This new ‘epidemic’ of malls will spread shopping flu

By Yvonne Kawira Mutisya | 7yrs ago | 5 min read

The recent opening of the eagerly awaited Two Rivers Mall saw 'aspirational shoppers' take to Limuru Road with gusto. But most went there to take selfies while staring at stuff they can mostly afford after drawing the winning ticket in a lottery.

Fashioned after South Africa's Sandton City, Two Rivers Mall is the largest shopping mall in East and Central Africa and opened shop at a time when Nairobi appears to be experiencing an 'epidemic' of shopping malls chasing tenants with diminishing purchasing power.

Two Rivers Mall, for instance, is right next to Roselyn Riviera along Limuru Road where the Village Market is just around the corner.

Along the Thika Superhighway, Garden City Mall is diagonally opposite Mountain Mall with Vantage mall coming up next to t across the road to Garden estate in Nairobi and further down the highway is Thika Road Mall (TRM). And before you reach Thika town you can choose to shop at Spur Mall in Ruiru or the Juja Mall in Juja town.

The case is the same in Athi River where shopping malls are being erected less than a kilometre away from one another.

This coupled with city dwellers gradually taking to online shopping and with most estates having supermarkets and mini markets, has complicated the business viability of shopping malls.

In fact, some retailers have found it a struggle maintaining costly rental spaces in shopping malls, like Absolute Chocolate Director, Ahmed Naheed, who closed shop at Garden City Mall almost a year ago.

"It was becoming increasingly hard to sustain that business as there was slow traffic during weekdays. Traffic would increase on the weekends. This made it impossible to sustain the high rent expenditure in that outlet" Naheed told The Nairobian in a telephone interview.

But Robert Okubo of 200 Degrees Cleaning Services, the firm contracted to provide cleaning services explained that the mall was built to target upscale customer and "There is normally good traffic recorded especially in the amusement park. It gets extremely busy on the weekends. It has the rarest pools around which has gained popularity."

Are this high end clientele frequenting shopping malls or what explains the fact that some are virtually empty?

Nexgen Realtors Manager, Jack Odiwuor says that strategically located malls get many clients looking for things all under one roof.

"We manage properties like the Lavington Mall and other spaces in Gigiri and Upperhill- here, the target clientele is high end. And so is the pricing of these spaces."

Jack adds that beginner entrepreneurs find the going hard as most are hardly known. "So they sometimes get challenges when they cannot manage to make enough money to meet the rent expenses. Others move out of these malls because they got the location for their products wrong," he explains.

And while some Kenyans prefer online shopping, still, physical malls have some advantages over the online ones. Cytonn Investment Management, a local real estate concern, cites lack of trust and confidence in online payments as one reason buyers will always troop to shopping malls.

According to a by Oxford Business Group released in February 2016, 65 per cent of retail in Kenya are in traditional platforms- walk-in stores while 35 percent are in online marketplaces, targeting consumer-to-consumer trades.

But trooping to malls has been affected by among others, high cost of living, inflation, stalled economy in the wake of looming elections and job cuts.

Abel Munda, the Managing Director of Liberty Life says the perception that Kenyan economy was growing has been created by huge infrastructure projects like highways and the Standard Gauge Railway.

But, he corrects that "These projects do not put money in the pockets of its citizens. And therefore the purchasing power of target client is greatly affected."

Real estate experts have sounded alarm bells about an seemingly oversupply of retail space in Nairobi and "Beyond the Two Rivers Mall, no further retail space will be required in Nairobi, as there will be oversupply," warns Britam Asset Managers CEO Kenneth Kaniu but adds that "In places Nanyuki, Kisumu, Nakuru, Naivasha and Mombasa, there is a lot of opportunities" as Kenyans like to shop and experience the variety of offers provided in malls.

Kaniu predicts that "Two Rivers for instance, might take long to pick up, as long as two years even, after which you will see a spike in its traffic."

A report titled Investor's Perspective on Kenya's Retail Sector- by Cytonn reveals that Nairobi's retail space has been growing at a Compound Annual Growth Rate (CAGR) of 17 per cent with the best markets for investing in retail sector being Kilimani and Karen.

Kiambu Road is another area with high retail occupancy rates of above 90 per cent attributable to affluent dwellers with high purchasing power.

This state of malling, however, has created a situation where "Spurting of malls in the same region has resulted in stiff competition between malls," says the report.

While kiosks, market stalls, supermarkets and cosmetic shops are still the most relevant stores, the formal retail market has grown with several malls being constructed to offer consumers the convenience of a one-stop shop.

The most affected of Nairobi shopping malls must surely be Taj Mall along Mombasa Road where kerfuffle over its location and construction of the 13-kilometre Outer Ring Road from Thika Road junction to Taj Mall, accounting for an exodus of tenants including banks, hospitals and supermarkets reducing occupancy from 10 per cent in 2017, down from 80 per cent in 2012.

Kaniu argues that owners of Taj Mall should consider alternative location as even completion of the road won't help matters since "It is going to be a bit difficult to convince people to take up space at the mall" which is counterproductive since "these malls are a source of employment and when they close down it means that thousands of people will be rendered jobless."

The Cytonn report recommends continuous revamping of malls to meet the tenants' and consumers' expectations as "Ease of access results in increased consumer traffic, making the location attractive to retailers. Proximity to urban areas, densely populated areas or high-end settlement will result in a large consumer base for retailers' products