A few years ago, securing a shop in Nairobi’s central business district (CBD) was akin to striking gold. A prime location meant steady foot traffic, visibility, and the potential for growth for any type of business, whether you sold electronics, clothing, shoes, or household goods.
Back then, traders were willing to pay a goodwill fee of up to Sh10 million, which is a one-time upfront payment that tenants make to secure retail space for several years.
The idea behind it is simple, and the concept is as follows. A shop facing Tom Mboya Street or Accra Road attracts foot traffic automatically because these are well-known streets where people have shopped for decades.
Customers know these areas, trust them and visit them regularly when they need to buy something. Landlords capture this value through goodwill fees, essentially charging tenants for the privilege of being in a well-known location.
For many years, this arrangement worked well, as established traders could afford the goodwill because they had existing customers and proven business models.
Today, however, property agents are witnessing a shift. Goodwill still exists, but it is no longer the automatic requirement it once was. This shift is in a bid to attract tenants to the many empty commercial spaces across Nairobi.
“In the early 2000s and up to the pre-Covid period, goodwill was standard for most commercial spaces, especially on ground floors. Prime streets like Tom Mboya Street and Moi Avenue attracted the highest rates. In those areas, sizeable shops would attract goodwill of up to Sh12 million,” observes Justin Mwangi, Head of Commercial Agency at Lloyd Masika.
“After the pandemic, even in those prime areas, if someone is getting goodwill, it may be in the range of Sh2 million to Sh3 million,” he juxtaposes.
He adds that streets such as Moktar Daddah now have vacant shops that require no goodwill. Before the pandemic, the same spaces would demand goodwill of up to Sh3 million.
“Finding tenants for shops is now challenging,” he says.
Behind the decline
The decline is not driven by a single factor. Justin points to a combination of reduced spending power and changing customer habits. In downtown areas, foot traffic remains high. However, visibility alone is no longer enough.
“Do these people have the purchasing power, despite the foot traffic?” He poses. “If not, then even if there is traffic, you will not get the desired result.”
Historically, he explains, businesses that paid the highest premiums were electronics dealers or traders seeking a strong presence in the city centre. Spaces were often allocated to whoever was willing to pay the highest premium. That competitive pressure has eased.
Additionally, real estate agents have observed that one of the biggest shifts in the property sector has come from the way businesses now operate.
“More than 50 percent of people are taking just a small space,” says Justin, adding, “Because they are selling more online.”
Instead of large showrooms, many traders now prefer a small office or basement storage space. Marketing happens online, and goods are either delivered or collected by customers.
This change has directly affected the demand for large, highly visible retail spaces, as well as the willingness to pay high premiums. “Nobody is willing to take on a very big commercial space,” he explains.
He adds that malls which were once fully occupied now have occupancy rates of around 60 percent to 70 percent, with some far below that level. Many of the spaces vacated during the pandemic, he observes, remain empty.
“Even traditional high-demand locations such as Moi Avenue, River Road, Nyamakima and Kamukunji have seen goodwill rates drop sharply. Buildings such as the Ambassadeur Hotel, where ground-floor spaces once attracted up to Sh15 million, now see outgoing tenants negotiating goodwill of around Sh2 to 3 million,” Justin points out.
The CBD exodus
At the same time, some businesses are leaving the CBD altogether.
Justin notes that congestion and limited parking spaces have driven both traders and shoppers toward peri-urban commercial like Westlands, Upper Hill and Parklands.
Large shopping centres, such as Sarit Centre, Two Rivers, TRM and The Hub, have emerged as alternative business hubs.
“Anyone who drives will tend to avoid the CBD because of parking and congestion,” he says. “As a result, the customers in the CBD are increasingly those who commute using public transport, while shoppers who own cars prefer suburban malls,” he adds.
James Odenyi, a property consultant at Ryden International, has observed a similar pattern.
“Most businesses are moving to safer, leafy suburban areas such as Upper Hill, Kilimani and parts of Lavington,” says James.
Ground-floor spaces in many buildings still attract goodwill charges, and restaurants remain among the businesses most likely to pay higher amounts, but this is negotiable, unlike in the past.
“Pricing now depends on the street, the building, and the nature of the business. An oversupply of office and retail space has also shifted bargaining power toward tenants,” says James.
However, he adds that newer commercial buildings often charge higher rents than older ones, partly because developers are looking to recoup their investment. There is also a perception among customers that new buildings offer a better experience, drawing curiosity and footfall.
“Older buildings whose owners have already recouped construction costs tend to be more flexible in their pricing,” he adds.
New uses for space
A building under construction on Moi Avenue in Nairobi, with a banner showing shop prices from Sh30,000, photographed on February 18, 2026.
Photo credit: Bonface Bogita | Nation Media Group
Despite the rise of e-commerce, physical space has not become irrelevant. Many online sellers still have a small location where customers can verify the business, collect items or make payments.
“It’s not just online businesses affecting physical shops,” he says. “People still prefer a physical location so they can trust the business.”
Faith Kahunyo, a trader at Simara Mall, is living the reality described by Justin and James. Her shop is on the seventh floor because she couldn't afford to pay at least Sh1.5 million in goodwill fees charged for ground-floor spaces in her building.
She pays just Sh30,000 per month for the space, sells her products online, and rents shelves to other online business owners.
“Renting a shelf cost just Sh1,000 per month.” The space just serves as a collection point where customers can pick their orders and browse her merchandise in person.
Simara Mall is a new building located at the junction of Accra Road and Tom Mboya Street. Its occupancy is almost 85 percent, making it one of the more successful commercial properties in an increasingly challenging market.
According to Abdullahi Yusuf from the building's management, shops on the ground floor attract significantly more customers than those on higher levels.
Ground floor shop rent ranges from Sh50,000 to Sh100,000, depending on size. Goodwill for the ground floor ranges from Sh1.5 million to Sh3 million, charged for a period of five years and three months.
“If a tenant leaves before the agreed period ends, the remaining balance can be refunded,” explains Abdullahi.
As one moves up the building's floors, the costs reduce significantly. From the third floor upwards, rent ranges from Sh35,000 to Sh70,000 — nearly half of what ground floor tenants pay.
At Platinum Plaza on Tom Mboya Street, the pattern is similar. Monthly rent ranges from Sh55,000 to Sh65,000. Tenants pay a one-off legal fee of Sh15,000, plus a service charge of Sh65,000 that covers building maintenance, security and cleaning. Goodwill for ground-floor spaces ranges from Sh400,000 to Sh600,000, depending on the shop's position and size.
The growing resistance
However, the concept of goodwill is facing growing resistance.
“Unlike in the past, many of the tenants or shop owners are rejecting the idea of goodwill,” notes the building management.
Here, goodwill is not refundable when a tenant leaves, meaning that if a business fails or the tenant decides to relocate, they lose that entire investment.
At Superior Centre, the cost of goodwill for the ground and first floors can reach Sh3 million for a five-year-and-three-month period, with service charges roughly equivalent to the monthly rent, effectively doubling tenants' monthly payments.
In areas such as Kamukunji in downtown Nairobi, a traditional hub for wholesale and retail trade, goodwill in newer buildings ranges from Sh3 million to Sh3.5 million for ground floors and around Sh500,000 for the first floor. Yet even these spaces struggle to find tenants.
As physical retail becomes too expensive, many traders are shifting online. Products are displayed on Instagram and Facebook pages, orders are confirmed on WhatsApp, and sales are made through TikTok Live streams at any time of day or night. If they exist at all, physical stores have been reduced to pick up points or storage facilities.
The exception
However, not everyone has abandoned the traditional model. Mesh Raphael, a shoe wholesaler in Kamukunji who has been operating since 2019, believes that maintaining a physical shop still makes sense.
He paid Sh1.2 million for a strategically located space. “With my business, I need a lot of space for packing shoes for my customers,” he explains.
His monthly rent is Sh150,000, including other charges. “Many customers don't want to walk far, so they prefer shops that are nearby,” he adds.
Mesh represents businesses that deal in bulk goods or serve customers who need to examine products in person before buying them. However, these are becoming the exception.
