Buffalo Mall Naivasha has reported a Sh. 271 million loss in the seven months to January, attributed to rent cuts for tenant.
Increased investment in malls across major towns has led to intense competition for tenants who are benefiting from lower rents and other favourable lease terms at the expense of developers.
Mauritius-based multinational Grit Real Estate Income Group disclosed the performance of Buffalo Mall in which it acquired a 50 per cent stake in 2016 for $4.5 million (Sh. 450 million).
The multinational made the disclosures giving investors an insight into the local property market ahead of its plans to list on the London Stock Exchange (LSE) at the end of this month.
Retail chain Tuskys is the anchor tenant at the 6,121 square-metre mall, which has 37 other commercial renters and a vacancy rate of 1.7 per cent.
Grit, through its valuation and advisory services provider Broll, says “many of the tenants at the centre have been offered a rental reduction or a rent free period to lessen the rent burden on the smaller line shops.”
“As per the budget provided the current rent rebates amount to around 18 per cent of total annual income.”
The rent reduction trend is spread across the country and is expected to continue this year, according to the Grit report.
Malls in Nairobi, where quality properties are currently charging monthly average rents of between $32.5 (Sh3,250) and $48 (Sh. 4,800) per square metre, are facing the highest pressure to reduce their lease fees as more properties are opened.
Estimated formal retail supply in Nairobi and Mombasa has grown rapidly in the past few years to stand at the current 630,000 and 80,000 square metres respectively, according to Grit.
Some of the new malls that have opened in Nairobi in the past two years are NextGen Mall along Mombasa Road and Two Rivers and Rosslyn Riviera along Limuru Road.
New developers are expected to add another 98,000 square metres of space in Nairobi alone this year, further tilting the market in favour of tenants.
This story was first published by Business Daily.
