The Effect of Anchor Tenants on the Financial Performance of Shopping Malls in Nairobi

Abstract

Nairobi County has experienced huge increase in the number of shopping malls that have been set up, more than in any other county in Kenya. There has been great speculation and debate on sustainability of 35 shopping malls in the smallest County in Kenya in form of geographical size. Investors have also worried on their return on investments undertaken in setting up malls in Kenya and particularly in Nairobi County. On the other hand, international brands such as KFC, Carrefour, Java, etc together with local re-known supermarkets and other brands have used their popularity to bargain for cheaper rent rates as anchor tenants that would ensure increased traffic in the malls and consequently increase the occupancy rate of the mall. This study therefore focussed on the effect of anchor tenants on financial performance of shopping malls in Nairobi County, Kenya. The study collected primary data in all the 35 shopping malls in Nairobi County in the form of quarterly rent received by the mall in the year 2018, the parking space available in each quarter, the area occupied by anchor tenants relative to area occupied by other tenants, and the occupancy rate of the mall in every quarter. Regression analysis was undertaken to determine the effect of the independent variables on the dependent variable. The response rate of 91.4% was achieved that translated to a total of 32 malls from a possible 35 shopping malls. The regression model used in analysis had a coefficient of determination (R squared) of 37% and the Analysis of variance indicated that the null hypothesis of the study to be rejected. The model was significant as the p value was less than alpha value. It was therefore concluded that there was a statistically significant effect of anchor tenants on financial performance of shopping malls in Nairobi County. The presence of anchor tenants had negative effect on financial performance, while all the other variables had positive significant effect on financial performance.