Britam managers say too many malls have been put up in Nairobi

The shopping mall sector has been hit by a glut that has reduced options for investors in the real estate business, Britam Asset Managers.

The firm’s real-estate tracker shows there is an oversupply in all types of retail space in Nairobi and for big malls countrywide.

“Beyond the Two Rivers Mall expected to open by the end of this year, no further retail space will be required in Nairobi, as there will be oversupply,” Britam Asset Managers CEO Kenneth Kaniu said at the East Africa Property Investment Summit on Wednesday.

Britam Asset Managers says investment opportunities have, meanwhile, shifted to the counties, industrial and residential real estate.

“In areas like Naivasha, Kisumu, Nakuru, Nanyuki and Mombasa, there is a lot of opportunity for malls that range from 1,000 to 10,000 square feet,” Mr Kaniu said.

MML, in its first ever Industrial Market Report, said that while the industrial sector has not attracted institutional or overseas investment, there was speculation that it would offer the new frontier for growth.

Last year, the Nairobi county government issued record levels of planning approvals for multi-unit, developer-led industrial/warehouse developments, at 280,000m², the majority of which is expected to be delivered in the next two years.

The industrial market in Nairobi absorbs around Sh3 billion a year in investments — excluding land costs — compared to Sh20 billion that goes into commercial office sector.

“The industrial market has changed markedly in the last three years, previously, almost all industrial premises and warehousing were owner-occupied, but this year, two thirds of the completions will be for sale or lease,” said MML chief executive James Hoddell.

MML reported that Embakasi in Nairobi currently tops in the supply of warehouses for lease or sale, with Industrial Area leading in owner-occupied warehouses.

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However, in 2015, warehouse take-up was as high in Kiambu County and Mavoko sub-county as in Nairobi, with land being cheaper in the city’s outer perimeters currently benefiting from improved accessibility to the airport as a result of new infrastructure.

This comes as several indexes show the glut has also hit apartments and office space that rode on Kenya’s construction boom over the last decade.

According to a report by HassConsult, rental prices in Nairobi recorded a drop in the final quarter of 2015 caused by an oversupply of apartments and falling demand.

Cytonn Investment Management in its Nairobi commercial office market report said commercial office space in Nairobi could be headed for a glut after 5.4 million square feet of office space was completed in 2015 compared to 3.4 million square feet in 2014.

In 2014, Managers and Mentor Management Limited (MML) predicted that by the end of 2016, there will be over 2.8 million square feet of office space, or 19 per cent of the total stock of new buildings delivered since 2009, lying vacant.