Decades of Growth: Kenya’s Real Estate Retail Market Transforms from 1983 to 2023

Kenya’s formal retail market has experienced substantial growth since 1983, driven by positive demographics, improved infrastructure, and a favorable business environment. The influx of foreign capital has played a pivotal role, attracting international retailers and developers. Currently contributing 15.4% to foreign direct investment (FDI), the wholesale and retail sector consistently ranks among the top three contributors to Kenya’s GDP.

The formal retail space has grown at an average annual rate of 28.3% since 1983, with a total tracked stock of 1,232,925 m2. Notably, 15% of retail malls were developed by foreign investors, highlighting the sector’s attractiveness to international capital.

Compared to other African countries, Kenya stands out as a leading retail hub, with Nairobi’s density estimated at 0.14, surpassing cities like Lagos and Accra. This article explores the evolution of Kenya’s retail formalization, highlighting key timelines.

### Pre-2000 (The Debut)
The formal retail market in Kenya traces back to 1983 with the opening of Sarit Center in Nairobi’s Westlands District, marking the country’s first shopping mall. Subsequent developments, including Yaya Center and Village Market, added 67,895 m2 of retail space.

### 2000 – 2010 (The Expansion)
With a growing middle-class population, Kenya’s retail market saw a surge in stock, adding 106,069 m2 between 2000 and 2010. Homegrown retail giants like Nakumatt and Uchumi played a significant role, anchoring key developments such as Westgate Mall and Capital Center.

### 2010 – 2015 (Foreign Capital Boost)
Foreign investors intensified their interest in the market during this period. Actis expanded its presence with projects like Junction Mall and Garden City Mall. South Africa’s Stanlib established Kenya’s first Real Estate Investment Trust (REIT), contributing to the completion of 339,123 m2 by both foreign and local investors.

### 2015 – 2018 (The Boom Era)
The retail sector experienced a boom, attracting significant investment and resulting in the launch and completion of major projects, including Two Rivers Mall, Garden City Mall, Rosslyn Riviera Mall, Village Market expansion, and The Hub Karen. This period added a substantial 503,193 m2 of formal retail space.

### 2018 – 2023 (The Great Decline)
The market faced challenges with rising vacancies reaching 19.7% in 2017, leading to a developer’s recession. The COVID-19 pandemic further impacted shopping behaviors, causing a decline in demand for physical spaces. Despite these challenges, 2023 marked the completion of BBS Mall, the largest shopping center in Kenya.

While the retail sector has witnessed significant growth, Kenya’s overall formal retail penetration remains below 50%, with disparities in distribution. Various factors, including inadequate infrastructure, currency depreciation, high-interest rates, and complex retail dynamics, have hindered optimal market performance.

### Conclusion – Convenience Drives Demand
Consumer preferences for both big malls and smaller retail stores highlight the importance of convenience through proximity, affordability, and flexibility. The pandemic prompted an increase in smaller retail stores, and the hybrid shopping strategy is expected to grow at an 11.0% compound annual growth rate between 2023-2027.

Looking ahead, several developments are in the pipeline, with projects like Beacon and Cove Malls expected to contribute an estimated 66,162 m2. Despite a slowdown in the sector, the retail market continues to evolve, emphasizing the significance of convenience in driving consumer demand.

For further insights and feedback on Kenya’s retail evolution, contact Estate Intel at insights@estateintel.com. Subscribe to ei Pro for access to affordable real estate data, including sales rates, yields, supply drivers, and information on key market participants.