E-commerce seen disrupting small-scale rental business in Kenya

Source Xinhua

The banner at a building in downtown Nairobi, Kenya’s capital, recently declared a one-month free offer for anyone taking up rental space.

The building hosts dozens of rental shops for small traders selling clothes, shoes, books, jewelry and those running photocopying and mobile money shops.

The free one-month renting offer was to entice businesses to take up the shops whose rent averages 25,000 shillings (250 U.S. dollars) per month.

A spot check at the building on Friday revealed several of the shops remain vacant, and so are those of numerous other buildings across the east African nation’s capital.

The situation has largely been blamed on the economic slowdown. However, a rise in e-commerce in Kenya is one of the major things disrupting the commercial small-scale rental business.

While most of the small traders are vacating the rental shops, they are not closing their businesses.

A majority are taking their stocks to their houses where they now operate from and advertise the goods online, sale and deliver those bought via courier services.

“It was not making sense for me to pay 150 U.S. dollars rent every month and business was low,” said Faith Nguma, a trader who sells men’s shows.

She used to operate from a stall along Moi Avenue in Nairobi’s central business district but vacated the premises in November 2019.

Nguma, who lives in the east of the capital, advertises her merchandise on social media sites Facebook, Twitter and Instagram.

“I normally post what I have then deliver in offices or homes of clients. The person I had employed at the shop sometimes does the deliveries or I do them myself or use courier service if outside Nairobi,” said Nguma on Saturday.

She has gotten used to her new modus operandi, noting she is not only saving the rental money but also time and wages she used to pay her worker.

Vincent Wesonga, who closed office for his software start-up in the Nairobi central business district, said he had no choice but to work from home.

Wesonga had run the office for five years, with rent rising over the years to 250 U.S. dollars a month.

“I closed the office in October 2019 because jobs dried up but I am still in operation. It became hard to pay rent for the office and for my home,” he said.

He now advertises his services on social media sites including Twitter as other jobs come through referrals.

On the micro-blogging site, the messages “please retweet, my next client could be on your timeline” have become common as Kenyans seek business.

To try and find business, landlords are not only offering free rent but they have done away with goodwill they used to charge tenants, with the cash starting from 1,000 to 20,000 U.S. dollars.

“E-commerce has given distressed businesses a lifeline,” said Bernard Mwaso of Edell IT Solution.

Initially, he observed, when people closed their shops, they would dispose of the stock and quit altogether but now there is an option of selling goods online.

“Once someone finds their footing in online business, certainly they will not go back to renting shops again. E-commerce is certainly cannibalizing the rental business slowly,” he added.

Antony Kuyo, a real estate consultant with Avent Properties, acknowledged that the rental business is facing a tough season.

“Most commercial buildings are losing tenants and new ones are not taking up space. The business environment is becoming tough because of the sluggish economy but it is certain that people are also turning to new ways of cutting costs like e-commerce,” he said.

Cytonn, a Nairobi-based investment firm in its Q3 report of 2019, notes that most commercial spaces in the capital are posting huge losses forcing landlords to cut rental charges to retain existing tenants.