Tough economic times and increased completion of malls saw rental yield fall by a record 10.2 percent with occupancy rates in existing properties declining by 4.8 percent.
Realtor Cytonn Investments quarter three Retail Sector Report 2019 says Westlands experienced the largest drop in performance with a 7.1 percent fall in rental charges.
The charges dropped to Sh203.60 per square feet in 2019 from last year’s Sh219.20 for the same space.
“The decline is mainly attributed to an increase in retail space supply of 0.8 million square feet within the past year with the addition of malls such as Waterfront, The Well, Mountain View and the expansion of Westgate and Sarit Centre,” says the report.
Westlands, added the report, experienced the biggest drop in performance in rental yields from last year’s 12.2 percent to 9.2 percent.
This saw landlords reduce rent to retain tenants as well as attract new ones via a six-month grace period where space was leased out at no advance cost on goodwill and rental prepayments.
Kilimani enjoyed high patronage at a 9.9 percent rental yield due to its attractive rent per square feet price of Sh170.4, improved roads network and increased residential investments that attracted high-end clients among them expatriates working in embassies and non-governmental organisations.
Retail space in satellite towns was the worst performing at six percent rental yield blamed on fierce competition from the traditional shops and kiosks.
Property owners charged Sh131.40 per square feet, 28.3 percent lower than the market average of Sh168.60.
The retail sector is increasingly becoming attractive to both local and foreign investors eyeing new revenue streams from Kenyans who now prefer to reside in mostly urban communities.