Here’s why Nairobi’s formal retail market is being outperformed by neighbourhood malls

Deborah Jesusegun . 2 years ago

Here’s why Nairobi’s formal retail market is being outperformed by neighbourhood malls

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Article Summary: Currently representing 15% of total stock, Nairobi’s retail pipeline remains limited with the majority of the developments (64%) being on hold. This follows on the oversupply recorded between 2016 and 2018 that has seen total stock accumulate to approximately 6,921,194 sq ft. This is similar to Lagos’ retail market, in which more than 60% are…


Currently representing 15% of total stock, Nairobi’s retail pipeline remains limited with the majority of the developments (64%) being on hold. This follows on the oversupply recorded between 2016 and 2018 that has seen total stock accumulate to approximately 6,921,194 sq ft. This is similar to Lagos’ retail market, in which more than 60% are on hold as noted in our Lagos pipeline report here

Interestingly, Nairobi continues to feature as one of the leading retail hubs across Sub Saharan Africa with a retail density estimated at 0.14. This figure is higher than most cities in Africa such as Lagos and Accra who have a recorded density of 0.018 and 0.06 respectively.

The market has also recorded continued global capital interest as evidenced by the recent investment of approximately $52 million by Proparco and DEG (German Investment Corporation) into Naivas supermarket chains, one of Kenya’s leading retailers.

However, with poor access to the crucial foreign exchange required for imports, a depreciating currency and increasingly unaffordable rents, the future looks gloomy for the sector.

On a more positive note, neighbourhood malls and convenience retail stores are emerging as a clear winner in Nairobi’s retail market outlook. The emergence of retail bazaars has seen essential services such as groceries and pharmacies remain accessible to consumers.

Unfortunately, while these malls could essentially price out the more formal retail developments, they are unlikely to see any institutional capital interest  due to the lack of scale associated with them.

For more information on Nairobi’s real estate market, you can view our detailed report that highlights different sectors in the market.

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