The retail sector in Kenya has been going through turbulent times according to a report released by Cytonn Investments that looked at the retail sector in Kenya.
According to the report, the retail sector in Kenya is being faced with a tough operating environment that is characterized by low credit as well as the wait and see attitude that has been adopted by investors as a result of the 2017 general elections and the uncertainties surrounding the outcomes.
The reports points out that the retail sector in Kenya experienced an increased supply of retail space, which grew by 41.6 percent on a year-to-year basis in Nairobi alone from 3.9 million SQFT in 2016 to 5.6 million SQFT in 2017, and is expected to grow further by a 3-year CAGR of 7.3 percent to 6.9 million SQFT in 2020. The significant 41.6 percent growth is mainly due to bullish outlook by developers on the retail sector leading to the development of malls such as Two Rivers which opened in February 2017.
Other challenges attributed to the dismal performance in the retail sector in Kenya include increased competition with new entrants such as Carrefour and Choppies, and internal challenges facing retailers on financing and supply chain management, especially Nakumatt and Uchumi.
The above challenges, according to Cytonn Investments Limited, have led to a decline in performance of the sector with average rents declining by 9.0 percent countrywide from an average of 154.9 shillings per SQFT in 2016 to 141.0 shillings per SQFT in 2017 and occupancy decline of 2.7 percent points from 82.9 percent to 80.2 percent resulting in an 0.4 percent points decline in yields from 8.7 percent in 2016 to 8.3 percent in 2017 for the entire the country and 0.4 percent points decline for Nairobi from 10.0 percent in 2016 to 9.6 percent in 2017.