Nairobi’s retail property space has become more dynamic over the years. Despite the downfall of two of the country’s biggest retailers; Nakumatt and Uchumi, Nairobi has attained some level of sophistication driven by lifestyle consumers. Furthermore recent mega mall developments like Two Rivers and others have greatly modernized the shopping experience.
According to a market report by Vaal Kenya, most of the retail centres are offering healthy tenant mix incorporating both local and international retailers. Another development is that landlords are now considering revenue-based rent compared to the traditional space-based rent model which dealt a heavy hand on under performing tenants. The move has been necessitated by the changing dynamics of the market where retailers have a wider range of spaces to select from over the past 2 years.
The report says that the segment has witnessed continued demand from both local and international retailers such as Shoprite and Carrefour. Average occupancy by the second half of 2018, stood at 84% across various centres compared to 78% registered by the same period in 2017, a growth attributed to increased confidence from both the retailers and the consumers.
The market supply has been much more than demand, a situation which has seen landlords offering lease terms that are more attractive to the retailers such as pop-up shops with flexible lease tenure, contribution to tenant installation, revenue-based rent calculation.
Last year, the management of Rosslyn Riviera mall offered a major incentive to tenants in a bid to fill the space due to the market glut. The mall agents announced a six-month free plan with only half of the rent due in the following six months for any tenant that would sign up.
Nairobi’s formal retail supply is approximately 530,000m². 2018 registered a lower supply of 24,000m² compared to 118,000m² in 2017 due to the decline of development process attributed to the general election and high cost of financing. With more malls planned in the pipeline, such as the Beacon, and recent completions like the Waterfront Karen, supply is well oiled up.
Runda occupies the largest market share at 19% followed by Thika Road at 18% and Westlands area at 16%. On the retailer side, Tuskys has the largest market share followed by Naivas and Chandarana. This follows the fall of Nakumatt which led to the closing of most of their outlets. The spaces have seen been taken up by other retailers.
Consequently, most landlords are now considering having an anchor tenant or a sub anchor tenant that is not a supermarket for diversification.