Commercial real estate is thriving in Kenya, East Africa's largest economy.
The country’s multi-layered economy, which is anticipated to be worth $151 billion (Sh20.9 trillion) by 2028, and political stability, have helped to cement its position as a rising African star.
A well-structured services sector which is strongly supported by key financial institutions as well as a healthy agricultural sector bode well for the future of the country.
Telecommunications companies, business process outsourcing centres, other information technology service providers and corporations are all looking to rent offices and industrial and logistics properties across Kenya.
Asset classes like industrial, housing, data centres, and corporate and diplomatic housing are gaining momentum in Kenya. On the residential side, there are two sub-sectors increasing in demand, the first being purpose-built student accommodation on the back of an increase in demand for quality accommodation among higher learning institutions.
Earlier this year, Absa signed an Sh6.7 billion financing arrangement with Acorn Development-Real Estate Investment Trust (D-REIT) Student Accommodation to support the development of up to 10 purpose-built student accommodation (PBSA) projects in Nairobi and its environs. The second asset class is affordable housing, which has been driven by the government’s drive to reduce the housing deficit by 250,000 units per year.
Looking ahead, the investment case for both specialisations of residential property is strong and will persist.
Kenya’s population is young with a median age of 20 years. People need to live in decent homes. There are also youth coming from other African countries to study in Kenyan universities and at Kenyan software coding schools.
There is also growing demand for light industrial warehousing space which has been spurred by the growth in e-commerce. We are also seeing more discussions around data centres and satellite hospitals.
From an investment perspective, the commercial real estate industry in Kenya has also begun to attract a wider variety of owners. We have observed a diversified pool of investors either acquiring or developing large-scale real estate projects.
We have seen an increase in the number of pension funds wanting to develop affordable housing units, Saving and Credit Co-operatives (Saccos) and international players coming in to acquire residential units.
On our part as financial institutions, we are encouraging ordinary East Africans to invest some of their savings in listed stocks which can provided them with consistent income returns. Listed funds will also draw private equity to the East African region.
Zaharaa Khanbhai is Head of Commercial Property Finance, East Africa, Absa Bank Kenya.