Small is beautiful business space in Nairobi after Covid disruption


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Small is beautiful business space in Nairobi after Covid disruption


Workstyle by Landron Group at The Address on September 18, 2020 in Nairobi. PHOTO | DIANA NGILA | NMG

If there is one important lesson that the Covid-19 pandemic could have taught businesses, then it would be cost reduction.

Ideologically, cost-cutting measures such as downsizing, laying off employees, shutting down facilities, streamlining supply chains, and moving to cheaper buildings were unimportant for many companies before. the coronavirus.

After President Uhuru Kenyatta imposed one of the most stringent lockdown measures such as movement restrictions and dusk-to-dawn curfews to contain the spread of the virus last year, companies realized how unimportant large workspaces were in difficult economic conditions.

The acceptance of online shopping sites on websites and social media platforms (e.g. Facebook, Instagram and Twitter) also informed the decision.

As demand for larger spaces declined, demands for smaller units in Nairobi’s central business district (CBD) increased.

Thus, building owners transformed large spaces left by single tenants into stalls.

The late Tuskys Magic, which sits between Ronald Ngala and Mfangano streets in Nairobi, has now been turned into stalls.

The renovated space is now partially occupied by tenants, just a few weeks after its entry into service.

Each tenant is required to pay Sh 300,000 in goodwill, with the highest rent ranging from Sh 20,000 to 25,000 per month. The largest spaces range from Sh30,000 to Sh35,000.

BuyRentKenya Managing Director (CEO) Elizabeth Costabir says the stalls are becoming popular because they are affordable in terms of monthly rents.

“The stalls appear to have gained popularity again since the pandemic due to declining wages and, in some cases, loss of jobs, which has led many people to open businesses for income or support. their needs, ”says the CEO.

For building owners, however, small units (stalls) account for around 90 percent of rental income compared to a single tenant.

“It’s not really about more income but rather a guaranteed income

“With many units, at least 80-90% of the rental income can be easily collected from a large retailer that pays the rent and maintains it for a long time,” adds Ms. Costabir.

Knight Frank Kenya Retail Portfolio Manager Ashmi Shah believes the stalls reduce the risk of declining income if one or more tenants decide to move out.

“They are becoming popular with tenants who don’t need large spaces in formal malls or who use them as pickup or drop-off points for deliveries.

“Their spending is also lower than that of shopping malls to allow a variety of trades in the same space to give shoppers more choice,” Ms. Shah argues.

A few meters away is the Reli cooperative house, located between Mfangano and Hakati streets. The entire ground floor, which was also left by Tuskys, is now filled with stalls.

For example, the smallest booth with a goodwill of 400,000 Sh costs 30,000 Sh per month.

On the other hand, those with the greatest goodwill of 1.6 million shillings cost 60,000 shillings per month. This covers six years.

The demise of retail giants like Nakumatt, Tuskys and Shoprite has left hundreds of square meters of space empty.

The occupation was then hit when the government imposed one of the most stringent lockdown measures, including a dusk-to-dawn curfew as well as social distancing measures to curb the spread of Covid-19.

Besides stalls, the pandemic has also increased demand for smaller offices, with employees working from home.

The reduced spaces mean that businesses can save on high rental costs. Likewise, the large offices are now partitioned.

Because of this, the popularity of shared spaces grew for their affordability, as a business didn’t need to rent an entire building or floor, but an office. Shared spaces were synonymous with foreign brands and freelancers some time ago.

Mainstream companies, however, are slowly adopting them.

“Big offices are now turning into smaller spaces due to downsizing in the office or downsizing.

“Many companies have maintained the work from home policy, reducing the need for large space,” said the CEO of BuyRentKenya.

Some companies that provide coworking space in the country include Kofisi and Workstyle Africa.

According to Knight Frank Kenya, agency director Anthony Havelock, there is a trend that some large companies are downsizing or re-evaluating their space requirements.

“Another notable development is the increase in overflow space and the resulting increase in serviced offices that are now marketed; this is due to the contraction, ”notes Havelock.

Ms. Shah, however, believes small spaces aren’t necessarily cheaper.

A disadvantage of small spaces is that they require constant management, thus increasing administrative costs.

For example, a business operating a traditional Class A office is estimated to spend 173,600 shillings per 1,500 square feet for a team of six employees on base rent. It would also spend Sh32,550 on monthly service charges, Sh129,600 depreciation mainly on furniture, fixtures and equipment.

Another Sh86,800 on expenses like internet, cleaning, office management, coffee, drinking water, printer and office supplies, and Sh30,000 per month on utilities such as electricity, water, among others.

This drops to Sh 455,700, but Workstyle says the figure may drop to Sh 227, 850 under private office and 162,750 Sh in co-working spaces.

According to Knight Frank, the popularity of flexible workplaces has overtaken traditional office rentals.

“This model has particularly struck a chord with SMEs, mature start-ups and multinationals, where flexibility and profitability – not only in the number of offices, but also in the length of the lease – are very attractive”, the company said in its Kenya Market Report 2019.

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