Does Kenya real estate give hope?
Kenya is one of the most invested countries in the African continent. Does the Kenyan real estate interest in the international arena give hope? Will Kenya’s real estate sector gain value next year?
Investment management company Cytonn, Kenya real estate commented on. According to Cytonn, the real estate sector in Kenya has become a difficult investment option due to increasing demand and increased supply.
Cytonn’s senior investment analyst, Caleb Mugendi, said there is an oversupply of commercial offices of 5.3 million square feet, which is expected to grow to 5.7 million square feet in 2019.
Mugendi added: the retail segment has an oversupply of two million square feet that is expected to increase with the opening of malls, such as Crystal Rivers in Athi River. “The residential sector has increased supply in the middle to high-end residential sector, with a decreasing effective demand, hence recording a three per cent decline in occupancy rates in 2018.” Mr Mugendi explanied real estate sector is highly unpromising this year, adding that in the residential sector, their projection shows performance will remain flat.
However, some markets can perform well due to their location and accessibility and infrastructure.
“In the commercial office, we forecast a decline of the average rental yield to eight per cent from 8.1 per cent as a result of oversupply, with the average occupancy rates expected to decrease by 1.3 percentage points from 83.3 per cent to 82 per cent.”
Further, in retail, he said returns are expected to stagnate as a result of increased supply.
In the next year, the real estate sector in Kenya is expected to decline to 2.9 percent.
Despite these drawbacks, mixed-use projects remain popular. He says “The real estate sector is set to embrace the concept of mixed-use developments as investors diversify their real estate portfolios, given the thematic real estate space surplus.”
Sevdenur Demir / realestatecoulisse.com
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