By Vera Shawiza

Cytonn Real Estate, the development affiliate of

Cytonn Investments, released their Kenya

Retail Sector Report-2020. The report analyses

the performance of the retail sector in Kenya

through tracking the changes in occupancies,

rental yields and rental rates. It also outlines

the retail space demand, opportunity and

outlook of the sector.

According to the report, the 2020 period

recorded subdued performance across the

various real estate themes resulting from the

tough operating environment as the economy

grappled with effects of the Coronavirus

pandemic. In the retail sector, performance

declined recording average rental yields of 6.7%,

0.3% points lower than the 7.0% recorded in


The subdued performance is largely attributed

to: i) 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% decline to Kshs 115.1 per SQFT in 2020,

from Kshs 118.0 per SQFT in 2019, and, ii)

reduced occupancy rates which declined by

0.7% points Y/Y from 77.3% in 2019 to 76.6% in

2020 attributable to reduced demand for

physical retail space due to growing focus on e-

commerce and scaling down of retailers in the

wake of reduced revenue inflows.

Rental yields within the Nairobi Metropolitan

Area (NMA) declined by 0.5% points to 7.5%

from 8.0% in 2020 attributable to decline in

demand for space evidenced by a drop in

occupancies by 0.6% points from 75.1% in 2019

to 74.5% in 2020 and marginal decline in rent of

by 0.1% to Kshs 168.5 from Kshs 168.6 per


The subdued performance is also attributed to

the current oversupply of retail report spaces by

3.1 mn SQFT, shifting focus to e-commerce

leading to decline in demand for physical retail

spaces, constrained consumer spending given

the tough economic environment and exit by

some retailers to cushion themselves against

the negative effects of the Coronavirus


Mt. Kenya region offers the best investment

opportunity to retail space developers, with high

rental yields of 7.7%, 0.1% points higher

compared to market averages of 6.7%, the

region currently has an existing retail space

deficit of 0.7 mn SQFT, the under supply signals

high demand.

Within the Nairobi Metropolitan Area (NMA), the

opportunity lies in Westlands and Karen which

were the best performing retail nodes with

rental yields of 9.8% and 9.2%, respectively

attributed to relatively high demand as the

neighbourhood host affluent residents with high

consumer purchasing power, ability to charge a

premium on rates on the high quality retail

spaces, relative good infrastructure thus ease

of access into the areas and relatively high

occupancy rates of 80.9% and 79.1%,

respectively above the market average of


The table below summarizes metrics that have

a possible impact on the retail sector, that is

the retail space supply, performance, retail

space demand, and concluding with the market

opportunity/outlook in the sector;

Majority of the Kenyan regions that is Kiambu

County, Mt Kenya region, Machakos, Mombasa

and Kajiado are undersupplied and therefore,

we expect to see developers shifting their focus

to these regions. However, in the short-run we

expect developers to scale back on the top-tier

regions that are oversupplied, that is, Nairobi,

Kisumu, Uasin Gishu and Nakuru with more

development picking up based on demand from

international retailers and investors as well as

improved financial environment

Main urban cities such as Nairobi and Kisumu

have an existing oversupply of space while

regions such as Kiambu County and Mt Kenya

region are undersupplied and therefore, we

expect to see developers shifting their focus to

these regions. This will be supported by

demand from international retailers and

expansion by local retail chains

The retail sector performance in the Nairobi

Metropolitan Area declined by 5.4% and 4.7%,

respectively to record rental yields of 8.0% and

occupancy rates of 75.1%, respectively. Nairobi

and Mt Kenya were the best performing region

with average rental of 8.6% and 8.0%,

respectively. Kisumu’s performance dropped

significantly due to increased mall supply

The retail sector performance recorded a

decline of 0.3% and 0.7% points in average

rental yields and occupancy rates, respectively,

coming in at 6.7% and 76.6%, respectively

Nairobi and Mt. Kenya were the best performing

regions with average rental yields of 7.7% and

7.5%, respectively, attributable to relatively high

demand for quality retail space demand for

space in malls.

We expect the sector’s performance to be

cushioned by entry of local and international

retailers taking up prime retail space left by

their troubled counterparts.

Despite four major cities i.e. Nakuru, Uasin

Gishu, Kisumu and Nairobi being oversupplied,

the rest are undersupplied including Kiambu

with a retail space demand of 0.8mn SQFT

Nairobi, Kisumu and Nakuru are the most

oversupplied areas by 3.1 mn, 0.3 mn and 0.2

mn SQFT of space, respectively while areas

such as Mt Kenya are under supplied by 0.7 mn


The outlook for the sector is NEUTRAL and we

expect to witness increased development

activity in areas outside Nairobi, with

developers shifting to satellite towns and

county headquarters in markets such as

Kiambu and Mt. Kenya that have an existing

retail space demand of 0.6 mn and 0.7 mn

SQFT, respectively.

Cytonn Investments is an independent

investment management firm, with offices in

Nairobi – Kenya and D.C. Metro – U.S. We are

primarily focused on offering alternative

investment solutions to individual high net-

worth investors, global and institutional

investors and Kenyans in the diaspora

interested in the high-growth East-African

region. We currently have over Kshs 82.0 billion

of investments and projects under mandate,

primarily in real estate.

Cytonn Real Estate is Cytonn’s development

affiliate, which is focused on developing

institutional grade real estate targeted at

specific institutional, high net-worth and

Diaspora investors. Collective, Cytonn

Investments and Cytonn Real Estate manage

over Kshs. 82 billion of real estate projects.

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