Kampala’s real estate sector lost 40 per cent of revenues in 2020 following a contraction in demand during the pandemic.
Property managers disclosed that the closure of most businesses during the period caused the losses.
Knight Frank’s Kampala Market Update for the second half of 2020 shows that the Ugandan economy is slowly unravelling from the effects of the Covid-19 lockdowns that characterised much of H1 2020.
The report said that the property sector was yet to pick up as demand and supply across all four subsectors of the industry continue to shake off the drag-on effects of the pandemic.
In mid-November, the government of Uganda partially lifted up the lockdown, imposing a set of restrictive standard operating procedures to contain the disease.
“The impact of these measures on retail as a whole, is that trade in Uganda is still under severe pressure, and is further impacted by lack of consumer spending on the back of a slowdown in the economy,” Knight Frank said in the report.
The report states that there has been a significant improvement in space being taken up in Kampala’s retail markets as demand for formal retail recovers.
“The partial lifting of lockdown measures in the second half of 2020, saw on average, an 8% month-on-month growth in footfall, with July registering the highest record in the half-year at 22%. This was driven by the entry of new players in the market such as the opening of LC Waikiki,” Knight Frank Uganda, Managing Director Judy Rugasira Kyanda said.
She also noted, however, that tenant turnover in retail establishments remained under pressure, due to diminished consumer spending power and continued restrictions on specific retail segments including bars and nightclubs.
The report also predicts that office tenants will downsize on space and drive hard bargains in the short term while a rebound is expected in 2021/2022 following vaccine rollouts.
Average occupancy in Kampala’s prime residential apartments dropped by 8% year-on-year in H2 2020 compared to H2 2019, against a 6% year on year increase in the supply of apartments in the prime residential areas of Kololo, Nakasero, Bukoto, Bugolobi, and Naguru.
According to the report, this forced landlords to discount their rents to remain competitive in an already oversupplied prime residential market.
Rental yields in Kampala’s prime residential suburbs averaged between 8% – 10%.