on residential units prices
Questionnaires were also administered to professionals in real estate firms, to give
their
heir views on whether The Junction has mall has had effect on the increase the
prices for high end residential units increased over the last eight years within 1
kilometer radius from the Junction. Almost 100% of the respondents mentioned that
there has been an increase in prices for the high end residential units over the last
eight years. The data collected is presented in the table below according to how
many residential units where completed in the respective year and how much the
developer or the real estate firm was selling the units for. All the residential units in
the data presented are three bedroom apartments.
apartments
54
The table 4.2.1 Price shift over time.
YEAR OF COMPLETION
NO OF UNITS
PRICE(KSH)
2007
50
6,500,000
2008
75
9,000,000
2009
101
10,500,000
2010
207
13,500,000
2011
271
14,000,000
2012
398
15,000,000
2013
532
17,500,000
2014
712
20,000,000
Source: Field Survey 2014
Figure 4.2.2 Bar graph presentation of price shift over time
Price Shifts over time
25,000,000
Ksh Shillings
20,000,000
15,000,000
10,000,000
5,000,000
0
2007
2008
2009
2010
2011
2012
2013
2014
Year of Completion.
Source: Field Survey 2014
55
4.3
Residents response on the increased prices for residential housing units
When asked on whether The Junction mall was a contributing factor into their current
location;
i.
65%
% of the respondents mentioned the Junction Mall as a key factor they
considered before relocating to their current location.
ii.
25%
% of the respondents mentioned that The Junction didn’t contribute
c
to their
location but suitability of the accommodation as the main reason they
relocated to the current premises
iii.
10% of the respondents mentioned other factors like proximity to schools like
Makini, Riara school and church as reasons as to why they
th
choose the
current premises. This data is presented in the pie chart below.
Figure 4.3.1
.1 Pie chart presentation of the factors affecting choice of location.
Factors affecting choice of location
10%
Proximity to The Junction
25%
Sutability of accomodation
Other factors like schools
65%
Source: Field Survey 2014
56
The residents living
iving within one kilometer radius from the Junction mall were also
administered with a questionnaire asking them on whether they would be willing to
pay a premium to live close to Junction.
i.
60%
0% of the respondents said they would be willing to pay a premium in order
to enjoy the benefits like easy access of recreational facilities etc of residing
close to the Junction mall.
ii.
30% of the respondents said they would not pay high rates to live close to the
Junction. They mentioned some of the factors that would discourage them
such as terrorism,, noise,
noise traffic congestion etc
iii.
10% of the residents were not keen on answering this particular
questionare.This data is presented in the pie chart below.
Figure 4.3.2
.2 Bar graph presentation of the residents willingness to pay a premium
Effect on Prices
70%
PERCENTAGES
60%
50%
40%
30%
20%
10%
0%
Willing to pay a premium
Not willing to pay a premium
Indifferent
RESPONSES
Source; Field Survey 2014
57
4.4
Research Observations.
Observations.
The researcher made the following observations in the course of the data collection
through field survey.
4.4.1
4.4.1 The Plot Ratio Reduction.
Reduction.
The developers are now developing more blocks beside the earlier developments in
for example on acre land. Due to increased demand for housing and the need to
maximize on profits developers are now developing 4 blocks on one acre plot on
Riara Road, Gitanga Road, Masanduku Lane and Hatheru Road unlike in 2007
where one block of apartments sat on one acre plot.
4.4.2
4.4.2 Increase in the
the Number
Number of Storeys.
Storeys.
The real estate developers have also increased the number of storeys put up on the
apartment blocks.In 2007 the apartments had upto a maximum of four storeys but
currently in 2014 the storeys go up to seventeen storeys with lift provision.
Figure 3: Residential Completed 20052005-2011 GND+4
Source: Field survey 2014
58
Figure 4: Residential completed 20122012-2014 GND+7
Source: Field Survey 2014
4.5
Hypothesis Testing
The hypothesis of the study was that; the increased development of shopping malls
has impacted on the Kenyan residential property market. The findings of the study
supported the hypothesis as it was shown that the development of The Junction
shopping centre has lead to increased prices of high end residential housing units.
The increase in prices according to the findings of this study is attributed to the
increased demand for residential units within 1 kilometer radius from the Junction
shopping centre. Most of the residents who were interviewed preferred living close to
the Junction shopping centre and were even willing to pay a premium for it because
of the benefits offered by the centre like quick and easy access to household goods
and recreational facilities.
The findings of this study have also shown that the development of the Junction
shopping centre has led to an increased supply of high end residential housing units
59
within 1 kilometer radius. In order to meet the increased demand for high end
residential units developers have had to eject more units into the market. Almost
100% of the developers who were interviewed mentioned that they have had to
increase the number of storeys in apartment blocks or developed an extra block of
apartments beside the existing one.
It is therefore evident from the finds of this study that the development of shopping
centers creates a vibrant residential property market in the surrounding areas.
60
CHAPTER FIVE:
FIVE: CONCLUSIONS AND RECOMMENDATIONS
5.0
Introduction
This chapter presents conclusions and recommendations of the study in the light of
the study objectives. Areas of further study regarding the subject are also included.
The objectives of the study were:
1. To document the factors leading to increased development of shopping Mall
in Nairobi.
2. To investigate the effect of increased shopping Mall development on the
supply of residential property market.
3. To investigate the effect of increased shopping Mall development on the
prices of the residential property market
In answering the question, the study examined the factors that have led to increased
development of shopping centers in Nairobi and the impact of the shopping centers
on the residential market. Answers to the issues raised have been deliberated in the
foregoing chapters and will be examined in summary form in this chapter.
5.1
Conclusions
From the findings outlined in this study found out that several factors have led to the
increase in shopping mall development in Kenya. One of the factors leading to this
increase is the fact that the Kenyan economy is stabilising gradually. After sailing
through rough waters in 2011, the economy is back on track achieving 5% growth in
2012.In addition, the Kenyan’s middle class has grown to 10% of the urban
61
population or 1.5 million people making Kenya home to one of the largest middle
class populations in sub-Saharan Africa.Thirdly this increase has also been caused
by increased urbanization in Kenya. This is more evidenced by the recent UN
estimates that suggest Kenya’s urban population will expand to 38 million by 2030
and account for 62.7 percent of the national population.
The findings of this study also found that the improved road transport has lead to
increased economic activities along these major roads, shopping malls development
being one of them. Lastly the Kenyan retail sector has experienced penetration by
many foreign investors.Some of the popular international market brands include Mr.
Price, Truworths,Woolworths, while local brands include Java, KazuriJewellery, Little
Soles, Artcaffe, Dormans Coffee, Johari,General Motors, Proctor & Gamble,
Microsoft, Ogilvy and Mather, Coca-Cola and Citibank command a huge retail
market presence in most of the leading shopping centres in Nairobi increasing the
demand for retail space in Kenya hence the increased development of shopping
malls in Kenya.
Moreover according to this study there is a positive correlation between shopping
centers and housing prices and supply. Overall, the estimated capitalization effects
according to this study suggest a revealed preference by many households to live
near a shopping centre and the stores that naturally agglomerate nearby. On
average, the benefits to quick and easy access to household goods and recreational
facilities offered by shopping centres appear to matter more to households than any
increase in crime, traffic and congestion, noise and light pollution, or other negative
62
externalities. This therefore increases the demand for housing units close to the
shopping centres which consequently leads to developers to develop more
residential housing units to meet the market demand in the particular geographical
area.
In addition this study also found that residential units within the 1kilometre radius
from the shopping centre command a high premium. The findings also show that
residential units in an area with a shopping mall on the average are considered more
attractive. Homebuyers pay a price premium for a flat located in an estate with a
shopping mall as opposed to one without.
Shopping centers are important to the economic development of any country and
there increased development contributes to a vibrant real estate market.
5.2
Recommendations
Based on findings and conclusions that have already been made, the following
measures are recommended.
That future development of shopping centers in Nairobi should be well planned and
strategic bearing in mind that their development affects the neighbouring residential
market. In order for Kenya to bridge the gap between demand for residential housing
units and supply, Kenyan developers, real estate firms, the government and all other
key stakeholders involved in real estate market, should view shopping centre
development in the Nairobi’s suburbs and neighbouring estates as a means of
resolving the shortage of residential housing units.
63
In addition all the key stakeholders in real estate which include the Government, real
estate researchers and professionals should be involved during the planning of a
new shopping centre in an effort to ensuring holistic planning and consideration of
the effects that the shopping centre might have on the real estate market and the
general economy of Kenya.
It is also important that Real estate developers try to minimize the negative
externalities like crime, traffic and congestion, insecurity, noise and light pollution etc
which tend to discourage people from living close to the shopping centers.
Future shopping center developments should be encouraged not only in the high end
suburbs but also in the low end areas. This will consequently increase the supply of
low end residential housing units where the demand for housing units in Kenya is
high. Both the local and National Government of Kenya should encourage policies
and incentives that are investor friendly so as to increase shopping mall
development in Kenya which consequently contributes to a vibrant real estate
market.
5.3
Areas of further research
•
Since shopping centers are becoming increasingly popular in Kenya and
especially in Nairobi, studies need to be conducted on the effects that the new
shopping centers have on the already existing shopping complexes.
•
Studies to be also conducted on the effect of the increased shopping centre
development on the Kenyan commercial real estate market.
64
BIBLIOGRAPHY
i.
ADFB, (2013): African Housing Dynamics: Lessons from the Kenyan Market,
African Economic group.
ii.
ADFB, (2011): The Middle of the Pyramid: Dynamics of the Middle Class in
Africa, African Development Bank.
iii.
Cecilia M. and Maria S. (2011): Kenya’s Infrastructure: a Continental
Perspective
iv.
Policy Research Working Paper.
v.
Cox, W. and Cooke, E. (1970): Other Dimensions Involved In Shopping
Centre Preference, Journal of Marketing.
vi.
Des Rosiers, F. and A. Lagana (1995): Shopping centres and house values:
an empirical investigation, Journal of Property Valuation and Investment.
vii.
François D.et al. (1996): Shopping centres and house values: an empirical
investigation, Journal of Property Valuation &Investment, Vol. 14.
viii.
Hickman, E, Gaines, J. and Ingram, F.J. (1984): The influence of
neighbourhood quality on residential values: The Real Estate Appraiser and
Analyst, Vol. 50.
ix.
Howell, R. and Rogers, J. (1981): Research into Shopping Mall Choice
Behavior, Advances In Consumer Research: Association for Consumer
Research.
x.
ICSC (2000): ICSC shopping center definitions: Basic configurations and
types.
65
xi.
Ikhram,(2013): How Shopping Malls Affect Property Value, Journal of
marketing.
xii.
John D. and Mark E. (1994): The Evolution of Shopping Center Research: A
Review and Analysis.
xiii.
John J. (1975): Retail Centre Planning and Central Place Theory; Journal of
the Town Planning Institute.
xiv.
Kwame A. (2010): Shopping Centres and the Price of Proximate Residential
Properties; Department of Real Estate, SDE, National University of
Singapore. Liangping Wang (2011): Shopping center development in China:
Current situation, challenges and solutions; Division of Building and Real
Estate.
xv.
Lowe M. (2000): Britain’s regional shopping centres: New urban forms? Urban
Studies. Vol.37, No.2.
xvi.
Mu B. (2010): American Shopping Centre Development History; Financial
xvii.
Economics Shanghai.
xviii.
Njau (2011): Sustainable Urban Communities: Challenges and Opportunities
in Kenya’s Urban Sector; International Journal of Humanities and Social
Science Vol. 1 No. 4.
xix.
Richard, A. (1991): A brief history of the mall: Advances in Consumer
Research Volume 18, Association for Consumer Research.
xx.
Stephen, W.( 2007): Housing challenges in sub-saharan Africa;International
Housing Coallition.
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xxi.
Winger, A. (2007): How important is distance from the Centre as a
Determinant of Urban Residential Values, Appraisal Journal.
Web source:
xxii.
A brief history of shopping centres, June ICSC.
xxiii.
http://www.icsc.org/srch/about/impact of shopping centers/briefhistory.html
xxiv.
Wikipedia, Shopping mall explanation.
xxv.
http://en.wikipedia.org/wiki/Shopping_mall
xxvi.
American shopping center development history.
xxvii.
http://www.verylib.com.cn/read/read.html
xxviii.
www.investopedia.com
67
APPENDIX1:
QUESTIONNAIRE
TO
REAL
ESTATE
DEVELOPERS
AND
PROFESSIONALS IN REAL ESTATE FIRMS.
Dear Respondent,
I am a student at the University of Nairobi pursuing a Diploma course in Real
Estate Agency and Property Management.
I am conducting a research project on the impact on increased shopping centre
development on residential market in Nairobi.
Please fill in the blank spaces as honestly as you can. All information provided will
betreated with utmost confidentiality.
NAME……………………………………………………………
PROFESSION……………………………………………………
Q1. What is the name of the residential development you have put up close to The
Junction?
……………………………………………………………………………….
Q2. How many units does the development comprise of?
...............................................................................................
Q3.On what Acreage does the development sit on?
………………………………………………………………………………
Q5 Tick in the box the year the development was completed?
...............................................................................
68
Before 2004
2005-2011
2011-2014
Q6. Please indicate the asking price for the residential units below.
Unit
3 bedroom
4 bedroom
Sale Price
Rental rate/Month
Q7.Do you think the proximity of the development toThe Junction Mall has had an
increase on the prices? Yes ( )
No ( )
Q8.If yes in the above please tick by what percentage below.
PERCENTAGE
300%
250%
200%
150%
100%
50%
69
APPENDIX 2: QUESTIONNAIRE TO THE RESIDENTS CLOSE TO THE
JUNCTION MALL
Dear Respondent,
I am a student at the University of Nairobi pursuing a Diploma course in Real
Estate Agency and Property Management.
I am conducting a research project on the impact on increased shopping centre
development on residential market in Nairobi.
Please fill in the blank spaces as honestly as you can. All information provided will
betreated with utmost confidentiality.
NAME……………………………………………………………
GENDER ……………………………………………………
AGE...........
Below 30years (
)
Between 30-40 years (
)
Between 40-50 years (
)
Between 50-60 years (
)
Above 60 years
)
(
Q1. Do you think there has been an increase residential development around The
Junction in the last seven years?
Yes
No
70
If your answer is yes in the above please tick on the table what you think might have
led to this increase.
REASON
Proximity to The Junction
Improved infrastructure
Property boom
Q2. Would you be willing to pay a premium to live close to the Junction?
Yes
No
Q3.If your answer is yes above would you say The Junction contributed to your
current location?................................................................................................
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APPENDIX 3: SECTIONS OF THE JUNCTION MALL
Source: field Survey 2014
72