During the month of May, the real estate sector saw an overall increased activity in the residential sector, while the commercial office and hospitality sectors remained sluggish.
According to Cytonn Investments’ monthly report, in terms of market uptake, apartments accounted for 62.6 percent of all residential market’s uptake in Q1’2019, followed by maisonettes and bungalows at 23.4 percent and 12.0 percent, respectively.
Apartments, however, recorded 13.7 percent points decline from 76.3 percent in Q4’2018, a sign of subdued market activity. The dominance of apartments is an indication that the housing market is predominantly in the middle-income segment of the population.
Buyers’ housing preferences were largely influenced by a number of bedrooms and bathrooms, with the location being a key determinant in pricing.
“In line with our Cytonn Q1’2019 Markets Review, we expect the residential market to continue recording modest performance due to factors such as off-take financing, which continues to be elusive for home buyers, as well as insufficient credit advancement to developers” read the report.
The commercial office sector recorded minimal activity largely attributable to the tough economic environment especially as developers continue to experience constrained access to credit.
This is evidenced by relatively low private sector lending which currently stands at 4.9 percent, and the office space oversupply which came in at 5.2 million SQFT in 2019 according to Cytonn’s Nairobi Metropolitan Area Office Report 2019, resulting in declined building activity.
However, during the month, Japanese multinational firm, Toshiba, launched its first office in Nairobi at Regus Office Park Westlands.
This marks its second branch in Africa, after South Africa, reaffirming Kenya’s attractiveness and as a regional hub, a factor that has been attracting multinational firms keen on accessing the Eastern and Central Africa markets.
The retail sector also remained largely dormant but for international food chain Burger King’s newly opened branch in Lavington at Shell Petrol Station, indicating foreign retailers’ interest in growing their local footprint in a bid to tap into the Country’s growing middle class.
“We expect the commercial sector to remain sluggish particularly in regards to construction activity, owing to reduced business activity in terms of expansion plans, across the country largely due to tight economic conditions and the ongoing oversupply. However, the sector’s performance will be cushioned by the continued interest from foreign players.” the report noted.