For the last couple of years, talk of the rising African middle class has made headlines across the world. In just over 15 years, the consumer expenditure rose from $470 billion to $1.1 trillion in 2016 according to The Harvard Business Review. Also contributing to the growth include high urbanization levels, a fast-growing population, and growth in per capita GDP. In Kenya, investors have been seen angling at the share of the pie as demonstrated by the rise of the mall economy over the last ten years.

In total, Kenya has an approximate number of 60 malls, more than half of which, are located in Nairobi. Time and again, the question of whether the aggressive development of mall space is sustainable has arisen.

Facts suggest that growing incomes have increased the spending power of buyers. Some prefer the general setting of malls; as kids can wander freely yet remain safe, and the availability of high-quality products in varieties. There is also a significant proportion of customers who enjoy the distinctiveness of the mall experience which deems spending in these spaces worth it.

However, it is also true that many malls are underperforming due to a large number of retail transactions which occur through informal channels. Some multinationals companies, many of whom sell their merchandises in malls, are finding their businesses in the region underachieving, with a sizeable 30 percent struggling to hit their target revenues.

According to Deloitte’s African Powers of Retailing report 2015, the informal economy accounts for 90 percent of retail transactions which is attributed to, by factors such as a variety of cheaper product alternatives, and accessibility. For the majority of consumers, the mall economy is not as economical as products have the added price of a mall space rent, the quality of fresh produce is in doubt, and high inaccessibility owing to traffic congestions in malls.

With the upcoming government initiative to build 1 million affordable houses and the commercial real estate investment alternative in middle-income residential areas interconnecting to low-income residential areas, investors will be able to tap into the larger population recording high retail transaction numbers. As evidenced in various parts of Nairobi, malls which have been set up in residential estates are more stable due to the increased ease of convenience in accessibility and the availability of all-time customers. However, the full potential in neighborhood commercial real estate can be achieved by not limiting retail spaces to offices and traditional retail spaces. Creating recreational and entertainment options such as open-air theatre spaces coupled in art oriented estates, and building integrated fresh produce markets are some of the ways to make commercial areas in neighborhoods more people oriented.

A population living in an urban environment, desire lots of amenities nearby. Fitting the profile of people who live and visit a neighborhood is crucial as investors search for retail tenants. Also, the type of commercial brands and companies going into a space to attract tenants has to fit the profile of the neighborhood.

Additionally, increased traffic congestions along roads nearby a community may already have made housing along those roads less desired, resulting in lower property maintenance and a decline in property values. Commercial uses may be the better fit along these roads. On a larger scale, the community may have a goal of plummeting vehicle trips, which would, in turn, reduce the need for costly road repairs on arterials throughout the community. Introducing commercial uses closer to these neighborhoods can help achieve that goal by reducing the number of length and automobile trips while increasing concentration on the retail spaces.

For most residential commercial spaces, it is a question of where a locale’s workforce want to be both before, and after work and convenience of those facilities.

KENYA REAL ESTATE TRENDS

Start Up Companies revolutionizing Real Estate

Only a couple of years ago, the real estate sector heavily relied on real estate agents as the group of people with the most understanding of the industry. However, the development of the online property portal has allowed real estate to become more accessible, providing a wide range of property for sale, purchase, and rent.

Other than allowing transparency through the elimination of intermediaries, startups are now streamlining property management, allowing building owners the freedom to centralize their marketing materials and budgets.

Lamudi Kenya is one of the startups offering offline services to home buyers who are not connected on the internet in a bid to create an all-inclusive platform. As the revolution rows, more startups are expanding their services to allow owners to manage their workflow by enabling them to determine their most valuable agents and keep track of tenant interactions.

Kenya Growing Adoption of Smart Buildings

Smart workspaces which have been on the rise contributed to the growing number of start-ups in Kenya require smart buildings which result in the creation of smart cities. While Africa is considered to be lagging in harnessing the benefits of smart city development, Kenya has been on the lead into embracing this new technology-rich ecosystem. In 2016, the Konza Technopolis Development Authority entered an agreement with the UN to homogenize the development of what is considered will lead to the formation of the first African smart city. The Konza City plan is based on the integration of IoT, whose exponential growth is evidenced by the growing rollouts of IoT deployments, particularly for global sustainability.

Additionally, Safaricom is one of the leading telecommunications that is collaborating with real estate developers to build smart buildings in Kenya. The initiative, dubbed Jiji Smart, was initiated in 2015 and it allows for the integration of fiber cabling smart buildings providing internet connections and other communication solutions. The government has been on the forefront to support the move to smart buildings. As the collaboration between the private and the public sector grows, the real estate sector, through the use of technology is set to transform.

GLOBAL REAL ESTATE TRENDS

Rising demand for short term rental Home-stays in Vietnam

According to Phu Vinh Real Estate Company, the popularity of homestays is on the rise gaining preference over condo-hotels as a form of lodging among tourists. Investment in homestays has increased in tourist areas such as Hoi An, Sapa, and Cu Chi. This is mainly attributed to low management costs to both investors and customers. The high and sustainable profit return of about 6 percent per annum is one of the driving factors for this investment.

In a survey by Savills real estate, Ho Chi Minh City was ranked third in a study of 50 cities worldwide for rental property growth in late 2017, while Vietnam’s southern metropolis was ranked fifth regarding investment prospects and second for development prospects. A similar phenomenon is being experienced in Kenya as the demand for homestays grows. In Kenya, the market is driven by tourists looking to experience an authentic African feel. The concept is somewhat popular in the serene towns of Kenya including Nyeri, Nanyuki, Ngong, and Kiambu counties.

North America adopts resilient building in construction

Resilience in the construction industry is taking center stage in North American countries. This is due to the onslaught of hurricanes, heat waves, flooding, tornadoes, cold waves, and wildfires mainly in Canada and the USA. In 2017, Canada’s forest fires destroyed 2400 buildings, forcing 80000 residents to evacuate. In the USA, property owners reported having incurred losses nearing $ 400 million in 2017. In a bid to alleviate the effects of natural disasters, developers have resorted to building resilient sites and structure features.

Resilient projects underway include the raising of streets in Miami Beach and the building of earthquake resistant sky scrapper sans rebar in California. Canada has been on the forefront of for adaptation of resilient buildings to reduce vulnerability to climate change. In Kenya, there are some natural disasters, which each year, leave more people displaced.

Inadequate housing and unmaintained structures are some of the major causes of the collapse of structures otherwise necessary in communities. Resilient measures need to be put into place to ensure their functionality even when not in use.

This Week in the Kenya Real Estate Market

This week’s focus is on the sale and rental prices for 4 bedroom houses Nairobi’s Kyuna and Kilimani areas. Data used was acquired from listings by property firms in Nairobi, and analysis was done to provide a clear image of what to expect when purchasing a residential home in either of the two areas. Kilimani area rental prices were slightly higher in comparison to Kyuna. While the asking purchase prices in Kyuna were relatively higher compared to Kilimani.

4 – Bedroom Houses Rents

4 – Bedroom Houses Sales Price

Kenya’s Interest Rate Watch

Treasury bills were subscribed at 132.34% down from 138.3%, last week. The 91 –Day, 182-Day and 364 –Day bills yielded 8.045%, 10.424%, and 11.159% rates respectively with the 364 Day bills outperforming the rest at 171.53%.

Out of the 24 million government offered treasury bills, the total accepted bids were 31, 671, 840 million up from 28,054,130 the previous week.

Kenya Equities Market Watch

The total shares traded during the week increased by 104.66 percent up from 17908500 shares last week. Major indices – the NASI, the NSE 25 and the NSE 20 Share index declined by 0.952, 0.785, & 0.456 percent respectively. Market capitalization decreased by 0.950 percent indicating appreciation in prices.
The number of Equity deals during the week increased by 28 percent to 1205 deals this week while I-REIT deals remained at 6

Market Analysis Summary

Car & General dominated the gainer’s chart recording an 8.89 percent gain. Other top gainers of the week were Eaagads Consumer goods, Liberty Kenya, and Kenya Airways which closed the top 5 gainers of the week at 4.38 percent.
Among the top losers of the week were Longhorn Publishers, Home Afrika, and East African Cables closing at 4.72, 4.17 and 2.68 respectively.

Currency Highlights

Last week, the shilling strengthened against the US Dollar, the Euro and the Sterling Pound at 1.127, 3.305, and 4.388 respectively.
In East Africa, however, the shilling performed weakened against the Ugandan and Tanzanian shilling at 0.475 and 0.345 respectively.

This report is written by Buildafrique Consulting Group; a Kenya Real Estate Consultant and Development Solutions provider that offers End-to-End Financial, Development Management, and Investments Solutions in Real Estate, to allow Developer, Investors, and prospective Home Owners manage risks and realize value for their investments in a fast evolving Real Estate market.

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