Kenya’s retail sector continues to attract significant foreign investment, contributing to its robust performance and growth. According to the Cytonn Kenya Real Estate Retail Sector Report 2024, increased foreign investor appetite for Kenya’s property market, particularly in the retail, hospitality, and industrial sectors, has been a key driver of the sector’s resilience and expansion.
The report notes several recent developments that underscore the growing foreign interest in Kenya’s retail sector. For example, international retail chain China Square opened its third branch in Langata, investing Kshs 600 million to lease 100,000 square feet of space previously occupied by Uchumi Supermarkets. This expansion highlights the confidence foreign retailers have in Kenya’s market potential.
Additionally, the opening of BBS Mall, the largest mall in East and Central Africa, in Q1 2024, has significantly contributed to the region’s retail landscape. Offering 130,000 square meters of modern, high-quality spaces, IBBS Mall has attracted numerous international retailers, further enhancing the sector’s appeal to foreign investors.
The Nairobi Metropolitan Area (NMA) continues to be the best-performing region, with an average rental yield of 7.9% in 2024, compared to the market average of 7.6%. This performance is driven by high demand for quality retail spaces and the presence of tenants willing to pay premium rents. The average rent per square foot in NMA increased by 4.5% to Kshs 185 in 2024 from Kshs 177 in 2023.
Foreign retailers such as Carrefour, Giordano, Kentucky Fried Chicken (KFC), Eat’N’Go Limited, Java, ChicKing, and Simbisa brands have established and expanded their presence in Kenya. Their entry into the market has created demand for more quality retail spaces, driving sector growth and stability.
The report also highlights the role of private equity in driving retail sector growth. Investors are actively seeking profitable entities within the retail sector, providing the capital needed for expansion and development. This influx of investment has enabled retailers to enhance their product offerings, improve customer service, and expand their market reach.
However, the sector faces challenges that could impact growth. Subdued consumer purchasing power, rising construction costs, and an oversupply of retail spaces are some of the key issues. Despite these challenges, the overall outlook for Kenya’s retail sector remains neutral, supported by continued foreign investment and ongoing infrastructure improvements.
In conclusion, foreign investment plays a crucial role in driving the growth and resilience of Kenya’s retail sector. The entry and expansion of international retailers, coupled with private equity investment, have significantly enhanced the sector’s appeal. While challenges exist, the sector is well-positioned to capitalize on these opportunities and sustain its growth trajectory.
