Nakuru is the fourth largest town in Kenya, located approximately 160 km North-West of Kenya’s capital, Nairobi. The town also serves as the headquarters of Nakuru County, the fourth largest county in Kenya in by GDP per capita with an estimated population of 376,979 people as at January 2018, according to the County Government of Nakuru.
A recent survey carried out by Cytonn Investments identified the main factors driving the real estate market in the town. These include positive economic growth, devolution, population growth, and infrastructural developments.
Nakuru County’s GDP per Capita is the fourth highest in the country after Kiambu, Nyeri and Kajiado at USD 1,413. The rising per capita income has increased demand for real estate in Nakuru Town.
Devolution has also opened up Nakuru Town and thus creating demand for housing units, retail spaces and office spaces, which host investors and government officials. Further, devolution has attracted well-oiled individuals like entrepreneurs, private investors and government institutions such as public service boards to the county headquarters.
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Currently, Nakuru Town has an estimated population of 376,979 that has grown from 286,411 as at the 2009 census while the County has a population of 1,891,739, according to the County Government of Nakuru. This has increased demand for real estate developments for residential as well as commercial purposes.
Nakuru has also benefited from infrastructural developments from the National and County developments. Early this year, the Kenya Urban Roads Authority (KURA) announced plans to upgrade 22 km of roads within the town at a cost of Ksh. 1.8 billion.
The County Government of Nakuru also in 2017 announced plans to upgrade Lanet Airstrip, to a fully fledged airport that would accommodate huge passenger and cargo planes. Details of completion timelines are yet to be disclosed.
These initiatives will improve accessibility to the town and thus open it up to real estate development.
However, the town’s real estate market has also faced challenges including infrastructure development, access to funding and inadequate planning.
Nevertherless, the market has begun welcoming institutional developers who are coming up with investment grade housing units and the urban population is appreciating them as evidenced by high uptakes of 39.7% for mid-end apartments and 22.9% for high-end apartments, additionally, indicating that developers can exit developments in 3 years.
The town’s residential sector recorded average rental yields of 4.2%, price appreciation of 4.6%, hence a total return of 8.8% with a price range of between Ksh. 6.1m and Ksh. 13.0m for high-end housing, and between Ksh. 3.6m to Ksh. 4.9m for middle-income housing. Apartments and detached units had total returns of 10.7% and 6.8% on average respectively.
Based on the survey, the market prefers apartments as they attract lower rental rates thus more affordable with rents at on average Ksh. 23,970, 56.4% lower than detached at Ksh. 55,000.
Nakuru Town land markets recorded an annualized capital appreciation of 8.8% this is attributed to speculation and increased demand for land in residential zones. On retail space, the survey found that Nakuru has rental yields of 5.8% on average as compared to Nairobi, Mombasa and Kisumu that have average rental yields of 9.7%, 10.0% and 9.9%, respectively due to the low rent.
The study also established that Nakuru Town lacks Grade A office spaces with most of the buildings being Grade C. In terms of performance, office spaces in Nakuru Town record average rental yields of 5.4%, 3.5% points lower than the 8.9% for mixed-use developments in the market.
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