A Look At Retail Market Performance in Key Urban Centers in Kenya: Nairobi Remains Oversupplied

Cytonn Investments has released the retail sector report for 2018 focusing on major urban centers in Kenya where the sector registered a positive trajectory.

Unlike in Nairobi, where the performance softened as a result of an oversupply, in key urban cities in Kenya, the retail sector performance improved, recording a 0.3 percent points y/y increase in average yields to 8.6 percent in 2018 from 8.3 percent in 2017.

The occupancy rates increased by 5.8 percentage points y/y to 86.0 percent in 2018 from 80.2 percent in 2017. The better performance is attributable to the recovery of the market from the tough economic environment in 2017 characterized by prolonged electioneering and reduced credit to the private sector, with private credit growth reducing from a five-year average of 14.0 to 4.3 percent as at June 2018.

Mt. Kenya and Kisumu were the best performing regions, with average yields of 9.9 percent and 9.7 percent respectively.

Mt. Kenya performance is attributable to a 4.5 percent points y/y increase in occupancy rates due to low supply of retail space, accounting for 9.6 percent of the market share

The Kisumu performance is driven by high occupancy rates of 88.0, percent, a 2.0 percent points above market average at 86.0 percent driven by increased retail business to serve the increasing urban population at 52.0 percent of the population compared to country average at 26.5 percent.

Nakuru was the worst performing region with a rental yield of 6.9 percent, which is due to low rental rates charged within that market of an average 83.3 shillings per SQFT, 38.0 percent lower than the market average of 134.3 shillings per SQFT, as a result of competition from mixed-use developments (MUDs) that are older in the market.

This is how the regions ranked in retail performance according to Cytonn:

1. Mouth Kenya
2. Kisumu
3. Nairobi
4. Mombasa
5. Eldoret
6. Nakuru