Property prices and rents in the high end residential and commercial market segments peaked in 2016, owing to a rebalancing of supply and demand according to real estate consultancy firm, Knight Frank Kenya.
Knight Frank noted that prices have largely remained unchanged, while declines in rents, particularly for prime residential, are shrinking. Notably, the top-end of the market for residential and commercial property is dominated by expatriates and multinational occupiers.
According the company’s latest data, prime residential prices decreased by a marginal 0.4% in the 12 months to September, with transactions happening in low volumes. Rents, however, decreased by 9.2% in the year to June, with a decline of only 1.5% in the second quarter of 2016.
In the office market, supply currently exceeds uptake, with up to 3 million square feet expected to have come into the market in 2016. Office space prices and rents have plateaued, but activity is anticipated to rise as some multinationals trade up space, while others consolidate offices to single locations. Nairobi still remains a regional hub and growth is expected to resume when small scale oil production commences.
Ben Woodhams, Managing Director at Knight Frank Kenya, said: “The prime property segment is undergoing a normal property cycle. The pressure on rents is largely due to the current oversupply in the market. For buyers, long term capital gains continue to be attractive as values have increased by as much as 40% over the past five years.”
In retail, asking rents have remained unchanged since 2014 as more shopping centre developments come into the market. The Hub Karen opened in February, while Rosslyn Riviera and Two Rivers – both on Limuru Road – are expected to start trading in early 2017. The widening variety of retail developments has attracted international brands such as Foschini (Sterns) and Carrefour, promising an upscale experience for shoppers in malls.
In industrial property, scarcity of high quality logistics and warehousing space, particularly in Nairobi, has created opportunities for development. Sophisticated occupiers in this segment require purpose-built facilities of high specifications to support modern manufacturing, storage and distribution processes.
It is anticipated that prospects in the high-end property market will improve significantly after next year’s general election, helped by faster GDP growth and improving global oil prices that could spur local exploration and production. Available data shows key indicators such as cement production and consumption, and the value of approved building plans, improved significantly in the first eight months of the year.
“Cement consumption has risen in tandem with production due to the ongoing construction projects in real estate and infrastructure. Similarly, the higher value of approved building plans in Nairobi in 2016 indicates that developers are preparing to build after elections, which is a show of confidence,” said Woodhamsthe.
