Cytonn Real Estate says Kenya’s real estate sector will have a NEUTRAL outlook, attributable to sluggish performance in the wake of a tough economic environment amid the Covid-19 pandemic.
According to Cytonn, Covid-19 has resulted in reduced disposable income thus dwindling transaction volumes and scaling down of operations by some businesses affecting uptake of office and retail spaces.
“We expect the land sector to record positive performance during the year, the commercial office and listed real estate sectors to record negative performance, while the residential, retail, hospitality, and infrastructure sectors remain neutral,” stated Beatrice Mwangi, a research analyst at Cytonn.
In 2021, the real estate sector shaped by:
(i) the continued focus of the affordable housing sector
(ii) improvement in the mortgage market
(iii) public-private partnerships in support of development and financing for the real estate sector
(iv) the trend towards e-commerce.
Despite the above, the sector is expected to be constrained by;
(i) constrained financing for developers,
(ii) ineffectiveness of Public-Private Partnerships (PPPs) for housing development,
(iii) reduced disposable income among consumers, and, (v) oversupply in select sectors which include; the middle – high-end residential, the commercial office and retail sectors, ‘’ she added.
Cytonn says it expects Kenya to witness more development activities on the affordable housing front, however, uptake will remain subdued as the negative effects of a sluggish economy persist due to the Covid-19 pandemic.
The commercial office sector is expected to have a NEGATIVE outlook as the sector’s performance continues to be constrained by an oversupply of 6.3 mn SQFT as of 2020 in the wake of reduced demand as some firms downsize due to financial constraints while others embrace the working from home strategy amid the Covid-19 pandemic.
“The sector however has pockets of value for Grade A offices in zones with low supply such as Gigiri, Westlands, and, Karen with relatively high returns compared to the market averages in addition to availability of high quality spaces suitable for the high-end and middle income clients,” Said Cytonn.