Shopping malls in Kenya seethe as major retailers fold

Shopping malls in Kenya are seething from the folding of a number of supermarkets from which they greatly rely on for customer footfall and 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.

In the most recent, the folding of several supermarket chains along with new trouble for chains such as Tuskys has left some establishments without their primary anchors.

For instance, Southern African based chains Choppies and Shoprite have exited the local scene leaving behind shells in retail spaces such as Karen’s Waterfront Mall and City Mall in Nyali.

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

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

Other retailers such as salons, cosmetic stores and cinema’s 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,” she added.

Besides internal mismanagement and a tough operating environment, malls faces 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.

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 factor 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 remain on an expansionary stance and have since scoop up some of the remnant branches left behind by peer exits.

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