Nairobi leads the way in the demand for retail space in Kenya

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By Beth Ngugi

The growing number of shopping malls has increased the demand of retail space in the Kenya, Nairobi taking the lead.

The real estate’s sector in Kenya is expected to continue growing on the set of developments such as REIT’s and the entry of institutional developers and financiers to the market.

According to the Cytonn retail report, Regional malls are the most attractive retail market for investments with yields of up to 11.7% and occupancy of 94.0%.

Kilimani and Karen in Nairobi and Mombasa City are the best markets for investing in the retail sector.

Nairobi, Mombasa, Kisumu and Nakuru counties have the largest retail supply with Nairobi having 3.95mn SQFT and additional 1.67mn SQFT set to be completed by 2017 which makes developers focus on Nairobi metropolitan and other counties.

The Kenyan retail market has an average rental yield of 8.7% at an occupancy rate of 82.9% where Mt. Kenya and Nairobi areas surpassing other areas with average rental yields of 10.1% and 10.0%, respectively, while Eldoret area having the lowest rental yields of 6.6%.

The report further states that most consumers prefer to shop in formal retail space as opposed to informal channels owing to product availability and this has led to the increase in development of retail space in the country, with which has a deal pipeline of more than 3.4mn SQFT.

With the positive outlook for the retail market expecting to grow by 20% y/y, retailers are spreading out using strategies such as franchising and increasing branch networks to tap into the market and increase revenues.

Some of the factors driving retail market are growing population, rising middle class and improved technology.

Various shopping sites like Jumia, OLX and Kilimall have risen in the recent years, with the growth supported by technological advancement, expansion of formal financial services, plastic money, comprehensive mobility and use of user incentive schemes thereby attracting large number of visitors.

The retail space in Nairobi has grown at a CAGR of 17% in the last 7 years, reaching about 3.95mn SQFT making it the largest shopping centre in sub Saharan Africa after South Africa.

Satellite towns in Kiambu county have the largest mall supply with a total of 310 000 SQFT of mall space in Juja and Thika areas.

Retail space opportunity was determined using indexing methodology while the survey on consumer behavior was conducted online over a period of four days.

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