Kenya’s Retail Business Witnessed  0.3% Sharp Decline in 2020

Kenya's Retail Business Witnessed  0.3% Sharp Decline in 2020

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Kenya’s retail industry has witnessed a decline of 0.3% and 0.7% points in average rental yields and occupancy rates, respectively, coming in at 6.7% and 76.6%, respectively over the same period last year due to the impact of the Covid-19 pandemic, according to Cytonn Investment’s Retail Sector Report 2020.

“The decline in performance is attributed to a 2.1% drop in rental rates, shifting towards e-commerce which has resulted to reduced demand of physical retail space, and, constrained spending power among consumers due to a tough financial environment attributable to the Coronavirus pandemic,” part of the report reads.

The report themed ‘E-commerce Shaping the Retail Sector’ found out that Nairobi and Mt. Kenya were the best performing regions with average rental yields of 7.7% and 7.5%, respectively.

This was attributed to the relatively high demand for quality retail space demand for space in malls.

On the other hand, rental yields within the Nairobi Metropolitan Area declined by 0.5% points to 7.5% in 2020, from 8.0% in 2019. 

This was driven by a 0.6% points decline in occupancy rates from 75.1% in 2019 to 74.5% in 2020. The decline is mainly attributed to reduced demand for physical retail space with a shift towards e-commerce.

However, Cytonn projects that by 2021, the retail space supply will have grown to over 7.8 mn SQFT, with the expected retail space addition of Britam Mall in Kilimani and the Beacon Mall which is expected to be constructed in the Nairobi CBD area.

According to the report, Kiambu Road, Mombasa Road and Westlands are expected to maintain the highest retail space supply in the Nairobi Metropolitan Area (NMA) recording a market share of 18.0%, 14.0% and 14.0% due to the availability of destination malls. 

Within the Nairobi, Central Business District, the expected development of Beacon Mall will bring approximately 300,000 SQFT and the completion of Britam Mall is expected to add about 140,000 SQFT increasing the market share of the Kilimani area to 7.0% from 5.0%.