2016 bad year for property developers, says report

2016 was not a good year for property developers in Nairobi as a number of residential and commercial spaces went unoccupied.

According to property consultancy Knight Frank, the property market experienced an oversupply for the larger part of the year with developers’ returns on investment shrinking.

The upcoming elections have also dampened real estate market as investors kept off from venturing into new business until after the 2017 elections.

Knight Frank Managing Director Ben Woodhams said that both the transactions and price of prime residential spaces dropped in what is a clear indicator of a struggling economy.

Prices of prime residential spaces dropped in Nairobi by 0.4 per cent to September. They declined further by 2.3 per cent in quarter three (Q3).

“Transactions happened in low volumes as buyers looked at longer term capital gains,” said Woodhams.
Rentals went down by 9.2 per cent in the year to June as the market grappled with an oversupply of spaces. There was a slight decline in Q2 with the rentals dropping by 1.5 per cent.

But Woodhams was quick at dispelling fears that the market might be crashing. “This is not a crush by any means. It is just a slight imbalance between demand and supply,” explained Woodhams who added that the market is likely to rebound after the elections.

Sales also stagnated in the first-half of the year, according to Knight Frank.

Woodhams, said the delayed construction was due to next year's elections. He said that a scale down in consumption was due to the exit of multinational expatriates, especially in the oil sector following a slump in the global oil prices.

Woodhams said that they expected more than three million square feet of office spaces to come online. This is even as the supply of office space exceeds demand.