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Kampala, Uganda | PATRICIA AKANKWATSA | Retail rental rates in Kampala have remained stable over the past six months as the industry consolidates following a slowdown in the past two years, according to the latest report from the property agency, Knight Frank.
The property agency said rents for the retail segment remained stable at US$200 for a space that is less than 10 meters square, US$48 for less than 50 meters square, and US$28 for a space that is less than 100 meters square.
The rental rates for tenants seeking for a space of more than 500 meters square remained at US$20 per meters square and US$14.5 per meters square for rental space that is more than 1,000 meters square.
According to the report, retailers have reported a significant growth with malls performing exceptionally well since the launch and opening of new anchor tenants in them.
An anchor tenant is a major department store or chain store located in a shopping center that attracts the-would be customers for different items in a shop.
Victoria mall in Entebbe, for instance, had the highest footfall per square meter of gross leasable area of any mall in East Africa, at 41 people per square per month, subsequent to new anchor (Shoprite Supermarket) opening in June 2018, according to Knight Frank.
This was followed up closely by the Acacia Mall at 17 people per square meter per month and with the same trend expected at the Village Mall in Bugolobi once Shoprite’s 5th outlet opens there in the first quarter of 2019.
Mark Du Toit, the head of retail at Knight Frank said the country’s retailers have changed their attitude towards rental facilities.
He said that shopping malls work for them because they are spacious enough to serve their customers.
He cited the redevelopment of entrance and exits at Shoprite Lugogo Mall as examples which were undertaken to ease traffic congestion on both Lugogo bypass and Shoprite on Jinja road.
He said the opening of the 8th Café Javas store at Lugogo Mall in November last year was well received by the primary catchment market of this neighborhood and has added to the leisure and dining options available in the area.
Rental rates for other segments
However, rental rates for residential houses recorded a sharp decline as the sector recorded an increase in new stocks of prime residential accommodation, 85% of which were apartment blocks.
For example, the average rent for prime two bedroom furnished apartments reduced from $2,250 to $1,850 and unfurnished from $1,500 to $1,000 during the period under review as the residential sector registered a 5% decline year on year from 86% to 81% in occupancy rates for the prime residential suburbs of Kololo, Nakasero and Naguru.
The decline was attributed to an increase in the supply of houses in prime locations within Kampala and the suburbs of Naalya, Kira, Najjera, Namugongo, Buwaate and Kitende.
Similarly, the industrial sector recorded a drop in rental rates owed to supply outstripping demand as companies continued to relocate to smaller premises.
The report further stated that the rental rates declined 5% year on year in the traditional industrial areas of Ntida, Luzira, Bugolobi and the 1st– 8th Streets of Kampala.
Also, the industrial sector continues to be dominated by owner occupied property and speculative development of warehousing space for rent.
“There also seems to be increased development of industrial space along Jinja Road up to Mukono and beyond, which has had a positive impact on land values for well located, encumbrance free land,” the report notes.
The commercial sector, however, that consists mainly of office space recorded a 2% annual increase in occupancy for Grade A and AB office space in Kampala from 84% in 2017 to 86% in 2018 .
Approximately 13,000m2 of Grade A/AB office space in the core Central Business District (CDB) (between Kampala road and Yusuf Lule road) and periphery areas (parts of Kololo, Bugolobi, Nakawa and Bukoto) was leased during the 2nd quarter of 2018 compared to 11,000m2 in the 2nd quarter of 2017.
This represents an 18% year on year growth in take up rates attributed to increased flexibility from landlords with regards to lease terms at renewal and new leases.
Fashion, food, entertainment to drive retail sector
The report further notes that a strong retail sector performance will continue to be driven by the fashion, food, entertainment and leisure offerings at the malls in support of Kampala’s reputation as a strong consumer driven market compared to other East African countries.
Judy Rugasira, the managing director at Knight Frank, however, said the current trend of corporate tenants and government parastatals moving into their own built to suit buildings will have an adverse effect on office space by increasing the supply of vacant stock on the market in the short to medium term.
“Office rents will continue to steadily fall if the demand doesn’t increase significantly”, she said, adding that Final Investment Decision (FID) on Uganda’s basin wide crude oil development will have an impact on the property market.
Uganda hopes to start oil production in the next two – three years.
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