The Mall Game is Beyond Bloody
Real Estate, Real Estate investments Zambia (REIZ), Retail

When Hyprop Investments Limited bought Manda Hill in 2013,they believed they had landed themselves a gem. With two anchor stores in Game and Shoprite, Manda Hill was the quintessential mall of choice for any retailer who wanted to tap into the gold of the 40,561 sq meters on offer. With 109 stores and 1434 parking bays, Lusaka is well catered for.

However, something happened. Taking a 5 minute drive away on Great East road was East park mall entering the mall game. Their aggressive move into the game was clear. With the exit of Fresh view, Chicago’s and Harelequins among others, it is clear there must have been a better offering away from Manda Hill. However, one would argue that if a management team believes that their product is superior and that switching costs to competitors are very high, the expectation is that tenants in this case would stay. Therefore,a management team must look at the external forces that would lead customers to choosing their competitors over them.

Factors that often influence decisions to switch from one product to the next is price elasticity of demand. However, when the product is inelastic, consumers are not keen to switch unless their hand is forced. We believe the external hand of inflation and fluctuating exchange rates over the last 2 years has had the unenviable impact of making companies pricing strategies undesirable.

Therefore, despite the macro factors, any player enter the mall game as second mover would mean they enter the game not to lose. They will take time to study the forces of competition. They will ensure they bring a product offering that is irresistible. They will also increase the plethora of offerings (that goat store is a classic).They will purse differentiation because coming in lower that their competitors will not only destroy value but will make paying of the debt for construction more difficult.

It is clear that the mall game is bloody. However, we believe that players in this game who will emerge on top will need rethink their strategies for these immovable assets. It is not all about location location location!! It is about the offering. REIZ has signaled expansion of Arcades. That is a sign that they know they will have to make the necessary investments to ensure they maintain their position as cost leaders in the real estate industry. Based on their 2016 AR, we expect a beautiful offering. It is now your move Manda Hill. What will you do?

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