Half empty Kisumu mall struggles to sign anchor tenant

It was supposed to be Kisumu’s fanciest shopping mall, catering to the middle class of the lakeside city. But nearly two years after its completion, the Lake Basin Mall is struggling to get by with occupancy of less than 40 per cent.

Despite its strategic location near the Mamboleo Junction on the Kisumu-Kakamega highway, the Sh4.2 billion mall that was completed in 2017 is yet to sign its first anchor tenant.

The Lake Basin Development Authority (LBDA), which owns the facility, had earlier indicated that it was signing anchor tenant-ship agreement with Tuskys Supermarket, but the retailer is understood to have pulled out of the deal citing the construction of the Southern Bypass which – it said – could barricade the mall.

Tuskys later took up space at Mega Plaza, now the tallest building in Kisumu, following the closure of Nakumatt.

But according to LBDA chairman Cavince Owidi, the mall is in the process of picking an anchor tenant from among French retail giant Carrefour, South Africa’s Shoprite and Choppies from Botswana, which are keen on taking up the space.

The 60,000-square-metre shopping facility is the largest mall in western Kenya. The five-floor complex has 140 shops, a three-star hotel, showrooms, a doctor’s plaza, a tyre centre, and a recreational park.

Lake Basin Mall, which charges monthly rental fees of Sh80 per square foot – exclusive of service charge and VAT – expects to gross rental income of more than Sh220 million annually.

Shopping mall owners in Kisumu are struggling to attract and retain tenants due to a glut of space that has forced many landlords to cut rents and sweeten lease offers to their tenants.

According to Cytonn’s 2018 Kenya Retail Sector Report, Kisumu retail space market is now oversupplied by at least 200,000 square feet – with additional mall space coming up in the lakeside city. This glut points to a more difficult future for landlords.

Pundits reckon that developers have aggressively built malls in strategic locations of Kisumu, 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.

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.”

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

READ: Pain ahead for Kisumu mall owners as glut hits lakeside city

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.

This, according to Eric Ounga, the founder of Kisumu-based property builder Ounga Commercial Agencies, is informed by the market’s promising future.

“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,” Mr Ounga says.

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