Retail Activity in Kenya Softens as Oversupply, Financial Constraints Weighs on Investors and Consumers

David Indeje is Khusoko’s Digital Editor, covering East African markets.
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The decline in performance is
mainly attributed to oversupply and constrained spending power among consumers due to a tough financial environment

Kenya’s retail activity has softened in 2019 as investors consider how the tough financial environment might impact their investment outlook, according to  Cytonn Investment’s annual report on the sector.

In its latest Kenya Retail Sector Report -2019, based on rental yields, occupancy rates, as well as demand and supply.

“In 2019, the sector’s performance in key urban cities softened, recording average rental yields of 7.0%, 1.6% points lower than the 8.6% recorded in 2018,” reads part of the report.

The reduced performance is largely attributed to: rental rates reductions which has declined by 10.6% to Kshs 118 per SQFT in 2019, from Kshs 132 per SQFT in 2018, and increased vacancy rates with average rental yields declining by 1.6% points to 7.0% from 8.6% recorded in 2018 while average occupancy rates fell by 4.7% points to 75.1% from 79.8% recorded in 2018.

The findings are based on research conducted in 8 nodes in the Nairobi Metropolitan Area, as well as key urban cities and regions in Kenya, including North Rift, Coastal Region, Western/Nyanza, and Mt. Kenya.

In the report,  destination malls were the best performing mall typologies recording average rental yields of 9.4% attributable to charging premium rents for the high-quality space, facilities provided, and higher footfall attracted by the presence of international retailers


On the other hand, community malls recorded a decline in occupancy rates from 84.5% in 2018 to 76.1% in 2019 attributed to a large number of community malls opened within the past year.

Nairobi Metropolitan Area leads with the largest market share of retail space at 49.5% with community, destination and neighbourhood malls accounting for 45.0%, 100.0%, and 48.9%, respectively

Besides the firm taking a neutral stance outlook in the sector,  they remain optimistic that its performance will remain cushioned by increased market activity driven by the entry of international retailers into the Kenyan market and the expansion efforts by local retailers such as Naivas and Tuskys as they take advantage of the attractive rental rates.

” The outlook for the sector is neutral and we expect to witness reduced development activity in Nairobi, with developers shifting to county headquarters in some markets such as Kiambu and Mt. Kenya that have retail space demand of 0.8mn and 0.2mn SQFT, respectively.”

David Indeje is Khusoko’s Digital Editor, covering East African markets.

In my role as Community Engagement Editor For Khusoko, I care about our audience. engaging them, getting news delivered to them across a variety of platforms, and expanding the diversity of voices on our website.

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