Landlords In Ruiru, Rosslyn And Ruaka Getting More Returns Than The Rest

By Soko Directory Team / Published July 5, 2022 | 10:13 am

KEY POINTS

Apartments in Thindigua, Ruaka, Waiyaki Way, and, Kikuyu, recorded the highest average y/y total returns of 7.5, 7.4, 7.3, and, 7.3 percent respectively.

KEY TAKEAWAYS

In the Nairobi Metropolitan Area (NMA), the residential sector registered improved performance with average total returns coming in at 5.8 percent, 0.3 percentage points increase from 5.5 percent.

The average rental yield for office spaces slightly increased by 0.02 percentage points to 7.35 percent from 7.33 percent in FY’2021.

The Real Estate sector recorded increased activity, attributed to the recovery of the sector following increased property transactions.

In the Nairobi Metropolitan Area (NMA), the residential sector registered improved performance with average total returns coming in at 5.8 percent, 0.3 percentage points increase from 5.5 percent recorded in H1’2021.

The average rental yield for office spaces slightly increased by 0.02 percentage points to 7.35 percent from 7.33 percent in FY’2021, mainly driven by an increase in the average rental rates, while the average rental yield for retail spaces remained the same at 7.8 percent when compared to FY’2021 performance.

The average selling prices for land in the Nairobi Metropolitan Area (NMA) recorded an overall improvement in performance with the YoY capital appreciation coming in at 3.1 percent.

“Some of the key factors that have continued to shape the performance of the sector include: i) Continued focus on Affordable Housing, ii) Efforts by the government to provide affordable mortgages, iii) Increased business operations by firms and Small and Medium-Sized Enterprises, iv) Positive demographics, iv) rapid infrastructure developments promoting property investments, and, v) Aggressive expansion by local and international retailers” Stated Linah Onyango, a Research Analyst at Cytonn Investments.

Conversely, there exist a couple of challenges facing the sector such as; i) Constrained lending to the Real Estate sector amidst an increase in Non-Performing Loans (NPLs), ii) Increase in prices of construction materials, iii) Oversupply in select Real Estate sectors such as the commercial office and retail sectors, iv) shift towards e-commerce affecting the uptake of retail spaces, and, v) Continued poor performance of the REIT market.

In the residential sector, detached units registered average total returns of 5.6 percent y/y while apartments recorded an average total return of 6.0 percent y/y.

Detached units in Ruiru, Rosslyn, Juja, and Redhill, recorded the highest average y/y returns at 7.8, 7.5, 6.7, and 6.4 percent, respectively.

Apartments in Thindigua, Ruaka, Waiyaki Way, and, Kikuyu, recorded the highest average y/y total returns of 7.5, 7.4, 7.3, and, 7.3 percent respectively.

Cytonn

In the commercial office sector, Gigiri, Westlands, and Karen recorded the highest rental yields of 8.6, 8.1, and, 7.9 percent, respectively, in H1’2022 compared to the market average of 7.3 percent. Their performance was mainly driven by the presence of high-quality office spaces that generate prime rents.

In the retail sector, Kilimani, Westlands, and, Karen were the best performing nodes with average rental yields of 9.7, 9.0, and 8.9 percent, respectively, compared to the overall market average of 7.8 percent.

The remarkable performance was driven by; i) the presence of quality retail spaces fetching prime rents and yields, ii) their superior locations containing affluent residents with a high consumer purchasing power, and, iii) adequate infrastructure enhancing investments.

For the land sector, un-serviced land in the satellite towns of Nairobi recorded the highest YoY capital appreciation of 7.8%. This was mainly due to: increased demand resulting from their affordability, scarcity of land within Nairobi which in turn drove demand for land in the satellite towns, the concentration of affordable housing projects in the satellite towns thus driving demand for land, and, improved accessibility to these areas supporting demand for Real Estate investments.

The outlook of the Real Estate sector is positive for one Sector-Land, and neutral for six Sectors-Residential, Commercial Office, Retail, Hospitality, and, Listed Real Estate. Therefore, our overall outlook for the Real Estate sector is NEUTRAL, supported by; positive demographics, improving infrastructure, continued focus on the affordable housing front, and improved access to mortgages.

The performance of the sector is likely to be constrained by the existing oversupply in the commercial office font and the retail sector, reduced consumer purchasing power brought about by the tough economic environment, and subdued performance of the REIT instrument.

About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system.Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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