Glut in Kisumu malls temporary – investors

Friday, August 30th, 2019 00:00 |
Kisumu’s multi-billion Lake Basin mall located on the Kisumu-Kakamega highway. Photo/PD/DANNEL OGENDO

The mall-building spree in Kisumu town has resulted in a market surplus of retail space, which is good news for retailers in the fast-growing city as rents either stagnate or fall.  

Unfortunately for investors, the new malls and expansion of old ones has spiked competition for tenants, creating a crisis. The supply of space exceeds demand, translating into low  tenancy levels, with some malls registering as low as 40 per cent occupancy.

Despite the glut, property developers are foreseeing a bright future for the new Kisumu shopping malls despite concerns by investors over lack of tenants. Suku Sherwin, an administrator at Shiloah Investment who owns several properties in the town, says regardless of market saturation, there are opportunities for more malls. “This is a service city to the larger Nyanza, Western and parts of Rift Valley regions, making it a natural hub for shopping malls,” urges Sherwin. 

He warns prospective investors targeting shopping complexes to pay attention to the quality of services they want to offer for them to survive in a competitive market. “The town is absolutely ripe for shopping complexes since this is a readily available market, but quality and good customer relations are a key driving force in the property sector,” he adds.

West Kenya Real Estate managing director Benard Onyango advises developers to come up with stylish ways to attract and retain business. He says supermarkets, learning institutions and banks should be key targets. “The changing dynamics in the shopping malls means that developers have to be more careful. They should not just target single players as a driving factor in the business,” he says.

He urges that opportunities for mall developments lie in the outskirts of the town such as around Kisumu International Airport, which are at vantage points to accommodate such projects. “Strategic location is a key factor for the malls to flourish,” he adds.

 International brands

The town has over the recent years experienced an increase in malls, which have since doubled following the entrance of new players in real estate business.

Years back, Mega Plaza, United Mall and Swan Centre were the prominent commercial properties. However, new developments have gradually sprung up. These include Tuffoam, which is being extended by five floors, West End, Mini Mall and the new Lake Basin Mall. 

Another mega commercial building under construction in the city centre is Unique Mall. Though still under construction, Tuffoam Mall, owned by the Tuff Foam Mattresses Company, has attracted tenants such as Safaricom, Bata, Masinde Muliro University, Standard Chartered Bank, media houses and insurance companies.

According to Cytonn’s 2018 Kenya Retail Sector Report, the Kisumu retail space market is oversupplied by at least 200,000 square feet – with additional space coming up in the city. The commercial retail sector had rental yields of 9.4 per cent at an average occupancy of 78.3 per cent.  

“We remain neutral over the sector given the increased supply of malls translating to 149 SQM per 1,000 urban persons compared to other counties such as Nairobi with 145 SQM per 1,000 urban persons and Kiambu at 45 SQM per 1,000 persons,” Cytonn said.

Consequently, a section of shopping mall owners in the town are struggling to attract and retain tenants due to a glut of space. For instance, the Sh4.2 billion Lake Basin Mall completed in 2017 is yet to get an anchor tenant. The shopping complex is the largest in Western Kenya. 

Owned by Lake Basin Development Authority (LBDA), the controversial mall is struggling to get full occupancy nearly two years after its completion. Currently, the mall has less than 40 per cent tenancy despite its strategic location along the Kisumu-Kakamega highway. It has no anchor after Game Stores declined.

 The five-floor building has space to host 140 shops, a three-star hotel, showrooms, a doctor’s plaza, recreational park and a tyre centre. A spot check by Boma established that a sizeable space in other malls in the town also lies vacant and the owners are luring tenants to come on board.


Sherwin says the twin-towered Mega Plaza is a pacesetter for developers constructing malls in the town. Sittting on 1.8 acres with a space of close to 250,000 square feet, the mall is centrally located in the town.  

The proprietor says he is keen on attracting both local and international institutions to occupy the firm’s shopping malls in the lakeside town. Already, South African retailer Game Stores has taken up prime space at Mega City mall following the exit of Nakumatt Supermarkets. “We have moved from targeting normal clients to corporate institutions and established brands, which makes us different from other players,” says Sherwin.

Eric Ounga, the director of Ounga Commercial Agencies, is also optimistic that Kisumu mall ventures remain viable regardless of the present difficulties. “The focus should shift from the present occurrences. The fact that a bigger percentage of the space is vacant does not mean that the properties are doing badly in business,” says Ounga.

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