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Economy, global brands to drive real estate in 2017

The growth of real estate in 2017 will be driven by economic growth and entry of global brands dealing in vehicle manufacture, retail chains and hotels, says a new report.

The Cytonn’s Investments Business and Market Outlook 2017 report released on Monday projects Kenya’s 2017 gross domestic product to grow at between 5.4 per cent and 5.7 per cent.

The economic growth, the report, says will be supported by government expenditure on infrastructure, recovery of the tourism sector and the continued growth of the construction sector.

It says a number of global brands, including Wrigley’s, entered the Kenyan market in 2016, with Volkswagen announcing plans to set up shop in Kenya this year.

“These, together with the growing small and medium businesses, will lead to increased demand for office, industrial as well as residential real estate to house the offices, products and employment, respectively,” said the report.

The global brands and multinational companies’ entry into Kenya has created demand for Grade A offices, leading to an oversupply in Westlands and Gigiri. This has offered multinational companies more options to choose from when selecting ideal locations to headquarter their regional operations.

“We expect to see more tenants upgrading to Grade A space from
B and C grade accommodation, leaving large vacancies in those sectors,” said a Nairobi City Report released in April 2016.

Large housing deficit, demographic trends such as the growing middle-class, continued improvement in infrastructure and better operating and legal environments will also drive real estate growth in 2017.

Last year, Kenya’s standing improved by 21 places in the World Bank ease of doing business report, signalling that a raft of business reforms initiated by the government were paying off.

The Doing Business 2017 report released in October last year showed that Kenya was placed at position 92 out of 190 countries surveyed, with Mauritius and Rwanda outpacing Kenya at 49th and 56th places, respectively.

“Reducing the cost of doing business and encouraging private sector innovation, entrepreneurship and business expansion is a key prerequisite to achieving strong and sustained economic growth and poverty reduction,” said the National Treasury Cabinet Secretary Henry Rotich in his 2015/16 budget statement.

Kenya’s emerging middle-class is wealthier than their peers in developed economies such as Britain and the United States, according to a report released in October 2015.

The Standard Chartered study, The Emerging Affluence Report 2015, also showed that Kenya’s middle-class saves six times more than their American and British peers in the West.

“While emerging affluent Kenyans have a cautious outlook for growth in Kenya, they are confident in their personal finances. Funding children’s education is the key spending priority in the next year,” said the report.

In the next five years, said the report, they plan to buy property, mainly for investment purposes.

It is for this reason that many developers are now coming up with housing projects that target the middle-class who have disposable income.