Business owners in Kisumu’s Central Business District are raising concerns over a surge in rental costs, which they say are jeopardising the survival of small and medium enterprises (SMEs) in the area.
Many traders argue that steep rental fees are eating into their capital, making it difficult to sustain their businesses in an already competitive environment.
New businesses are particularly vulnerable, with many struggling to stay afloat and ultimately closing their doors within a few months of establishment.
Even long-standing businesses are finding it harder to cope with the escalating rental costs, which they claim are not aligned with the profits they generate on a daily basis. The high rents have become a significant barrier to entrepreneurship in the CBD, with traders calling on landlords to reconsider their pricing strategies.
A survey of businesses in the area shows a clear trend of excessive rental charges, which have driven many traders out of the city’s prime commercial hub.
“Many of us can’t cope with the exorbitant rental costs. People invest heavily to start their businesses, but soon after, they struggle and eventually close due to financial instability,” said John Odhiambo, a trader in Kisumu.
Profit margins
His sentiment is shared by many, who report that after paying rent, little is left to reinvest in the business, let alone make a profit. Linda Atieno, a phone vendor, echoed the sentiment. “This has created an unsustainable business environment in the heart of the city, forcing many businesses to shut down unexpectedly,” she said.
Atieno explained that her rent had increased from Sh30,000 to Sh35,000 over the last three years, but her profit margins have remained stagnant. She was forced to raise prices on some products by Sh500 to Sh1,000 just to cover costs.
Many investors are finding it increasingly difficult to start businesses in Kisumu due to the high rent, which has deterred potential entrepreneurs from venturing into the county.
According to a real estate agent who spoke to the Business Hub, as more people move into the lakeside city for better job opportunities, trade, educational institutions, and improved living standards, they increase the demand for housing, both commercial and residential.
“When demand outstrips supply, landlords can raise rents because more people are competing for available rental properties,’’ the agent who requested anonymity said. Trends in the real estate market, including speculative buying or selling and shifts in investment patterns, he disclosed can also influence rental prices.’
The limited land availability within the city for new developments is also restricting the supply of new rental properties making the existing properties charge higher rents as owners capitalise on the demand.
The traders said they have raised complaints with Kenya National Chamber of Commerce and Industry (KNCCI), but are yet to see any resolution.
Nyanza branch KNCCI Chairman, Israel Agina, acknowledged the traders’ concerns but noted that the chamber has limited influence over rent prices in a liberalised market economy. “The forces of supply and demand determine rental rates, and property owners have the freedom to set them based on market conditions,” he explained.
Despite this, Agina disclosed, KNCCI is taking steps to engage landlords in discussions aimed at addressing the issue.
He emphasised the importance of balanced rent policies that encourage business growth while maintaining sustainability in Kisumu’s CBD.
Price controls
He also hinted that the government is considering reintroducing price controls, a measure that was abolished when Kenya embraced a free-market economy.
Traders are hopeful that rent controls could provide much-needed relief for struggling businesses, though concerns remain about balancing the interests of property owners and maintaining a healthy investment environment.
Millicent Auma, another phone accessories vendor, highlighted the challenges caused by rising rent.
“Every time the rent goes up, we have to increase our prices just to keep up. But that affects our customers, too. They have less purchasing power,” she said.
Like many other small business owners, Auma has been forced to pass on the burden of rising costs to her customers.
Some businesses, unable to keep up with high rental costs, are resorting to delaying payments or relocating to areas with cheaper rents. Others are pushing back against their landlords in the hope of negotiating more favourable terms through KNCCI’s intervention.
