Kisumu, Meru, Eldoret reap big from Nairobi’s mall oversupply

Office and retail space developers are shunning Nairobi for secondary cities as rents stagnate in the capital, says a new report by Knight Frank.

Knight Frank Kenya Managing Director Ben Woodhams, however, said Nairobi remains the regional hub for international investors.

According to Woodhams, Nairobi has experienced increased supply of retail space, forcing most of the developers to look for alternative markets in secondary cities around the country where demand still surpasses supply.

“Property developers are now looking ... outside Nairobi. This is due to the fact that rental levels have stagnated after too many malls alongside other commercial buildings opened in 2016,” said Woodhams.

The survey pointed out that the shift by investors to secondary cities was also as a result of a decline in supply of Grade A offices coupled with the fact that many multinationals are downsizing their operations in Kenya (oil exploration companies who made an entry into the Kenya market some years back, for instance, have left the country).

Grade a offices

“Nairobi experienced a constant demand inflow of Grade A offices, especially in areas like Westlands, when most of the oil companies who were doing explorations chose the country as their regional headquarters. However, some of these companies have left, creating too much office space in the city,” he said.

According to the survey, shift to the secondary cities like Kisumu, Eldoret, Nakuru, Mombasa and Meru where a number of malls have been developed has been as a result of government agencies, which were the major takers of the space, devolving their functions to counties.

Nairobi’s existing mall space is 391,000 square metres. The main malls include The Junction, Sarit Centre, Thika Road Mall, The Hub in Karen and Garden City.

Already, this ranks the city as the largest retail market in the region by existing shopping centre floor space. The soon-to-be opened iconic Two Rivers Mall in Runda will provide additional 700,000 square feet of office space.