Construction costs in Kenya might have become more expensive especially in Nairobi, but building cost in the East African capital is still one of the lowest on the continent, and even globally. Also, hourly wages in Africa’s construction industry are still by far the lowest globally. This is according to the latest publication of the International Construction Market Survey for 2018 by Turner & Townsend.
The annual report, covered 46 key markets across the globe, revealing insights about the nature of construction markets. The report states that labour shortages have become more frequent in global markets with this year recording shortages in 27 of the surveyed markets, up from 24 last year. In Africa, markets that experienced skilled labour shortage include Johannesburg, Kigali and Kampala.
According to the data, Nairobi has the highest margins of the continent’s surveyed markets, at 8.5%, and with the lowest preliminary costs of 6%. A more nationwide analysis showed that prospects for Kenya’s construction industry look bright. International real estate investors are re-emerging, and local development firms are pushing forward with plans. As an extra, the oil sector, finally, seems set to blossom with exports already begun.
Meanwhile, the country’s emerging middle-income class is raising demand for better quality homes and the government which has promised a million homes, has begun work to deliver. For developers, challenges remain skills shortage, credit scarcity and low labor productivity.
In Nairobi, the least costly category for construction was a basic warehouse or factory units which in 2018 cost $340 per square metre, an increase of $3 over the previous year. This is deceptively low as a large warehouse distribution centre or a high-tech factory would cost $485 and $971 per sqm respectively. The construction of car parks is also cost-friendly. A multi-story underground car park costs $437 per sqm while a multi-story above-ground car park would cost $408 per sqm.
For investors with interest in the education sector, the construction of primary and secondary education facilities cost $437 per sqm while building universities and colleges cost $485 per sqm. And for commercial property, the cost of constructing offices in a business park was $631 per sqm. Medium A-grade offices in the CBD with up to 20 floors cost $699 whereas for high-rise prestigious offices in the CBD, and investors would have to put in $922 per sqm.
Hospitality and Healthcare
Notably, hotels still cost more than hospitals to build. A 3-star traveler’s hotel costs $990 per sqm to build, a 5-star luxury hotel however costs much more at $1262 per sqm similar to a resort-style property costs $1262 per sqm. Comparatively, a daycare centre (including basic surgeries) costs $8256 per sqm and a regional hospital costs $1000 per sqm. A general hospital e.g. a teaching hospital costs $1214 per sqm. It remains to be seen whether the number of hospitals will exceed the number of hotels in the country.
Residential construction forms the bulk of the construction in the country. The cheapest to construct are aged care/affordable units which cost $437 per sqm. These are followed by individual detached or terrace style house of medium standard which cost $505 per sqm while individual detached houses of prestigious standards cost $777 per sqm. Medium standard townhouses cost $583 while low-rise apartments both cost $534 per sqm. High-rise apartments cost $631 per sqm.
In retail, a neighbourhood supermarket would cost $558 per sqm while a large shopping centre including a mall costs $655 as of 2018. A prestigious car showroom would cost $704 per sqm.
Airports are still the most expensive to build with a basic service low-cost carrier terminal costing $1942 per sqm while a full-service domestic terminal costs $2592 per sqm. According to the report, steel beams cost the most at $2039 per tonne followed by reinforcement beams at $1165 per tonne.
In 2018 labour costs ranged between $5 for the general labourers to $15 for the site foremen. The cost escalation is expected to be 3% during the 2018-2019 year compared to 1% the previous year. Overall, there was an increase in construction costs from the previous year.
Major infrastructure plans for the country include are a USD140m port at Kisumu and three airports at Lamu (USD188m), Isiolo (USD175m) and Lake Turkana (USD143m). The World Bank is funding a USD285m aviation modernization project to improve airport facilities
Further, Kenya’s urban population is expanding at an annual rate of 4.15 percent, generating demand for new cities. Already construction costs in major urban centres is quite high.
Related; Kenya Construction Costs, 2017