Nairobi Ranked World’s Cheapest City in  the Construction Sector

A report ranking international construction market survey in cities around the world has declared Nairobi one of the cheapest city for construction despite declining competition and the high cost of land.

The report, ‘International construction market survey 2017’ themed Building momentum, by Turner and Townsend presented data analysed from 43 key markets around the world delivering greater insight into the global construction industry.

Nairobi has been rated, warmer as competition decreases and prices begin to rise compared to Kigali , Johannesburg and Kampala which are considered lukewarm. It is only Dar-es-salaam that has been rated hot – have a higher number of projects, and consequently there is less competition for tenders, which tends to drive up tender prices.

To identify the most expensive place to build, the average build cost in USD of six different types of construction was assessed:
▪ apartment high-rise
▪ office block prestige
▪large warehouse distribution centre
▪ general hospital
▪ primary and secondary school
▪ shopping centre including mall.

“At the other end of the scale, Bangalore, Beijing, Dar es Salaam, Nairobi and Warsaw make up the five cheapest places to build, with Nairobi cheapest,” the report reads.

The most expensive locations are Hong Kong, London, New York, San Francisco and Zurich as they maintain their status as the five costliest places to build. The high growth in New York has seen the city overtake Zurich as the most expensive place to build with costs increasing by 3.5 percent since last year, whereas costs remained largely flat in Zurich.

The average cost of constructing any of the above six types buildings per m² in Nairobi is USD 683.49 compared to Dar es Salaam, where it costs USD 803.52 per m². Kigali was rated Africa’s most expensive city to build, at USD 1,117.12 per m².
New York overtook Zurich as the most expensive city in which to build, with an average cost of USD3,806.92 per m² followed by San Francisco (USD3,549.17 per m2) and Zurich (USD 3,527.87 per m2). Other most expensive locations are Hong Kong and London.

In the survey, Kenya’s real estate and construction sectors continue to be key drivers of economic growth, as they have been for the last five years, and the Kenyan construction industry contributes 7 percent of GDP.  however,”With elections scheduled for 2017, there is a possibility that investors could defer investment decisions until after the elections. Election-related expenditure could also result in a cutback in infrastructure spending.”

Cytonn Real Estate, 2017 Cytonn Nairobi Metropolitan Area Land Report. focusing on the performance of land in the Nairobi Metropolitan Area between 2011 and 2016 based on research conducted in 18 suburbs and 11 satellite towns in the Nairobi Metropolitan Area states that, “Land prices had a positive growth rate across all areas in the Nairobi Metropolitan Area, growing with a 5-year Compounded Annual Growth Rate, “CAGR” of 19.4 percent, and a 5-year price change of 2.50x over the same period.”

Head of Private Equity Real Estate, Shiv Arora, noted that, “The key drivers for the increments in land prices have mainly been population growth, rapid urbanisation, improved infrastructure opening up areas for development, legal reforms easing land transactions and economic growth increasing disposable income.”