RENTAL INCOMES IN HIGH-END PROPERTY MARKET BEGIN TO DIP Kenya: Kenya’s property market registered mixed growth results during the first six months of 2014, according to a report by Goldman Forbes Holdings Ltd. Though residential and commercial segments posted declined yields and slowed growth during the period under review, the development of shopping malls, warehousing and business parks increased. In the residential market, statistics indicate that the sub-sector is currently experiencing a rent correction in middle-upper and high-end properties. An analysis of areas such as Kileleshwa, Kilimani and Lavington, which are representative of the upper-middle property market, saw their rental incomes — usually in the range of Sh100,000 to Sh120,000 — shrink by between 15 per cent and 17 per cent. The dip has resulted in some houses in these areas falling vacant over the past 12 months. Landlords in areas such as Runda, Gigiri, Rosslyn and Muthaiga, representative of high-end property areas, recorded a drop in monthly rental incomes — which range between Sh300,000 and Sh350,000 — of 8 per cent to 10 per cent. “However, some areas like Parklands and Westlands remain resilient due to their proximity to the United Nations headquarters, and they are preferred areas for serviced and furnished apartments by most foreigners,” the report, which tracked trends in the market between January and June this year, indicates. Depressed growth For the lower-middle income segment of residential property, rental yields remained steady in growth but with lower momentum than in previous years. The story is replicated in the commercial real estate sector, which, despite showing a lot of growth in the past six years, has begun to slow down “on the back of low economic growth”. The report adds that large towns, such as Mombasa, Nakuru and Kisumu, remain stagnant in this segment as there is minimal construction of office-grade commercial property. However, there seems to be a shift to the development of shopping centres. For instance, next year, Naivasha expects to open the doors to Buffalo Mall, the first shopping centre of its kind in the town, which broke ground early this year. Goldman Forbes cites a global retail report from Cushman & Wakefield that indicates a positive global trend in shopping centre development. And with the oversubscription of the Eurobond, which indicates investor confidence in the Kenyan market, it is expected that major real estate projects will be initiated in major towns in 2015 and beyond. The success of the bond is also expected to ease pressure on local interest rates, allowing more capital allocation to the property sector. Increased investment Another segment that has reported increased investment is warehousing and industrial parks. “Growth in this sector continues undeterred as demand outstrips supply,” the report notes. “For property developers, this segment of real estate is profitable as construction is quicker and cheaper, and the buildings can be converted into offices or other functionalities with ease.” The returns are modest compared to office-grade property space, but are more stable, with long leases. -The Standard
Posted on: Fri, 04 Jul 2014 19:50:09 +0000
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