Kenya retail sector second most formalised in Africa on middle class growth

The boom in shopping mall construction and higher incomes have made Kenya’s retail sector the second most formalised in Africa.

Global consultancy Oxford Business Group (OBG) said Kenya’s formal retail sector accounts for between 30 and 40 per cent of the market, behind South Africa which has a penetration rate of 60 per cent.

OBG added that since 2011 Kenya has recorded the fastest growth in average consumer spending on the continent.

“Over the past five years, OBG reports, the average value of consumer spending has risen by as much as 67 per cent, making Kenya Africa’s fastest-growing retail market - led by large blue-chip domestic companies in a number of segments - which will continue to expand and diversify as more international brands enter the marketplace,” said OBG’s in a statement.

Developers have in turn been releasing retail space to the market, a factor that had led Nairobi to be labelled as the hottest retail property market, according to recent research by property consultants Knight Frank.

“Among the cities covered by this report, Nairobi stands out as a major focus for shopping centre development. It is ranked as the largest market by existing shopping centre floor space and it has the biggest development pipeline,” said the Shop Africa 2016 report by Knight Frank.

Nairobi will be home to Two Rivers mixed development, the largest shopping mall in East and Central Africa, that is coming up in the Runda suburb and is expected to open its doors by the end of the year.

READ: Kenya seen as Africa's fastest-growing retail market

On completion Centum Investment’s Two Rivers will dethrone Thika Road-based Garden City which is currently the largest shopping mall.
The Hub in Karen, Nairobi and Rosslyn Riviera (Runda) are other major malls under construction.

Lamudi, an online real estate platform, also said that Nairobi’s retail and office space sectors will be the main drivers for the city’s real estate growth this year.

OBG expects that devolution will catalyse mall development in the counties as funds trickle to these areas.

“While much of Kenya’s formal retail capacity is concentrated in central Nairobi and the port city of Mombasa, there has been growing development of formal space in cities such as Kisumu and Eldoret in recent years, with potential for even wider diversification in the future.

“This is being driven in large part by the devolution process, which has led to higher incomes in counties outside the capital, and consequently to a significant increase in investor interest in developing retail centres in these areas,” said OBG.

Kisumu, Meru and Eldoret towns are already attracting shopping mall developers.

Buffalo Mall Developments, which put up the Buffalo Mall in Naivasha, Nakuru County, is also going to develop a mall in Eldoret town.
State corporation Lake Basin Development Authority is behind the Sh2.5 billion Lake Basin Mall in Kisumu County.