Rents for retail stores continue to drop as tough economic times persist

Rents for retail stores continue to drop as tough economic times persist

March 2, 2020 0 By mykenyancareers
WESTGATE SHOPPING MALL - Rents for retail stores continue to drop as tough economic times persist
The finding has attributed the drop to an oversupply of retail space in certain locations and reduced consumer spending due to the current economic climate/FILE

NAIROBI, Kenya, Mar 2 – Rents for prime retail stores in the country decreased by 4.2 percent in the second half of 2019 to Sh466.44 per square foot per month, a research by Knight Frank has found.  

The finding has attributed the drop to an oversupply of retail space in certain locations and reduced consumer spending due to the current economic climate. Kenya’s economy is currently on a slowdown, with World Bank lowering her growth prediction for the year to 5.6 percent from 2019’s 5.8 percent. 

These factors have resulted in the retail sector remaining a tenants’ market, with landlords having to increasingly make concessions to compete with other retail centres for occupiers. 

According to the research, occupancy levels for retail averaged 77 percent, with the more established malls recording higher occupancy levels of over 90 percent.  

Footfall for most retail centres in Nairobi decreased over the review period due to competition amongst the increased number of malls, reduced consumer spending power and growth of e-commerce. 

Major retail developments in the pipeline include Comesa Mall in Eastleigh (280,000 sq ft) and Phase III of City Mall in Nyali (50,000 sq ft).  

There was also a notable decrease in the number of shopping centre developments opening in Nairobi and its environs over the period.  

Local and international supermarket chains continued to make strategic moves, expanding their local presence and establishing a stronger footing in the retail market.  

  • Recent developments in the retail sector  

In July, South African retailer Game opened its third outlet at Kisumu’s Mega City Mall.  

In August, local supermarket chain Tuskys opened a branch at Oasis Mall in Malindi, replacing Nakumatt as the anchor tenant.  

The retailer also announced plans to partner with small local retailers in Kenya and Uganda by 2024 through franchising and consolidation so as to gain a greater market share. It currently has a pilot franchise ongoing in Buru Buru Estate.  

Additionally, it has struck a deal with Vivo Energy to open express outlets within the Shell Petrol Stations. In the same month, South African retailer Shoprite Holdings borrowed Sh571 million from Stanbic Bank Kenya for its local expansion.  

The retailer opened two new stores: at Waterfront Shopping Centre in Karen and City Mall in Nyali.  

In September, Sokoni Retail Kenya became the majority stakeholder of Quickmart Supermarkets following the merger of Quickmart and Tumaini supermarkets. Tumaini supermarkets will, following its acquisition, now trade under the Quickmart brand name. 

The retailer opened its second 24-hour supermarket in Westlands in August and another branch in Ongata Rongai in November. 

Quickmart is expected to open another five stores in 2020, including its third 24-hour outlet in Hurlingham. 

In October, Chandarana Supermarket opened at Ridgeways Mall as the anchor tenant, whilst House of Leather & Gifts also opened its latest branch at Ridgeways Mall in December as the sub-anchor. 

Over the review period, current and new tenants continued to move into the new phases of established malls, extending a trend that has become prominent in the retail segment. 

In October and November respectively, fashion retailer Woolworths and Text Book Centre opened their flagship stores at Sarit Centre Phase III.  

Woolworths took up circa 23,000 sq ft, while Text Book Centre took up 20,000 sq ft. During the second half of 2019, several international brands opened stores across Nairobi.  

American sports and footwear retailer Nike opened a store at Westgate Mall in Westlands, while Turkish footwear and accessories store Flo opened at The Hub in Karen.