Retail space has been the hardest hit sector in the property market in the last six months as the value and rents for prime residential properties continued to fall, a new report shows.
The fall has been attributed to various factors, including oversupply and Covid-19.
According to the report, prime rental rates in retail fell to Sh453 ($4.2) per square foot monthly from Sh496 ($4.6) with occupancy levels averaging 80 per cent.
“The decline in rental rates was mainly attributed to the continued oversupply of retail space in certain locations, the current economic climate and reduced consumer spending due to a reduction in disposable income,” said real estate firm Knight Frank in its half-year Kenya Market Update report.
The report notes that landlords provided concessions and incentives on case by case basis to retain and attract new occupiers during the period. According to Knight Frank, prime residential prices in Nairobi fell 2.9 per cent in the first half of this year compared to a decline of 1.8 per cent in the same period lasting year.
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This pushed the annual decline to 5.1 per cent in the year to June. Prime residential rents also declined over the review period by 6.55 per cent compared to 1.67 per cent over a similar period last year, taking the annual decline to 7.62 per cent in the year to June.
“The decline in both prime residential rents and prices is mainly attributed to the continued oversupply of residential developments, unfavourable economic climate, low liquidity and expatriates returning home,” said the report.
Fewer transactions were also completed during the period as land registries remained closed owing to Covid-19. This saw potential buyers hold back land purchases.
“We expect prime residential rents to decline in the second half of 2020 due to the projected negative economic growth, tighter liquidity, continued relocation of expatriates and less disposable income from potential tenants,” said the report.
Knight Frank MD Ben Woodhams said prime monthly rents in Nairobi’s office market remained unchanged at Sh140 per square foot owing to Covid-19.