Kenya’s shopping malls feel the heat as retailers exit market

KENYA – Shopping malls in Kenya are feeling the pinch from the folding of a number of supermarkets from which they greatly rely on for customer footfall and as anchor tenants.

Malls and other retail establishments such as arcades have continued to rely on supermarkets as their anchor tenants to not only bring a steady flow of customers but also attract other tenants such as smaller retail outlets.

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Recently, the folding of several supermarket chains like Nakumatt, Shoprite, Choppies along with new trouble for chains such as Tuskys and Uchumi has left some establishments without their primary anchor tenants.

For instance, Botswana’s Choppies and South Africa’s Shoprite have exited the local scene leaving behind shells in retail spaces such as Karen’s Waterfront Mall, Garden City Mall, Shujaa Mall, Galleria, Greenspan all in Nairobi and City Mall in Nyali in Mombasa just to mention a few.

“Most of the anchor tenants we have are supermarkets as they mostly occupy the largest spaces hence attracting the biggest share of an establishment’s footfall,” noted Cytonn Real Estate analyst Beatrice Mwangi in interview with Citizen TV

In the past week, besieged the retailer Tuskys has been locked out of several premises including Athi River and Donholm’s Green Span Mall both in Nairobi where both outlets were auctioned.

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Fresh trouble within supermarkets along with the general economic slump occasioned by the COVID-19 pandemic has presented a double trouble for malls landlords who now stare at lower than average returns.

Other retailers such as bookshops, cosmetic stores, cinemas and other specialty shops have often made the decision to take up space in malls by virtue of the existence of the large chain retailers.

According to Mwangi, the retail sector is yet to move away from its dependence on anchor tenants even as some establishments such as the Nanyuki Mall and Garden City take up dual anchor-tenants to cover their exposure to a single entity.

“The chances are, without a supermarket, you won’t have any other traffic for the rest of the businesses. It’s a tradition that we may not be able to move on from completely.”

Beatrice Mwangi – Real estate analyst, Cytonn

Besides internal mismanagement and a tough operating environment, malls face other challenges among them competition from informal retail spaces, a growing focus on e-commerce affecting the demand for physical retail space and the oversupply space.

The retail sector for instance had an oversupply of 2.8 million square feet (SQ FT) as of the end of 2019.

Malls perceived not conducive since onset of COVID-19 pandemic

During the pandemic, malls have suffered a new nemesis as the majority of consumers pull back from the spaces over health and safety concerns.

According to a September survey by Ipsos Kenya on the retail sector COVID-19 compliance, malls have a low score of compliance presenting a high risk to shoppers thronging the establishments.

The survey notes 62 per cent of shoppers who visited malls did not feel safe dampening the footfall projections for the establishment even as the government continues to ease COVID-19 related restrictions.

Nevertheless, the malls space is expected to thrive on a number of factors including changing tastes and preferences, a growing middle class with higher purchasing power and improving demographics featuring a higher urbanisation rate above the global average and population growth.

Further, a number of supermarkets including Naivas and Quickmart, Carrefour remain on an expansionary stance and have since scoop up some of the remnant branches left behind by exiting chains.

According to an analysis by Cytonn Real Estate, the number of supermarkets stores by major retailers in Kenya is set to increase to 198 from the current 189 as brands such as Quickmart, Naivas and Chandarana mull opening new stores.

Naivas currently leads as Kenya’s largest retailer by branch count at 66 ahead of Tuskys at 54 and Quickmart at 32.

Chandarana Food Plus closes out the top four with a double-digit count of stores at 20.

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