Mall owners are offering tenants discounts of up to 50 percent on rent to prevent them from vacating the premises due to the tough economy that has reduced footfall in the establishments.
A mid-year property market review done by realtor Knight Frank Kenya shows that the retail property sector is yet to recover from the hit caused by the Covid-19 pandemic, which saw many people minimise their outdoor activities such as mall visits in favour of online shopping.
Kenyans are also having to do with less disposable income due to job losses and pay cuts, while those with access to cash are also exercising more prudence in spending due to the uncertainty over the pandemic.
Knight Frank said, therefore, the retail property market, which has seen a large jump in space supply in recent years, has turned in favour of tenants.
“Over the review period, it was noted that there were increasing requests from tenants who were considering surrendering their retail space. Landlords have responded by providing rental concessions to retain tenants, ranging between 10- 50 percent depending on the nature of business,” said Knight Frank.
“Similar to last year, occupancy levels for retail centres averaged 70-80 percent, although more established malls recorded higher occupancy levels of up to 90 percent.”
During the period, Knight Frank said, monthly prime retail rent prices declined by 4.8 percen t— to $4 (Sh435) per square foot from $4.2 (Sh457).
The same struggles also affect office developers, who have seen the asking prices for space fall marginally despite a sharp rise in the absorption of grade A and B space in the first half of the year.
Prime commercial office rents fell from $1.12 (Sh121.90) per square foot per month to $1.10 (Sh119.70), even as absorption of the top two grades rose by 64 percent as more people resume working from the office.
“Local and international occupiers over the review period were able to benefit by upgrading from older commercial buildings to modern Grade-A buildings at lower rental rates due to the current economic conditions, resulting in higher uptake,” said Knight Frank.
The office property market has been suffering from oversupply in recent years, and the rising absorption also reflects increased concessions by developers to tenants on rent, both in terms of price and flexibility of payments. Central Bank of Kenya. FILE PHOTO | NMG Kenya’s imports from Tanzania have exceeded its exports to the East African Community(EAC) partner state for the […]
