High malls supply and low returns push investors to include cinemas

In Summary

• Cinemas in malls include Two Rivers Mall in located in the Gigiri, Runda and Muthaiga neighborhood, Sarit Centre and 7D Cinema at Thika Road Mall.

• IMAX plans to set up more cinemas in malls around the environs of the city due to their scarcity.

Two Rivers mall in Ruaka.
Two Rivers mall in Ruaka.

Shopping malls are shifting to entertainment and cinemas as anchor tenants away from the traditional supermarkets to drive traffic and boost existing tenant customers.

According to Stanlib I-REIT chief executive, there is a need to add other retail components as sub-anchors including food courts to sustain the supermarkets that have been facing competition and posting low yields.

The fund has added a modern 300 seat capacity, 3- screen cinema at Greenspan Mall which will be commissioned in the second quarter of 2019 underpinned by a 10-year lease.


“Looking at the current real estate market, investors can tap into the entertainment segment to increase returns as there are opportunities there. The need is even currently high in mid-tiers spaces than in upper markets,” Stanlib asset manager Ruth Okal said.

The 3D multi-functional cinema put up at Sh48 million has a net valuation of Sh85 million consists of 2.7 per cent of their total retail portfolio.

Currently, cinemas in malls include Two Rivers Mall located in the Gigiri, Runda and Muthaiga neighbourhood, Sarit Centre and 7D Cinema at Thika Road Mall.

Garden City Mall along the Thika Superhighway also hosts the second IMAX theatre in the country. The first brand cinema was set up in 2012 at the 20th Century Plaza at the capital’s Central Business District.

At the opening of the movie theatre in November 2018, Century Cinemax group of cinemas chief executive Shafina Jaffer explained that they chose Garden City as they saw the mall as the perfect fit to give customers of the mall the “complete mall experience”.

According to IMAX project manager Kenneth Bett, the company is looking to set up more cinemas in malls around the environs of the city due to their scarcity.

“Most people are looking for the after-experience after doing shopping or visiting a restaurant. The business has been profitable especially with several screenings of a single film, but it would have more benefits if people are more informed,” Bett said.


The increased supply of malls has continued to exert downward pressure on its yields and occupancy rates.

According to new real estate sector performance for first three months of 2019, commercial office sector recorded a marginal decline in performance recording 8.0 per cent and 82.4 per cent in average rental yields and occupancy rates respectively, from 8.1 per cent and 83.3 per cent in a similar period last year.

Cytonn Investment also stated that the retail sector’s performance recorded 0.5 per cent points decline in rental yield to 8.5 per cent in the period from 9.0 per cent in 2018.

Average occupancies dropped by 3.0 per cent points to 76.8 per cent from 79.8 per cent.

“Average rents declined by 3.9 per cent to Sh174.3 per square feet per month from Sh178.2 in 2018, as property managers and owners reduced rental charges to attract tenants,” Cytonn showed.

According to the firm, the opportunity is in County Headquarters in markets such as Mombasa and Mt. Kenya Regions that have retail space demand of 0.3 million and 0.2 million sqft, attractive yields at 8.3 per cent and 9.9 per cent and occupancy rates at 96.3 per cent and 84.5 per cent, respectively.