Pension Firm Zamara to Invest Sh400m in Kitengela Mall

Retirement scheme administrator Zamara is building a mall in Kitengela, about 30 kilometres from Nairobi, despite fears of a looming retail-space glut in the Kenyan capital city.

Zamara, which broke ground last month on what is expected to be the largest mall in the neighbourhood, said the Sh400 million development was the first step towards enhancing revenues for the fund that currently manages Sh23 billion for an estimated 33,000 workers.

“We have sold 65 per cent of housing units comprising two-, three-, and four-bedroomed houses and since real estate has proved profitable, we have several land parcels that are scheduled for development in the coming days,” Zamara director James Olubayi said.

The development comes in the wake of mall supply gut fears and a retail turmoil that threaten to undermine profitability of shopping mall ventures.

According to a recent study by commercial property services firm Broll Group, Nairobi is experiencing an upsurge of shopping centres, which has led to relatively high vacancies especially within newly built developments.

“The local retail scene is restricted by a narrow tenant base that is unable to support the vacant spaces available in the market,” Broll Property Group chief executive Malcolm Horne said in the Broll Sub-Saharan Africa Snapshot 2017.

“Consequently, most shopping centres have majority of the same tenants, hence a lack of product differentiation is evident.”

The report further said that the process of acquiring tenants for newer developments is increasingly becoming difficult, which can be evidenced by the delays in opening of some shopping malls due to failure in securing tenants and reasonable occupancy levels.

“Generally, the prime shopping centres are recording average occupancy levels of 90 per cent, while the newer, less established centres are achieving occupancies of below 75 per cent,” Mr Horne said.

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Tenant turnover is also speeding up, with some retailers and restaurants unwilling to commit to a space for as long as five years, especially at newly completed properties.

The situation has been aggravated by the current turmoil in the retail sector that has seen established brands such as Nakumatt and Uchumi scaling down on branch expansions.

The slower uptake of space in malls, according to Broll, has resulted in tenants having an upper hand as it provides the ability to negotiate lower rental rates and more favourable lease terms.

The findings of the Broll’s survey echo those of British Asset Managers who recently said that oversupply of malls countrywide was expected to make it difficult to win tenants.

“Slower uptake of space is anticipated within the new malls due to demand and supply mismatch, where tenants are fewer than the supply,” British Asset Managers said in a study capturing trends in the first half of 2017.

The report says the trend will weigh heavily on retail rents, which will remain flat in the near future as more space is added to the market.

Britam managers reckon that shopping centres built to cater for neighbourhoods are likely to yield better revenue than those designed as destination centres.

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