Low uptake of spaces in shopping malls in Nairobi has not slowed down construction of the facilities that have shaped the country’s retail sector.
More malls are still coming up across the country, especially in Nairobi, even as a majority of them have empty spaces.
The new malls are mainly being constructed in suburbs in and out of Nairobi as investor appetite for the premises remain high.
Among the malls under construction is Crystal Rivers in Athi River by leading telecom Safaricom pension fund. The Ksh 43 billion (US$420 million) project will sit on two floors and offer parking for up 1,000 vehicles on its 200,000 square feet space.
Other major malls under development are Laxcon Mall in east of Nairobi, Waterfront Mall in Karen, a leafy suburb, and General Motors Mall, Bellevue Mall and South Fields Mall, being constructed along Mombasa Road.
However, there are other small malls coming up in suburbs like Rongai, Syokimau, Kitengela, Ruiru, Ruaka and Ruai.
“As a developer in Nairobi it seems that if you are not building a mall, then you are not serious. The malls are coming up everywhere even as reports indicate that there are not many tenants willing to occupy the space,” Antony Kuyo, a real estate consultant with Avent Properties, said Wednesday.
Kuyo noted that in Kitengela where he is managing some properties, two malls are coming up 500 metres from the each other while another in the vicinity has some shops unoccupied.
“I think developers are responding to what the market wants, especially consumers most of who, as research has shown, prefer shopping in malls. They believe that in the near future, over half of Kenyans would be shopping in malls,” he said.
That the already built malls are doing not so good is an open secret. Along Mombasa Road, a new mall that has been under construction for the last two years, is currently being spruced up before it is unveiled soon.
According to the developer, the anchor tenant would be a foreign retail chain making inroads in Kenya.
However, the rest of the space is yet to be taken unlike before when businesses would scramble for shops in such facilities.
Some 5 kilometres from the facility on the road that leads to Kenya’s main airport is another that was opened close to a year ago.
A banner on the wall of the mall advertises shops for renting, with the poster being there since the facility was opened.
Not far from the two malls near the central business district is another mall also calling for customers, with a banner prominently hanging on its wall.
There are at least 31 malls in Nairobi alone, with the list comprising only those whose construction is complete.
Nairobi accounts for 73% of the total number of malls built across the the country with the largest mall in the country being Two Rivers with 67,000 square meters in space.
Several real estate firms have indicated that Nairobi and its environs are facing an oversupply of malls, with most tenants taking up space unwilling to commit for long term.
“Many of Nairobi malls have taken much longer to mature than expected, with vacancy rates only reducing below 10 percent after two to three years of operation,” said Gerhard Zeelie, head of real estate finance, Africa Region, at Standard Bank, in a report released this week.
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Most of the malls, according to the report, are recording between 70% and 90% occupancy rates, but tenant turnover is high.
The situation has been blamed on slowdown of economy which has led to less consumer spending.
“It may be just a matter of time before mall construction slows down or even halts. Those who have already constructed are feeling the hit arising from low occupancy and low rent as businesses are not willing to pay premium. With the many malls coming up, rent would go down considerably making investors cut on development,” said Henry Wandera, an economic lecturer in Nairobi.
