Nairobi’s increasing mall space has kept retail rent in the high-end shopping centres stagnant over the past two years, according to a survey by Knight Frank.
The Africa Report –released last week– shows that leasing costs for retail space in malls in Nairobi remained unchanged at $48 (Sh4,944) per square metre a month over the past two years. There has been a significant rise in the supply of retail space in Nairobi recently, boosted by the opening of three malls— Two Rivers, The Hub Karen, and Garden City — in the last 2 years.
“The growing population, the rising demands of the middle class has meant that demand for retailing in shopping malls in developing countries in the world has grown exponentially” said Peter Welborn, Knight Frank Africa chairman.
A total of 130,500 square-metres of retail space has been opened in Nairobi in the last 18 months, as retailers seek to tap into the swelling middle class with growing disposable incomes and shopping-mall lifestyle.
“Outside of South Africa, the Kenyan capital Nairobi has the greatest volume of modern retail floor space in sub-Saharan Africa, and it continues to be a development hotspot,” said the survey.
Short term oversupply
However, the stagnation in rents with increasing retail mall space has sparked fears that formal retail space in East Africa’s largest city oversupplied.
‘In some cases, there will be short term over supply, that’s natural. That’s part of any economy in the world” Welborn said.
Uptake of tenancy in malls in Nairobi fell by 45 per cent in 2015, according to Knight Frank. South Africa remains the market leader in retail mall space in Africa with about 23 million square metres of shopping centre floor space.
Tunisia’s capital Tunis, posted the strongest growth in prime retail space rents over the past two years, increasing by 108% to US$26/sqm/month from US$12.5/sqm/month in 2015. Douala (Cameroon) follows with a 66% growth to US$46.5/sqm/month in 2017. Retail rents fell the highest in Antananarivo (Madagascar) since 2015, declining by 57% to US$15/sqm/month.
Nairobi’s best performance was noted in prime industrial space, where rents rose by 11.9% over the last two years to US$4.7/sqm/month, while prime retail rents remained unchanged over the period at US$48/sqm/month, according to the report.