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Rapid urbanization in Kenya’s county towns boon for retail sector

NAIROBI (Xinhua) -- High urbanization rate in Kenya’s upcountry towns following five years of devolution has become a boon for the East African nation’s retail sector.

Towns like Nakuru, Nyeri,Kajiado, Kakamega, Meru and Eldoret have experienced an influx of construction development amid rise in population since 2013, when devolution took effect.

The development consists of both commercial and residential buildings as people move from rural areas to the towns, putting less pressure on the capital Nairobi.

The towns are now awash with new malls and other shopping centers that have attracted retail businesses that include supermarkets seeking to cash in on the rising population.

In Kisumu, the recently opened Lake Basin Development Mall is one of the latest shopping centers in the town. And it holds a number of businesses that are seeking to reap from the fast-growing population in the lake side town.

The same scenario is replicated in other county towns that include Naivasha in Nakuru and Kitengela in Kajiado, Kakamega, Mombasa and Nyeri, where new malls have been opened as the towns experience an urbanization boom.

The malls have attracted the several retails chains in the East African nation as they expand from Nairobi and seek to tap into the new market.

Last week, local retail chain Naivas announced plans to open a fourth outlet in Mombasa at Mwembe Tayari, a once sleepy trading centre.

The outlet will occupy 27,000 square feet at Mwembe Tayari Mall in Mombasa, bringing to Naivas’ total store count in Kenya to 47. Other supermarkets expanding include Tuskys, Eastmatt and Tumaini.

Cytonn, a Nairobi investment firm, noted that the once smaller towns in the East African nation are experiencing faster urbanization than the national average.

Kisumu, for instance, has an urbanization rate averaging 5.5 percent per annum attributable to devolution compared to Kenya’s average urbanization rate of 4.4 percent.

“The retail sector in Kisumu recorded a 0.2 percent annualized increase in rental yields between May 2016 and May 2018, attributable to a 1.7 percent per annum increase in occupancy rates over the same period.

The increase in occupancy rates is mainly due to a high urbanization rate following devolution which is the pull factor for growth in population in the area,” noted Cytonn, on Monday.

On the other hand, Mombasa is an attractive prospect for retailers due to minimal supply of mall space compared to counties such as Nairobi, which means less competition from other retailers.

“There is relatively high demand for goods amid rising population. As per World Bank data, Mombasa had the fifth highest gross domestic product per capita in Kenya as at 2015 of 935 U.S. dollars compared to a national average of 1,455 dollars and the region benefits from a 100 urbanized population, which boosts demand for formal shopping outlets,” said Cytonn.

As urbanization booms, young people who would otherwise have moved to Nairobi in search of greener pastures are now moving to the towns, while others are relocating from the capital to the counties to take up jobs.

With jobs, both formal and informal sectors, being created in the counties, the spending power of residents has improved thus boosting the retail sector.

Henry Wandera, an economics lecturer in Nairobi, noted that towns in Kenya’s 47 counties are the future of the retail sector in Kenya.

“These towns have room for urbanization as compared to Nairobi, the reason why they are developing faster and are attracting huge populations and thus retail chains. Besides, the county governments are putting in much resource and attracting investors into the towns that most of them are their headquarters for the areas to develop,” he said.



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