Kampala real estate

The Kampala office market registered a 2% growth in occupancy from H1 2018 to H1 2019. This growth is mainly attributed to a 3% increase in occupancy rates for Grade B+ buildings from 78% registered in H1 2018 to 81% in 2019.

The increase in occupancy of Grade B+ properties is on account of tenants taking advantage of a soft office market at present to drive harder bargains for lower rentals, particularly for less prime properties. Other key drivers of office take-up include good location and accessibility, ample parking, space configuration and functionality, professional property management services as well as the quality of services and facilities at the properties for rent.

Knight Frank recorded a 1% increase in occupancy rates for Grade A properties from 92% registered in H1 2018 to 93% in H1 2019. This is a better performance in comparison to neighbouring occupancy for Grade A offices in Nairobi, which currently stands at 75% on average according real estate firm, JLL.

The addition of approximately 18,000 sqm of Grade A lettable space in H1 2019 is expected to have a negative impact on occupancy rates for Grade A space in the second half of 2019 if existing supply does not meet demand.

Whereas office take-up has seen some upward movement over the last 6 months, in H2 2018, a number of Grade A and B+ buildings experienced vacancies from government agencies and a few multinational companies that moved into owner-occupied built to suit premises. This increased the available supply of space on the market, mainly in the grade B+ and B office type, further increasing the bargaining strength of prospective tenants. This, in turn, led to a 5%-10% decrease in achievable rents.

Approximately 11,000 m2 of office space was leased in H1 2019, with legal services, logistics, tour & travel and insurance firms accounting for 20%, 20%, 12% and 12% of the space leased respectively. Yields for Grade A office space were recorded at 9%-10% while those for Grade B office space varied between 10%-11%.

Related; Prime real estate markets looking good after first half

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