At Week #16 of 2021, the following are Kenya Real Estate and Development Trends that are influencing Investment Decisions in Kenya Real Estate Market.
A.) KENYA REAL ESTATE TRENDS
i.) Satellite towns continue to anchor real estate sector rebound
Nairobi Satellite towns, regarded as the Capital’s dormitory for their popularity with the working class, continue to anchor the rebound of the Kenya real estate sector. According to a new report covering the performance of the Kenya real estate sector through the first quarter of 2021 to March 2021 shows improved residential sector and land returns anchored on the growth of the satellite towns.
Total return to investors in the quarter in the residential sub-sector, for instance, averaged 5.1 per cent from 4.7 per cent in 2019, while land recorded an annualized capital appreciation of 2.8 per cent. At the same time, apartments in satellite towns averaged the highest return in the residential sector at 5.4 per cent, while unserviced land in these towns recorded a 7.2 per cent average surge in prices, boosting real estate recovery. The report indicates that Satellite towns are witnessing increased activity, with people trying to look for affordable home options, supporting the real estate sector’s performance. Furthermore, the attractiveness of the satellite towns has further been anchored on improved infrastructure, which has made Central Business District (CBD) easily accessible. Moreover, price points in satellite towns have presented potential homeowners and investors with attractive entry points to make the switch from the suburbs.
ii.) Shifting customer demand continues to shape the warehousing market
Kenya’s industrial real estate sector is undergoing a transformation, with the traditional design of warehouses giving way to modern ones that are located in more convenient locations. Clients are now demanding a serene location different from the congested Industrial Area, Baba Dogo, and Mombasa Road areas of Nairobi, where most of the country’s old warehouses are located. Industrial parks are now moving to areas within Nairobi’s periphery such as Kiambu and Machakos counties, where they are easily accessible and are still in close proximity to key infrastructural developments such as the airport and railway termini.
The continued shift in taste is attributed to the changing clientele who prefer high-quality stock, which allows for modern retailing, distribution, and manufacturing practices. Modern industrial parks such as Tatu Industrial Park which is located in Ruiru, Infinity along the Eastern Bypass and Tilisi in Limuru, Kiambu county, have sprung up to meet the new demand. According to the Knight Frank Africa report 2020/21, the country will continue to witness more modern industrial developments away from the traditional industrial spaces due to the heightened infrastructural development witnessed in the country.
B.) GLOBAL REAL ESTATE TRENDS
At Week #16 of 2021, the following are the Global Real Estate and Development Trends that are influencing Investment Decisions in Kenya Real Estate Market.
i.) Capital flows’ recovery continues to pick up the pace
Real estate capital markets saw a continued rebound in activity in the final quarter of 2020, with the pace of quarterly declines decelerating. Robust transaction volumes during Q4, which were down a moderate 21% year-on-year, helped push full-year volumes to US$762 billion. Western countries with sectorial diversity, scale, and transparency led the recovery over the past three months in quarter 1 of 2021, notably France, Germany, and the United States. Investor interest gained momentum in gateway markets, particularly in Europe and Asia, as well as in growing talent hubs.
A divergent appetite for risk remains prevalent for both investors and lenders in Kenya and globally, with high-quality, core products seeing the deepest liquidity. Sectors offering growth or stability, such as logistics and living assets, are experiencing more resilient pricing. However, as bid-ask spreads continue to converge and risk aversion begins to subside, broader gains are poised to accelerate, particularly in segments of the office, retail and hospitality sectors.
ii.) Companies around the Globe continues to sell their Real Estate to preserve liquidity
Real estate companies around the globe are selling record amounts of real estate as they rush to shore up their Covid-19-battered balance sheets. According to Jones Lang LaSalle Inc. (JLL), firms across Europe, the Middle East and Africa sold 27 billion euros ($32 billion) of corporate properties in 2020. That was slightly more than what was sold in 2019, even as overall real estate deals collapsed during the pandemic.
According to JLL, companies in Kenya and around the globe are ditching property investment to preserve capital and release liquidity, as well as to reshape their portfolios to support post-pandemic business plans. Of the real estate sales, a third of corporate sales were office properties, with volumes jumping 10% from 2019. According to Real Capital Analytics data, all types of commercial real estate sales in Europe plunged by 27% in 2020, with this percentage likely to surge in 2021. Many of these real estate sales involved leaseback agreements, allowing companies to access capital while maintaining their premises. The forced shift to home working is also provoking many businesses to reconsider how much real estate they need. According to JLL EMEA Corporate Solutions CEO Mark Caskey, there is a wholesale rethink from many enterprises on their relationship to real estate.
Writer of the Article:
This Article 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:
- Feasibility Studies and Market Research.
- Project Finance and Capital Raising.
- Joint Venture & Finance Structuring.
- Project Management.
- Investment Design Appraisal.
- Quantity Surveying
- Construction Cost Consultancy
- Physical Planning and Planning Permissions
- Environmental Management and Impact Assessment
- Real Estate Development and Structured Investment Solutions
- Property Valuation
- Marketing and Property Sales Agency
- Property Management and Facility Management
- Office: Navigators, Kindaruma Road, Nairobi.
- Website: buildafrique.com
- Email: [email protected]
- Tel: +254 20 8058493 / Mobile: +254 722 474285