Mixed fortunes: No joy for low and middle-segment buyers

Kisaju view park houses in Kajiado county in Isinya taken on 31st March 2015. [PHOTO:WILBERFORCE OKWIRI/STANDARD]

Kenya: A recently released report shows that while the top end of the market reported a slowdown towards the end of 2014, demand in the low and middle-income residential areas far outstripped supply.

“Activity (in the high-end residential segment) has been affected by an oversupply of prime property and security concerns, which have been most evident in Nairobi and Mombasa. However, the low to middle-income residential market remained resilient, with demand for such housing still outstripping supply,” says the Knight Frank Africa Report for 2015.

What this means is that prices at the top end of the market could see an evening out if the trend continues.

There is no joy, however, for aspiring homeowners in the lowers segments as the continued status of demand being higher than supply means prices might not be coming down any time soon.

The report delivers a mixed bag of news for the office market but is positively optimistic about the retail market.

“In 2014, the market moved from a position of stability to having an oversupply of Grade B office space. There is a relative shortage of Grade A developments,” it says.

The report recognises the interest from multinationals in sub-Saharan Africa, and the effect of office demand. “Increased numbers of multinational companies are seeking offices in African cities, generating demand for high quality space, particularly in key regional hubs such as Nairobi and Lagos.”

On the retail end of the business, there has been increased interest from international brands seeking an entry into the Kenyan market. This has driven up demand for retail space, which would explain the boom in mall construction.

 Increased spending

This demand for retail space has also been driven up by the increasing spending power of Kenyan consumers and rising demand for overseas brands, according to the report.

“Brands such as Carrefour, Game and Debenhams are all set to make their debuts in the Kenyan market during 2015.... This has encouraged a strong level of retail construction, with over 220,000 square metres of retail space currently under development and due for delivery in the near future.”

At the same time, pre-leasing levels in the new schemes have been strong with the report citing the forthcoming Garden City Mall, which was “96 per cent pre-let as at December 2014.”


The industrial market is a different kettle of fish, however, with the report issuing a harsh indictment: “Activity has been restricted by the outdated nature of Kenya’s industrial stock, which does not meet the needs of major manufacturing companies.”

There is, however, a caveat that industrial requirements and demand for high quality warehouses may be satisfied by large-scale developments in the pipeline such as Konza City, Tatu City and KenGen’s Industrial Park

The overall outlook for the continent is positive with average economic growth of five per cent per annum since 2000. “The larger emerging economies of this region, such as Nigeria, Kenya, Angola and Ethiopia have increasingly been the key drivers of the continent’s growth,” says the report.

Kenya’s neighbour to the north, Ethiopia, gets a special mention as one of Africa’s fastest growing economies.

 Investor interest

As a boon from the sustained growth in sub-Saharan Africa, these (Sub-Saharan markets) are attracting increased interest from international investors.

The report cites South Africa as the source of the most noteworthy flow of capital into this region. South African-based investors targeting the rest of Africa include, RMB Westport, affiliated to Rand Merchant Bank, Sanlam, Stanlib, Atterbury, Resilient, Ivora Capital, Delta International and Novare.

“A recent entrant is the Momentum Africa Real Estate Fund, which was launched in January 2015 with a $250 million (Sh23.5 billion) equity goal, and has a focus on Ghana, Kenya, Nigeria, Mozambique, Rwanda and Zambia,” says the Knight Frank Africa Report for 2015.