Why destination malls are doing well in Kenya compared to neighbourhood and community malls

Destination (regional) malls are performing better in terms of rental yields than the community and neighborhood malls.

Destination malls, in the Nairobi metropolitan area, are performing better in terms of rental yields than the community and neighborhood malls.

This is according to a real estate report by Cytonn Investments which analyzes Kenya's real estate sector.

The study states that destination malls, defined as those which are between 400,001 - 800,000 sq ft, have an average rental yield of 10.3%, compared to a market average rental yield for the retail sector of 8.3%.

This being attributable to the high rental charges of on average Kshs 234.4 per sq ft, 36% higher than the market average of 172 Kshs per sq ft. These malls are only found in Nairobi and they include Two Rivers Mall, NextGen Mall, Garden City and Sarit Centre.

The high rents are as the retailers are charged a premium for class on rent due to amenities provided and higher footfall in the malls as a result of presence of international retailers mainly as the anchor tenants.

Neighborhood malls come in second with an average rental yield of 9% with rental charges averaging at Kshs 159.5 per sq ft. These malls, whose retail area is between 20,000 - 125,000 sq ft, however have the highest market share with 51% whereas community and destination malls take up 45.0% and 4.0% of the market share, respectively.

Community malls, those with a retail area of 125,001 to 400,000 sq ft, registered the lowest rental yields, 8.7%, mainly because of competition from retailers such as supermarkets and other small scale retailers. They also have fewer amenities as compared to destination malls.

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