Tenants in prime office properties and the occupants of retail outlets in mall areas should expect to continue paying their rent in dollars, as landlords hedge against exchange rate risks.
- •Constructing prime properties carries significant costs, often necessitating developers to secure loans, many of which are denominated in USD as financiers hedge against currency depreciation.
- •Due to the persistent loss of purchasing power of the Kenyan shilling against the USD, landlords face losses when collecting rent in KES while servicing dollar-denominated loans.
- •In response to this, landlords have increasingly favoured collecting rent in dollars, a trend expected to continue in the long term.
According Knight Frank’s H2 2023 Market Update, Nairobi’s retail sector adapted to market changes, with supermarket chains expanding into residential neighborhoods. Notable retail centers completed during the review period included GTC Mall, My Town, Park Avenue Place in Nairobi, Promenade Mall in Mombasa, and Catholic Mall in Kakamega. Additionally, fewer developments remain in the pipeline.
Traditionally, retailers primarily focused their outlets within well-established malls, predominantly situated in affluent neighbourhoods, distanced from the majority of urban residents. Evolving consumer spending behaviours, marked by a preference for convenience, have compelled retailers to establish their presence in residential areas. This shift, coupled with reduced disposable incomes and the surge in e-commerce, is prompting retailers to recalibrate their customer outreach strategies.
Consequently, there has been a discernible decrease in both market expansions and new entrants compared to previous years, as developers align their efforts with a more conservative approach, characterized by fewer speculative developments.
- •Over the review period, Quickmart opened their 59th outlet along Outering Road.
- •Carrefour opened two new stores to take their total tally to 22 – one at Nairobi’s CBD (Central Business District) and the other in coast region at Promenade Mall.
- •Kenya’s largest supermarket chain, Naivas, has now exceeded 100 outlets by opening 6 stores – at Malindi, Kisii, Waiyaki Way Shell petrol station, Saba Saba in Mombasa, King’ara Road in Lavington, and Cathedral Mall in Kakamega.
The closure of South Africa’s Builders Warehouse at Waterfront Karen has been attributed to the challenging economic conditions and the limited adoption of the Do-It-Yourself (DIY) culture in Kenya. The period also marked the establishment of a second branch of the more budget-friendly China Square – a retail chain offering diverse consumer goods such as electronics, furniture, DIY hardware, kitchenware, and stationery.
Owners of Prime Apartments Reap from Weak Shilling – Kenyan Wallstreet
