Wednesday, 05 April 2017 13:30

Kenya’s changing retail landscape

Written by
Rate this item
(0 votes)

Over the last two years, Kenya’s retail market has seen the opening of new shopping centres countrywide taking the retail GLA across the country to just over 760,000m2.

Fairview_Plaza

In spite of this, developers continue to add more retail with an estimated 135,985m2 of space to be added to the market in 2017 in Nairobi, according to Broll Kenya Market Report H1 2017.

Gordon Bell, Director and Head of East Africa Operations for Broll Property Group says: “The opening of Garden City in Kasarani in mid- 2015, The Hub in Karen in February 2016 and now Two Rivers which opened in February 2017 have added an additional 120,000m2 of prime retail space in less than 20 months.”

Data from the Broll Kenya Market Report H1 2017 shows that as of Q4 2016, established centres continued to have occupancy levels in excess of 90% while newer centres averaged below that. However, occupancies vary depending on their letting strategy, particularly those that are not simply chasing the optics of occupancy but at a deep underlying discount.

Retail rentals continue to vary from centre to centre, but average achieved rentals range between KSh300/ft² ($31/m²) and KSh350/ft² ($37/m²) excluding VAT and service charges on sub 200m2 shops.

Bell explains that Nairobi is faced with a fairly limited tenant base for medium-size premises. Where traditionally tenants competed for prime retail space, the converse is now true in Nairobi with landlords now competing for tenants and some really aggressive offerings in the market.

“Ultimately, landlords want tenants who can do the most business. The result is numerous international brands are now entering the market and local retailers feel the need to expand their number of outlets in spite of the pressures on their financial and management structures,” he says.

If we look at global retail trends, there is continuing debate about online shopping versus physical storefronts and changing consumer habits, says Bell.

He points out that while online shopping is becoming an additional retail offering for many brands, physical stores remain very relevant, particularly in Kenya where we continue to see the opening of new malls. Consumers see retail centres as more than just a shopping destination but also as a place for dining, entertainment and socialising.

Globally, the business of retail has become harder as a result of enhanced technology and the introduction of omnichannel which include retail stores, online stores, mobile stores, mobile app stores, telephone sales and other transaction methods retailers use to engage with customers.

Bell notes that even seasoned investors such as Warren Buffet, CEO of Berkshire Hathaway pointed to the tough and changing retail environment. In a media interview following the recent sale of the company’s 90% of its Walmart stake he said: “retailing is very tough and the online thing is very tough to figure out”.

According to the Broll Shopper Segmentation Vol 1: 2016,  Kenyan consumers regularly frequent  markets, informal and high street retail outlets, proof that a physical store is still relevant to many shoppers.

“Across East Africa, we are seeing an emerging trend of smaller strip malls measuring  approximately 10,000m2  where more favourable cost structures and the convenience aspect may better suit the much needed “up and coming retailers,” says Bell.

He adds that this would seem to indicate that as Kenyans shopping habits transition, and the economic growth continues, the value of  underlying spending power will be unlocked and become more fully reflected in the retail market. 

Last modified on Thursday, 06 April 2017 14:32

Most Popular

Getting into the buy-to-rent market without risking everything

May 03, 2017
Garry Palmer
A low growth economy and a rising cost of living has given property investors pause for…

Eris Property Group announces R1, 5 Billion new development in Umgeni, Durban

May 17, 2017
Umgeni Deco and Lifestyle Park Durban
Umgeni Deco & Lifestyle Park, Durban’s prime destination centered for success. 

Attacq appoints Jackie van Niekerk as Chief Operating Officer

May 05, 2017
Jackie van Niekerk md
Attacq announces the appointment of Jackie van Niekerk as the JSE listed capital growth…

Fourleaf Estate in PE is Africa's first residential development to receive full EDGE certification

May 05, 2017
Fourleaf Estate pic
The Green Building Council South Africa (GBCSA) has announced that the Fourleaf Estate…

Midrand residential property market continues to boil - Gauteng¹s fastest growing centre continues to attract investment

May 11, 2017
Waterfall Country Estate R9 95million
While house price growth in Gauteng has shown tentative signs of recovery in the last 12…