Kenya’s real estate market has expanded exponentially over the past 20 years, as shown by its growth in GDP contribution, which increased from 10 percent in 2000 to 12 percent in 2012 and 13 percent in 2016. Driving the growth are; improvements to infrastructure, such as upgraded major airports, better roads, and utility connections. Stable GDP growth, which over the past five years has averaged 5 point 4 percent compared to the Sub-Saharan region’s average of 4 point 1 percent.
Rapid urbanization at 44% p., for example, is a demographic trend. a population growth rate of 2.6 percent on average, compared to 2.5 percent worldwide and high total returns, which compare favourably to the traditional asset classes’ average returns of 12 point 4 percent at 25 point 0. As a result, as investors sought high returns and consumers sought aspirational lifestyles and quality goods, distinct trends have emerged across the various real estate themes.
Along with the country’s improving economy, the Kenyan office market has expanded quickly over the past ten years as businesses increased the size of their operations and multinational corporations continued to establish bases in the nation, which is regarded as a major economic hub in Sub-Saharan Africa and a key entryway to the East African market.
Due to changing consumer preferences and the demand for products of a high calibre created by foreign corporations, the sector is experiencing new trends as it expands. Due to the expansion of SMEs, serviced offices are gradually gaining popularity. As the dynamics of office space design and demand continue to develop, more developers are offering semi-fitted offices by including amenities like kitchen cabinets and partitions. Developers are increasingly using green building technology as it has been shown to boost worker productivity in addition to lowering operating costs and providing a safe and healthy environment for employees.
Another recent trend that has transformed the office space is the smart office. with features like a fully-stocked gym, cafeterias, and accessible entrances. The modern office is furnished with contemporary amenities to make it feel like home and to satisfy client demands. Today’s expanding modern offices are motivated by quality, ambiance, elegance, and tranquillity.
Significant expansion of mall space has been a key factor in the retail industry’s growth. With a growing middle class and more disposable income, international and local developers pounced on the chance to tap into the ready market with the mall concept, making Kenya, with 391,000 square meters, the second-largest mall space in Africa, behind South Africa. The Two Rivers Mall, Garden City, and The Hub are some of the most notable constructions. Additionally, the middle class has drawn foreign retailers like Carrefour, eateries like Burger King and Subway, and sporting goods stores like Adidas. The nation is also rapidly urbanizing, making technology a less important need. Kenya is one of the continent’s top technology hubs and is well known abroad for its unique mobile money transfer system. With a high internet penetration rate of 70%, online marketplaces like OLX, Rupu, and Jumia have experienced tremendous success as a result of the slow but steady growth of online shopping.
Similar to the office sector, modern industrial parks like Tatu City Industrial Park, Infinity Industrial Park, and Tilisi have emerged as a result of the gradual change in the industrial sector brought about by a changing consumer base that prefers high-quality products. The modern parks are also constructed to support the live, work, and play philosophy. The new market also demands a calm location that is distinct from the crowded Nairobi Industrial Area, Baba Dogo, and Mombasa Road areas, where the majority of Kenya’s old stock, primarily out-of-date warehouses, is located. To accomplish this, the new industrial parks are now relocating to areas on the outskirts of Nairobi, such as Kiambu and Machakos counties, where they are still conveniently close to the main airport and railway terminals and are therefore easily accessible.
The residential sector has experienced the highest demand due to the nation’s housing shortage, which currently stands at 200,000 units per year and has grown to over 2 million units over time. This is due to the country’s rapidly expanding population and, more specifically, its growing middle class. To make up for the 61 percent of urban dwellers who live in slums and the shortage of student housing, which accounts for 40 percent of the deficit, the biggest demand has been for affordable housing. As a result, we have seen an increase in the number of developers using low-cost housing construction techniques, like alternative building technologies, which are known to cut construction costs by as much as 50%. A live-work-play lifestyle is also more in demand, and Kiambu and Machakos counties are becoming hotspots for master planned communities. Such notable master-planned communities include Konza City, Tatu City, and Cytonn’s Newtown.
The tourism industry, which has been experiencing a volume rebound, heavily influences the hospitality industry. Earnings increased for the first time since 2012, rising from Kshs 84.6 billion in 2015 to Kshs 99.7 billion in 2016, while the number of foreign arrivals increased by 13.5 percent from 1.2 million in 2015 to 1.3 million in 2016. The government’s push for MICE (meetings, incentives, conferences, and exhibitions) has played a significant role in boosting the number of international visitors, who are the mainstay of the hospitality sector. Developers are converting standard locations into lodging facilities for hotels in an effort to diversify their revenue sources. In addition, investors are becoming more interested in a novel idea called dual-branding, which entails combining two concepts, like serviced apartments and a hotel, in the same structure.
As a result of infrastructure development, land values have increased, and a growing population has ensured steady demand. Investors are increasingly purchasing land with the intention of selling it in the future in the hope that land values will rise; this practice is known as land speculation. Land banking is the idea that a piece of land can be temporarily used to make money every day. Developers are also adding value to saleable plots through agribusiness and providing clients with seasonal returns in an effort to draw customers. Agriculture activities, agro-insurance, comprehensive farm management services, and a guaranteed market for the produce are all included in the idea known as agribusiness.
In conclusion, ongoing investment has resulted from players both domestic and abroad’s continued interest in Kenya’s real estate market.
By Real Estate, Locally.