Investigating the influence of rental prices and location of retail real estate on the increasing vacancy rates in Kampala. A case study of Kisenyi 1 and the Central Business District

Abstract

Rent is the economic return to land resources. Key property market participants such as investors and developers often use rental value as an indicator to appraise the viability of their real estate development and investment schemes. Due to the high demand for retail spaces, landlords take undue advantage of tenants and increase rent without adhering to rent regulations. This leads to frequent movement of retailers from one location to another, especially to urban areas which are more affordable and accessible. This study investigates the influence of rental prices and location of retail real estate on the increasing vacancy rates in Kisenyi 1 and the CBD. Data from Kisenyi 1 and the CBD were analyzed and the results show that; most retail properties which are in a more accessible location tend to attract more occupants compared to retail real estate constructed in a poor location (i.e. a location which is inaccessible, where tenant’s products are not visible, not in a prime spot etc.). These vacancies were observed to be available in mostly the upper/top floors. Retail properties which pays very high rent tend to chase occupants away looking for a more affordable unit though some occupants will stay as long as the location is favourable to them even though the rent is high. Reduced sales, highest and best use, urban poverty, imbalancement of supply and demand of retail properties and demographics of occupants were among other factors apart from location and rental prices that influence vacancy rates of retail real estate. Government lowering taxes on construction materials, landlords charging rents in shillings, proper advertisement of the properties and knowledge of market by property owners were among the possible solutions suggested to reduce the increasing vacancy rates.