The Nairobi Property has witnessed a re-balancing in the supply and demand in the high-end market thus, no indication of a bubble according to Real estate consultancy Knight Frank Kenya.
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 percent over the past five years.”
Knight Frank Kenya says their latest data showed 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 to the Prime Global Cities Index, prime residential prices decreased by a marginal 0.4 percent in the 12 months to September, with transactions happening in low volumes. Rents, however, decreased by 9.2 percent in the year to June, with a decline of only 1.5 percent in the second quarter of 2016.
The current supply exceeds demand. Commonly being leased in the range of 1,000-3,500 sqft. It is projected that approximately 3 million sqft will have come online by the end of the year.
Nairobi still remains a regional hub and growth is expected to resume when small scale oil production commences.
In retail, the widening variety of developments has attracted international brands such as Foschini (Sterns) and Carrefour, promising an upscale experience for shoppers in malls.
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In industrial property, scarcity of high quality logistics and warehousing space, particularly in Nairobi, has created opportunities for development.
Major Logistics and Industrial Property Development across SSA
It is anticipated that prospects in the high-end property market will improve significantly after the next 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 according to Woodhams.