Demand for smaller retail spaces increases amid Covid-19, and other REAL ESTATE TRENDS that are influencing Investment Decisions in Kenya Real Estate Market – WEEK #12 of 2021.

Posted on  |  Author Njoroge

At Week #13 of 2021, the following are the Kenya Real Estate and Development Trends that are influencing Investment Decisions in Kenya Real Estate Market.

A.) KENYA REAL ESTATE TRENDS

i.) Demand for smaller retail spaces increase amid the Covid-19 pandemic

Covid-19 restrictive measures in 2020 continue to drive enterprises and SMEs to reduce the working spaces amid tough economic conditions. Furthermore, the acceptance of online shopping sites on websites and social media platforms (for example, Facebook, Instagram and Twitter) also informed the decision. Most tenants do not require large spaces in formal malls or use them as pick-up or drop-off points for deliveries.

As demand for larger spaces continues to dwindle, requests for smaller units continue with upward growth. This has driven building owner’s to repurpose large spaces that single tenants left into stalls. An example is the Reli Co-operative House and defunct Tuskys Magic in Nairobi CBD, which have been converted into stalls. Currently, building owners are interested in guaranteed income, as smaller units (stalls) translate to about 90 percent of rental income compared to a single tenant.

According to BuyRentKenya chief executive officer (CEO) Elizabeth Costabir, stalls are becoming popular as they are affordable in terms of monthly rents. She further notes that with many units, at least 80-90 percent of the rental income can easily come in easily compared to one large retailer meeting the rent payment and sustaining it for a long time. Furthermore, Knight Frank Kenya Retail Portfolio Manager Ashmi Shah reckons that stalls reduce the risk of reduced income if one or few tenants decide to leave. He further noted that their outlay is also lower compared to the malls to allow a variety of trades in the same space to give shoppers more choice.

ii.) More Nairobians move to gated communities amid the Covid-19

Amid the Covid-19 pandemic, more Nairobians are moving to gated estates as they escape the densely populated zones where chances of infection are high. More Nairobians are also in search of privacy, protection and prestige.

The trend has come in handy for real estate investors who have realized home buyers no longer just buy a home but a lifestyle, which gated communities provide. According to Knight Frank, in its latest wealth report, the need for privacy, more outdoor space, and relatively lower prices has made the purchase of houses in gated communities to increase.

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B.) GLOBAL REAL ESTATE TRENDS

At Week #13 of 2021, the following are the Global Real Estate and Development Trends that are influencing Investment Decisions in Kenya Real Estate Market.

i.) Plans to cut back on offices reduce in major cities globally

A new survey by the global accounting firm KPMG indicates that most major global companies no longer plan to reduce their use of office space after the coronavirus pandemic, though few expect business to return to normal in 2021. According to the survey, 17 percent of chief executives plan to cut back on offices, down from 67 percent from the survey conducted in August 2020. The survey indicates that downsizing has already taken place, or plans have changed as the impact of extended, unplanned, remote working has taken a toll on some employees.

According to the survey, many offices in London, New York, and other western cities have been vacant for months after health authorities ordered staff to work from home where possible, but with the roll-out of vaccines, some firms are planning to reopen while others have already reopened. In Kenya, most firms that had reopened in January 2021 are looking to close, while some will downsize following the government directive on Friday, 26th March 2021. As such, the occupancy rate in Kenya offices will continue to plummet, affecting the office sector’s cash flow.

The survey, which took place between 29th January 2021 and 4th March 2021, covered 500 firms with sales of over 500 million dollars based in 11 countries, including the United States, China, Japan, Germany and Britain.

ii.) Demand for golf real estate increases globally

A global increase in demand for green spaces, wellness, and the opportunity to work from home is driving new interest in golf properties in the wake of the Covid-19 pandemic. Most buyers are leaving cities to golf resorts for their nature, fresh air and five-star services.

According to a new international audit by European Tour Destinations, a network of 30 world-class golf venues, consumer behavior shifts to golf properties are emerging trends in the global real estate.

According to the audit, Dubai and UK property buyers now account for 40% of real estate sales in golf estates, an increase of 10% year-on-year. In Portugal, the number of domestic buyers in golf estates has nearly doubled from 11% to 20% year on year, as of 2021.

The European Tour Destination further highlighted that golf property buyers are increasingly from local and domestic markets, often quitting city homes and making their purchase a permanent home rather than an investment. In Kenya, these residential communities are not yet appreciated due to their high-end nature, with most home buyers going for affordable housing units in mid-end communities.

Writer of the Report:

This Report is written by Buildafrique Consulting Group, Kenya multi-disciplinary consultancy, that offers END-TO-END DEVELOPMENT CONSULTANCY, REAL ESTATE, and PROJECT FINANCE solutions through specialized subsidiaries. Among our solutions includes:

  1. Feasibility Studies and Market Research.
  2. Project Finance and Capital Raising.
  3. Joint Venture & Finance Structuring.
  4. Project Management.
  5. Investment Design Appraisal.
  6. Quantity Surveying
  7. Construction Cost Consultancy
  8. Physical Planning and Planning Permissions
  9. Environmental Management and Impact Assessment
  10. Real Estate Development and Structured Investment Solutions
  11. Property Valuation
  12. Marketing and Property Sales Agency
  13. Property Management and Facility Management

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