The International Construction Survey for 2018 reports that the Kenyan construction industry is poised for growth in this year. International real estate developers have shown interest and those with plans on the ground are pushing to completion. The oil sector is also showing good prospects for the future with export plans already in place.
Further, the mega government housing project is set for ground breaking this year and the nation’s airport network is being upgraded, adding three more international standard entry points in Isiolo, Lake Turkana and Lamu.
Even as the growing middle class continues to demand quality and affordable housing, Kenya just like most major markets around the globe, could be faced with the challenges of skill shortage, lack of credit and low labour productivity.
Nairobi has been attractive to international developers for a number of reasons. First, the margins in the construction sector are estimated to be 8.5%, the highest of all the five African countries highlighted in the report. This also explains why the city is classified as warm.
Additionally, the survey shows that construction costs in Nairobi are expected to rise in the year by 3.0 per cent, compared to the expected global average of 4.3 per cent. Johannesburg and Dar-es-Salaam are forecasted to have the highest construction cost inflation for the second year running in Africa at 6 per cent and 5 per cent respectively in 2018.
The report which analyses construction costs globally also found that New York remained the most expensive place to build, followed by San Francisco, Hong Kong, Zurich and London. In Africa, Kigali, Johannesburg and Kampala lead the pack.
In general, Africa has the lowest costs to build while the most expensive cities to build in can nearly four times as expensive as the most expensive cities in Africa. Part of the reason is the high cost of labour in those markets, driven further up by skills shortage. For instance, the average cost per hour of skilled labour for North American cities is USD71.4 while in Africa the average is USD4.7.
The survey, which classified Nairobi as a warm market for builders also revealed that the global construction market has great optimism, reflected in the fact that no regions expect to see cost declines in 2018.
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