Kenya’s Retail Sector Improves Slightly in H1’2021 

Kenya’s retail sector is experiencing increased investor favour and returning to pre-pandemic levels due to the gradual reopening of the economy. 

This is based on the sector’s performance in H1 ‘2021 which witnessed a slight improvement of 0.1 per cent rental yield to 7.6 per cent from 7.5 per cent in FY’ 2020 attributed to increased market activities in the retail front according to Cytonn Investments.

“The average occupancies and asking rents also recorded an improvement in performance by 0.7% points and 0.3% points from 75.2% and Kshs 168.6 per SQFT in FY’2020 to 75.7% and Kshs 169.1 per SQ FT respectively in H1′ 2021,” Cytonn says.

The general improvement in the performance of the sector was attributed to the aggressive expansion of local and international retailers such as Naivas supermarkets and Carrefour taking up space previously occupied by troubled retailers.

“Despite the numerous expansion activities by local and international retailers witnessed during the quarter which have continued to support the growth of the retail sector, there are still various factors impeding its performance such as the shift to online shopping causing occupancy rates decline, the existing oversupply at 2.0mn SQFT in the Kenyan retail market and 3.1mn SQFT in NMA, as well as the tough economic condition causing space uptake decline,” Cytonn notes.

In terms of the submarket performance, Westlands and Karen were the best performing nodes recording average rental yields of 9.7 per cent and 9.5 per cent respectively compared to the overall market average of 7.6 per cent in H1’2021. 

The performance is attributed to the presence of affluent residents who have a high consumer purchasing power with the areas hosting high-end income earners, relatively good infrastructure, and relatively high occupancy rates of above 80.0 per cent against the market average of 75.7 per cent. 

Eastlands recorded the lowest yields of 5.8 per cent against the average market rates of 7.6 per cent, attributed to low rental charges of Kshs 136 per SQFT against a market average of Kshs 169 per SQFT, competition from informal retail spaces, and constrained consumer purchasing power.