The unprecedented mall frenzy witnessed in Kenya between 2013 and 2018 is witnessing a slow, if not expected death. That 5-year period witnessed the sprouting of new malls all around Nairobi and Kiambu County, resulting in an oversupply.
Long before the pandemic hit the country, a report published by Knight Frank in 2018, titled Kenya Market Update, detailed how the new malls in Nairobi and its environs were struggling to attract and retain tenants.
“Some of these malls have been unable to attract enough tenants to fill much of the available space which has seen them resort to desperate measures like giving free space, free parking and low rent to woo clients,” reads an excerpt from the report.
According to the report, a majority of shopping malls in Nairobi and its satellite towns are operating at an average of 45% occupancy.
As an example, back in 2018, Knight Frank turned heads when it listed an advert on behalf of Rosslyn Riviera Mall (Limuru Road).
What got Kenyans talking was the fact that the advert revealed that the mall’s management was offering 6-rent free months to new tenants.
It is important to note that despite the lucrative offer, the mall is yet to reach its optimal occupancy level.
The mall hysteria hit its peak in 2017, only to start on a downward trajectory that has seen malls such as NextGen (located along Mombasa Road) putting up some of its space for sale.
Out of the ten biggest malls in Sub-Saharan Africa, three can be found in Nairobi namely; Two Rivers Mall, Garden City Mall and The Hub.
There are four malls within a 10km radius in Karen, five malls within an hours drive along Thika Road, three malls within a 5km stretch along Limuru Road and countless others that have emerged all around the Kenyan Capital city.
An initial positive response to the emergence of mega-malls can be argued to have duped investors into believing that the Kenyan market was primed and ready to embrace a mall culture.
However, the initial heavy foot-traffic witnessed soon waned forcing some of the malls to invest heavily in services targeting children.
The Two Rivers Mall (Limuru Road) has successfully used this model of creating a fun-filled family experience to maintain stable numbers, in terms of visitors.
Engineering a perfect tenant mix blend has been mooted by industry experts as vital when it comes to survival.
Tenant mix refers to the blend of mall occupants based on a predetermined criteria based on market research.
Ideally, tenants comprise of retailers, service and entertainment providers. They represent the main income source of the mall, as well as serving to attract visitors.
Arguably, the tenant mix is what prompts customers to visit any particular mall and it must fit the targeted income group.
Malls rely heavily on an anchor tenant (usually a major supermarket/retailer) to attract and maintain visitors, as well as other complimentary tenants.
However, over the last 2-3 years, economic realities coupled with a toxic cocktail of both internal and external mismanagement has brought some of Kenya’s leading retailers to their knees.
The publicized collapse of Uchumi supermarket was soon followed by Nakumatt as well as Tusky’s, consequently, malls reliant on either of these retailers as anchor tenants have suffered greatly.
Just to put this into context, Nakumatta had well over 40 stores spread out across the country prior to the beginning of its unexpected collapse at the tail end of 2016.
The tale of Kenyan retailers revealed some of the hard realities and state of this particular sector.
Recently, the country has witnessed the entry of global retail giants such as Carrefour. This has slightly stemmed the fall of some malls in the Kenyan Capital.
Despite the hype linked with Kenya’s growing middle-class, any significant depth and scale of spending power are yet to be recorded on a consistent basis.
Notably, data published by the Kenya National Bureau of Statistics (KNBS) revealed that nearly half of Kenyan households earned less than Ksh 10,800 in 2018.
In order to understand why Kenya’s malls are facing an expected death, it is important to note that most of these malls were set up in the 2015-2017 period.
This was despite the fact that a study conducted by KNBS in 2015-2016, showed that four out of every five Kenyan households did their shopping from kiosks, general stores or open markets.
A report published by the African Development Bank during this period could explain why investors remained bullish and optimistic regarding the potential return from erecting a shopping mall.
The report highlighted the existence of a 300 million-strong middle class with a sizable chunk of disposable income – the study defined the middle class as anyone who spends between Ksh 200 and Ksh2,000 a day.
Currently, the ongoing Covid-19 pandemic has seen the mall’s fortunes dwindle even further as at least 2 million Kenyans are said to have lost their jobs in 2020 alone.
Shopping habits paint a clear picture of Kenyan’s destitution, as millions can no longer afford the luxury goods on sale at most high-end malls.
Recent reports have also revealed that a majority of Kenyans are surviving on credit including expensive mobile loans where some borrow from one digital credit provider to pay another.
In addition, the pandemic and various government measures taken to curb the spread of the virus has led to a rapid growth in the online retail space. This translates to another threat when it comes to in-mall traffic.
It remains to be seen what strategies these malls will employ in a bid to stay afloat during one of Kenya’s toughest economic periods in recent history.