Pandemic slows down retail sector performance in 2020, study shows
Kenya’s retail sector recorded subdued performance in 2020 across various themes, resulting from a tough operating environment as the economy grappled with effects of Covid-19 pandemic.
A report by Cytonn Real Estate, the retail sector performance recorded average rental yields of 6.7 per cent, which was 0.3 per cent points lower than the 7.0 per cent in 2019.
The subdued performance is largely attributed to reduction in rental rates in a bid to attract tenants amid a tough economic environment which saw the rental rates in the sector post a 2.1 per cent decline to Sh115.1 per square feets (SQ FT) in 2020, from Sh118.0 per SQ FT in 2019.
Equally responsible for the decline was reduced occupancy rates which declined by 0.7 per cent points year on year from 77.3 per cent in 2019 to 76.6 per cent in 2020 due to reduced demand for physical retail space caused by growing focus on e-commerce and scaling down of retailers.
Westlands and Karen were the best performing retail nodes in the Nairobi Metropolitan Area with retail yields of 9.8 per cent and 9.2 per cent respectively, because of their ease of accessibility and affluent residents with high consumer purchasing power among other factors.
With an existing retail space deficit of 0.7 million SQFT, Mount Kenya Region offers the best investment opportunity to retail space developers, with high rental yields of 7.7 per cent, 0.1 per cent points higher compared to market averages of 6.7 per cent.
The report says, Kiambu County, Mt Kenya region, Machakos, Mombasa and Kajiado are undersupplied, with expectations that developers will shift their focus to these regions.