Rental prices in malls have remained flat in the past year at $5.1 (Sh510) per square foot a month, as the market starts to see signs of oversupply of space in certain prime locations.
Occupancy levels for established malls remained high at over 90 per cent whereas newly completed retail centres continue to experience low occupancy levels of 45-75 percent.
New malls in Nairobi are struggling for full occupancy, forcing landlords to offer rental discounts to attract tenants.
Property management firm Knight Frank Kenya says in its 2018 second-half report that rental prices in malls have as a result remained flat in the past year at $5.1 (Sh510) per square foot a month, as the market starts to see signs of oversupply of space in certain prime locations.
Service charges have been ranging between Sh44 and Sh59 per square foot, the report says.
Occupancy levels for established malls remained high at over 90 per cent whereas newly completed retail centres continue to experience low occupancy levels of 45-75 percent. This is mainly attributed to the current oversupply and recent openings of various retail centres trading over the review period,” says Knight Frank in the report.
“Various landlords (have) therefore resorted to providing concessions on rentals and other incentives to attract tenants and to increase occupancy levels.”
Footfall in shopping malls over the review period rose, mainly owing to the revival of anchor tenants in the retail centres replacing Nakumatt.
At least nine new retail centres or extensions to existing malls were opened in the second half of last year, each jostling for footfall with rivals in what has raised fears that the retail real estate space in the capital city could become saturated.
Some of the recently opened outlets are Signature Mall in Mlolongo, Waterfront Mall in Karen, Coloho Mall in Machakos, Airport Centre mall in Mombasa and Kiambu Mall.
Others are Westgate Mall Phase II, Diamond Plaza II in Parklands and Rupa Mall in Eldoret.
Looking ahead, Knight Frank says that there are fewer new developments in the pipeline, and that the occupancy of the new outlets should improve.
More international brands are expected to keep eyeing the Kenyan market as well, helping the malls attract tenants.
But rents are unlikely to go up immediately, the firm says, as the market must first clear the oversupply.
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