Connect with us

Commercial Projects

Tough Times for Kisumu Mall Owners as Glut Hits City

Too few residents have the financial capacity to shop at the facilities regularly.

Updated

A view of section of Kisumu.
A view of section of Kisumu. PHOTO | FILE

Owners of Kisumu shopping malls have been struggling with slowing consumer spending and store closures by tenants. But the investors are now facing another huge problem: oversupply of malls.

After several years of mall building spree, Kisumu retail space market is now oversupplied by at least 200,000 square feet – with additional space coming up in the city, according to Cytonn’s 2018 Kenya Retail Sector Report.

Developers have aggressively set up malls in strategic locations of the lakeside city, but too few people have the capacity to shop at the facilities regularly.

This has turned some shopping malls into a retail nightmare as traders vacate the facilities in droves citing poor business and high rents that undermine their profitability.

People familiar with the local economy reckon that shopping malls have been experiencing low traffic especially during weekdays mainly because residents of the city are yet to embrace the emerging mall-going culture.

It is also believed that there is low circulation of money in Kisumu unlike in other major towns, a situation that undermines business growth.

“This explains the difficulty that businesses face even as they try to raise capital from their profits to meet the high rents,” Lake Estate Agency owner Nishma Karia said in a past interview.

Interestingly, despite the fact that some malls are reporting as low as 40 per cent occupancy, investors have been relentless in their development ambitions.

Tuff Foam Mall is, for example, being extended by five stories – following in the footsteps of Mega Plaza Mall, while Unique Mall is under construction in the city centre.

Johnson Denge, a manager at Cytonn Real Estate, warns that Kisumu’s low circulation of money could prove costly for developers if the mall construction spree continues unchecked.

“Kisumu is experiencing a supply glut, and the pressure is now piling on property owners to lower the lease fees and rental prices,” Mr Denge said.

“To keep afloat, a number of landlords have resorted to offering incentives to entice new tenants.”

READ: Half empty Kisumu mall struggles to sign anchor tenant

Besides repelling potential tenants and shoppers, half empty malls are bloodsuckers for the owners, easily recording millions of shillings a month in lost business opportunities.

They are, however, a boon to optimistic tenants who stand better chances of negotiating cheaper rents for the vacant spaces.

Indeed, some malls are now charging monthly rents of as low as Sh70 per square feet to attract and retain tenants.

Despite the present difficulties, some property developers argue that the future of Kisumu malls is quite promising.

“The focus should not be on the present but rather, the future. While a majority of people are looking at the current value of malls, the fact that a significant percentage of the space is vacant does not mean that the properties are running at a loss,” says Eric Ounga, the founder of Kisumu-based property builder Ounga Commercial Agencies.

“When United Mall was coming up, many were pessimistic and thought it was not a viable venture,” he says. “Now it has grown to become the busiest outlet as we speak. Today, it has one of the highest footfalls,” he adds.

Miriam Nkirote holds a degree in Urban Planning from the University of Nairobi. Her experience in analyzing the social-economic impact of projects makes her a valuable member of our team.