Commercial buildings gap in Rwanda limits entry of global firms

Limited supply of quality commercial buildings in Rwanda has hindered the entry of new global retail brands into the country, making the economy to miss out in creating the much-needed jobs and boost tax revenues.

A number of regional and global retail brands have expressed an interest in opening shop in Rwanda but, for lack of quality space, shelved or postponed their plans.

Those that have struggled for space include Adidas, Woodin, Brioch and Regus. Local and regional brands such as Simba Supermarket and Uchumi Supermarkets have also struggled.

“Lack of quality buildings has been an issue,” said Charles Haba, the managing director of Century Real Estate. “Our economy is growing, therefore it attracts regional and global firms, but finding quality space has been hard.

“Many, for instance Regus, have ended up going to other countries.”

Mr Haba noted that developers are not doing enough to construct good quality buildings in terms of design and functionality.

“Like any young market, developers are taking the market for granted they don’t feel the need to do extra,” he said. “It’s a really big problem.

“There is a big bank coming from Kenya but we can’t find space for them.”

Commercial real estate

The situation has also affected the growth of the commercial real estate market. A single supermarket employs not less than 100 people.

At the rate of $20 (Rwf15,000) per square metre, a building offering 6,000 square metres of quality space fetches $120,000 (Rwf89 million) in rent per month, which local developers could earn from a moderate building.

Much as there is this demand, some completed commercial houses are yet to get tenants, a situation industry experts attribute to the fact that some of them are not attractive enough to high-end retail clients. The buildings are said to be lacking in quality, location and accessibility, which are key elements sought by tenants.

“Generally what happens is, big retailers look out for the quality of the place they want strategic locations…sometimes they actually want you to build for them in a certain location,” said Mr Haba.

Although the trend is slowly changing with the completion of premier commercial buildings in Kigali offering office and commercial space, the economy is still missing out on lucrative investments due to the gap in quality space.

“I don’t think lack of quality buildings is a big challenge today,” said Alphonse Nkurunziza, the City of Kigali’s chief engineer. “When you look around, quality buildings have opened and more are opening soon some have even expressed concerns over whether they will get tenants.”

Industry experts say the City of Kigali has not done enough to emphasise quality of buildings. Although it cannot compel developers to build quality buildings since they could be limited by cost, it can encourage them and introduce incentives to make constructing such buildings attractive.

The recently unveiled M Peace Plaza (Makuza Plaza) seems to be a precursor to more quality commercial houses on the verge of completion. Champion Investment Corporation Complex (CHIC) will be completed by the end of the year while Kigali Heights will be ready by March.

Costly construction materials and high interest rates on loans are among obstacles that local developers face. Lack of ready financing has also affected developers, making some buildings take longer to complete than expected.

SOURCE: THE EAST AFRICAN