Market is ripe for premium retail and commercial space

?Kenya is facing an acute shortage of Grade A offices and high-end retail space despite perceived glut.

According to Garden City Mall managing director Chris Coulson, the two segments are on the rebound despite last year’s economic slump.

Mr Coulson, who has had a 20-year stint in emerging markets, says that prior to 2010, Kenya did not produce such premium space, especially in the office segment despite the rising demand.

“What we saw were Grade B offices that charged Grade A rates. The designs were poor, they were not sustainable and were badly maintained,” says Coulson.

In a 2016 report, investment and real estate firm Cytonn, said that Kenya fell short of true Grade A offices with what was then termed as Grade A offices falling way below international standards, especially with regard to size, building intelligence and overall structure.

“Ideally, Grade A buildings should occupy more than 200,000 square feet. Very few buildings in Nairobi (as of 2016 meet this threshold. Most of the Grade A buildings do not meet international standards as they do not meet all the requisite classifications such as ample parking space, structure, building intelligence and size,” said the report.

Currently, the country is on a drive to increase the construction of Grade A offices, especially in Westlands, Gigiri, Karen and Upper Hill. Coulson says the market has the ability to absorb all the upcoming office space within 18 months.

Higher premiums

There has been an increased demand for office space by government and private sector willing to pay higher premiums.

There has also been unprecedented development of retail space, with Knight Frank alone controlling 1.9 million square feet of retail space, the largest in the country.

Coulson says despite the seeming oversupply in commercial space, Kenya’s retail penetration stands at 30 per cent. He says the current shopper’s preferences is what inform the development of retail space.

“Today’s shopper wants more than just shopping but an experience that will keep him in the mall for a longer time,” he says.

A number of foreign retailers have taken up space in Kenya’s new malls. They include Choppies, Game, and Shoprite – all from southern Africa – as well as French retailer Carrefour. Shoprite is expected to open in Garden City in August, pushing the mall’s occupancy to over 90 per cent.

Recently, Garden City broke ground for a Sh54 billion business park incorporating two office blocks, a hospital, hotels and 400 homes.

[email protected]