Investor’s Perspective on Kenya’s Retail Space -#CytonnReport

The retail market in Kenya, following increased supply in Nairobi, is expanding to the counties. In Kenya’s attractive real estate sector, where total returns remain very attractive at about 25.0% p.a. over the last 5 years, the retail market has also benefited and grown.

According to the Cytonn Report on retail space released today, expansion over the years in the retail market has been driven by

1. GDP growth, which is has averaged 5.5% over the last five years and we forecast a 5.8% growth for this year,
2. Rising middle class,
3. Increased purchasing power of the middle-class,
4. Shifting consumer habits that have driven the development of new shopping malls, as Kenyans more increasingly visit formal retail centres.

Increased supply in Nairobi County has led to developers focusing on the Nairobi Metropolitan and other counties, and increased development has been recorded in satellite towns in Kiambu, Kajiado and Machakos counties. With an average yield of 10.0%, and occupancy of 89.3%, Nairobi Metropolitan Area still remains one of the most attractive investment destinations for retail real estate.

Read: Investing in Nairobi Real Estate -Report

According to the retail space report released by Cytonn Investments, there are still attractive regions to invest in the retail sector, and Karen has the best return with a yield of 12.5%. Karen and Westlands have the highest rental yields at 12.5% and 12.3%, respectively, while Mombasa Road and Eastland’s have the least yields of 8.2% and 7.5%, respectively. The high yields in Karen can be attributed to high occupancy rates, and the second highest rents in the Nairobi Metropolitan Area, with malls charging a premium for location and spending power of residents.

The Nairobi metropolitan area registered high returns of rental yield 10.0% at 89.3% occupancy levels, compared to residential space at a rental yield of 6.0% and 85.0% occupancy while the Mount Kenya and Nairobi regions have the highest yields while the rest of the regions are slowly gaining traction.