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Commercial property developer, AVIC International Real Estate (Kenya) Ltd has appointed Knight Frank Kenya to oversee leasing of the Global Trade Centre (GTC) Office Tower in Nairobi.

The two firms signed the agreement which gives Knight Frank the responsibility for leasing out prime office space in the 42 &ndash; floor - 184-metre skyscraper&nbsp;situated along Waiyaki Way, Westlands.

In a media release, Knight Frank said GTC has world-class AAA standard offices and sits at a location ideal for Fortune Global 500 companies and renowned global corporations looking to leverage the mixed-use development.

&ldquo;Adding the Global Trade Centre to our portfolio further demonstrates our market leadership in commercial property leasing in the country. GTC is a prime office space in Nairobi in arguably the best office location in the city. Our track record of catering to the best in class commercial office spaces will ensure we bring in a great mix of tenants to occupy this exclusive space,&rdquo; Knight Frank Kenya Managing Director, Ben Woodhams said.

AVIC Kenya Managing Director, Frank Wang said GTC is the first HOPSCA (hotel, office, parking, shopping mall, convention, and apartment) project in Kenya.

&quot;We enlisted the services of world-class designers, consultants and suppliers to work on this outstanding project for the Nairobi market. We are therefore glad to be working with Knight Frank Kenya who are highly regarded in the market and we value their competency in leasing commercial properties,&rdquo; he said. Construction of the 43-storey mixed-use building began in 2015 with the cost of the building estimated to at about Ksh. 40 billion. The facility was expected to be complete by 2020.

Related;&nbsp;<a href="https://estatecloud.co.ke/avic-unveils-the-global-trade-centre-in-nairobi/" style="color: #ff6600;">AVIC unveils the Global Trade Centre in Nairobi</a> &nbsp;

Prime residential sale prices in Nairobi marginally improved by 1.2% over the past 6 months to December, compared to a 1.1% decline in the same period in 2020 due to re-opening of economy and increased investment activity.

This is according to Knight Frank&rsquo;s 2nd Half 2021 Kenya Market Update.&nbsp;Prime residential rents remained unchanged over the past 6 months to December, compared to a 4.17% decline in during the same period in 2020. The stability in rentals is mainly attributed to increased occupancies across most high-end gated properties.

The prime residential sector still remains a buyers&rsquo; and tenants&rsquo; market due to continued oversupply in most locations.&nbsp; &ldquo;We are seeing a rebound in the residential market as there is now less uncertainty that had been brought about by the pandemic. We expect the prime residential sale and rental rates to remain stable in the first half of 2022 due to the favourable projected economic environment,&rdquo; said Knight Frank MD Ben Woodhams.

A significant amount of office space was released into the Nairobi office market in the 2nd half of 2021, after completion of several Grade A office blocks in the capital. This includes the iconic mixed-use Global Trade Centre (GTC) whose office tower has circa 625,000 sqft. of lettable area.

In the second half of 2021, absorption of Grade A and B office space increased by 60% compared to the first half of 2021 as a result of pent-up demand from 2020. Players in the co-working space and those in financial services took up most of this space with average occupancy rates across commercial buildings at the end of the year improving to 78% from 73% in the 1st half of 2021.

Over the review period, prime commercial office rents increased from US$1.10 to US$1.20 per sqft. per month. However, the sector continues to be a tenant&rsquo;s market due to the prevailing oversupply situation. The retail sector saw a slight increase in prime retail rents in the second half of 2021, from US$ 4.00 per square foot (sq. ft.) per month to US$ 4.10 per sqft. per month.

This was driven by increased demand for prime retail shops that are strategically located in developments. The period under review also saw supermarkets like Naivas, Chandarana, and Carrefour expand their retail footprint across the country while South African retailer Massmart that operates the Game Stores revealed its plan to sell its three stores in Kenya.

The 2nd half of 2021 saw foot and vehicular traffic increase in retail centres, which was attributed to the reopening of the economy, and the holiday season which saw consumers going to malls to take advantage of seasonal retail offers.

The National Construction Authority (NCA) has published a new set of regulations intended to protect building owners from fraudulent building service providers.

NCA's Defect Liability Regulations 2020 introduces a provision to safeguard commercial building owners from concealed structural flaws in a commercial building or fixed installations that may not be detectable during the ordinary patent defect liability period included in contracts.

According to the regulation, every contract for the construction of a commercial building shall prescribe a latent defects liability period shall be a minimum period of six years from completion of the patent defects liability period.

In the regulations, NCA has also extended the patent defect liability period from six to 12-months. This gives owners at least 7-years to recall contractors for faulty works.

It adds that a contractor shall be liable for the rectification of patent defects that become apparent during the latent defects liability period while building professionals are also required to obtain a professional indemnity cover for latent defects that may become apparent during the period.

The regulation has a cost effect on contractors since it requires them to obtain insurance cover for latent defects that may become apparent during the latent defects liability period.

The new regulations also require all owners of commercial buildings to have building insurance at all times to cover structural damages attributable to the owner.

Construction industry players have responded negatively to the new laws saying it is bad for business since it will increase costs for both parties.

The Institute of Construction Project Managers in Kenya chairman Tom Oketch told Business Daily that the new regulations undermined the role of architects as supervisors during the implementation of projects and was bad for business.

He said extending the patent defect liability period from 6 to 12 months will negatively affect cash flows for contractors since contractors will require more funds to facilitate their future operations as most of their income will be withheld to cushion property owners of any eventuality.

Other Kenyans outside the construction industry, however, are of a different opinion. Gilbert Josiah Mungu, a lawyer in Construction Law and Arbitration, told the Standard that the law should be extended to cover all construction contracts except for owner-occupiers.

“The idea that the regulation only applies to commercial buildings does not seem to be informed by commercial necessity geared towards reviving the construction industry and the application of National Construction Act, 2011,” he said

Read; <a style="color: #ff6600;" href="https://estatecloud.co.ke/construction-and-real-estate-key-beneficiaries-of-loan-restructuring-and-relief/">Construction and real estate key beneficiaries of loan restructuring and relief</a>

NCA slaps contractors with a 7-year defect liability period

Global Trade Centre (GTC) Tower Appoints Knight Frank As Leasing Agent

Nairobi ​Prime Residential Sale Prices in Marginally Improved in 2nd Half of 2021

An overwhelming 71% of African respondents in Knight Frank&rsquo;s 2021 Global Buyer Survey, indicated that energy efficiency was very important to them compared to 42% globally. In addition, more respondents across Africa (29%) indicated that they would prefer a greener home and be willing to pay more for it compared to 27% globally.

This indicates that the coronavirus pandemic has driven a shift in attitudes amongst African home buyers. The Global Buyer Survey represents the views of over 900 Knight Frank clients across 49 global markets and the 9 African countries: Kenya, Uganda, Tanzania, Nigeria, South Africa, Botswana, Malawi, Zambia and Zimbabwe.

<h2>Key highlights from the Africa respondents</h2>

<h2>ESG to drive future developments</h2>

ESG &ndash; Environmental, Social and Corporate Governance is taking precedence over other considerations for African home buyers. Good air quality, proximity to green space and access to good healthcare were unsurprisingly ranked as the most important location features to home buyers. &ldquo;The just concluded November Climate Change Conference (COP 26) in Glasgow, has helped to cement the growing importance of sustainable led residential developments.

This survey provides us with a timely glimpse on how investors and buyers are zeroing in on the sustainability agenda across Africa. &nbsp;We expect these findings will send a strong signal to developers on what buyers want, as the race to sustainability intensifies,&rdquo; said Knight Frank&#39;s Tilda Mwai.

<h2>Remote working influencing choice of home</h2>

A home study office, access to broadband internet and more outdoor space topped the list of the most preferred property features, indicating the impact of remote working on home buying trends. &ldquo;With greater flexibility towards remote working likely to emerge as a lasting legacy of the pandemic, we are seeing first-time buyers and homeowners gravitating towards top-quality homes, with amenities such as access to green space and reliable high-speed digital connectivity topping considerations,&rdquo; she added.

<h2>Right-sizing driving future buying intentions</h2>

Interestingly, rightsizing emerged as the key feature in future buying intentions with 22% of the respondents citing upgrading family&rsquo;s primary residence as the main motivation towards buying a house, while 17% cited downsizing as the main motivation. Furthermore, when asked about the type of property they would like to live in, in the future, 50% of respondents in the region said they would be more inclined to buy a rural or country estate; slightly higher than the rest of the world respondents (34%). In addition, with strict lockdowns imposed in most markets, it is no surprise that employment, healthcare, and children&#39;s education also emerged among the biggest motivating factors for African buyers.

<h2>Suburbs now in high demand</h2>

Some 34% of the respondents indicated that they are more likely to purchase a second home, in line with the global average at 33%. However, one of the standout differences was the apparent need for African homebuyers to live in the suburbs (57%). Globally this figure was lower at 33%. &ldquo;This is a fascinating insight into the impact of the pandemic on buyer preferences. The pandemic has supercharged demand for quality affordable homes in the suburbs as buyers look at the best of both worlds: space and greenery but easy access to services and amenities,&rdquo; said Tarquin Gross, Head of Residential Agency at Knight Frank Kenya.

A webinar organized by API events to discuss the impacts of real estate investment implications across Africa reveals the state of property market across the continent following the onset of COVID-19 and makes some predictions for the future.

The online event saw key industry players from real estate advisory, development, banking and private equity speak on various topics ranging from market fundamentals to valuations, financing and currency implications, risk management, social impact and after-effects.

Impact on Operations

Landmark Africa MD Paul Onwuanibe said the pandemic had taken about 35-70 percent of trading off the markets but the financial realities for each client will be different. He said clients that have resilience buffers such as more capital reserves are better placed.

Onwuanibe said retail and hospitality sectors are the most vulnerable but office and industrial segments appear to be more resilient.

“We still don’t know the impact of Covid-19. If it lasts for 3-months that will be more digestible, if it lasts longer like 6 months or more, that will be harder to take in,” said Niyi Adeleye, Head Real Estate Finance for Africa Regions, Standard Bank Group.

“The reason why remote working appears successful is because everyone is locked up. There is no replacement for social interaction and normalcy should resume once this is done,” he added, refuting the idea that remote working may take over working on site.

Impact on Investments

“Currently rates are high and volatile and the solution for lenders usually is conservative lending,” said Niyi Adelaye hinting that accessing to debt capital may be more limited.

“The volatility makes it difficult to have highly leveraged assets in Africa,” he added

He said that one way of dealing with volatility is applying a portfolio approach that enables assets to collectively develop a resilient buffer for the portfolio in and of itself.

The Standard Group banker said that the volatile market conditions in most of sub-Saharan Africa is counterproductive to the paradigm for private equity where high Internal Rates of Return (IRRs) and positive cash flow within a short time period are the favoured measures of viability.

Markets

Commenting on the state of African real estate markets, Niyi Adeleye said, “it’s still difficult to predict yields and risk-free rates following market activity due to the low volumes of trade in most African markets. The question remains what is the real cost of an asset?”

He said there are no systematic and comprehensive data platforms to rely on, no benchmarks. “We’ve got to build it from the ground up,” he said.

According Ilaria Benucci, Head of Construction and Real Estate for CDC Group, the instability of African currencies has also presented a significant challenge to international financiers and private equity.

“The sustainability aspect of African investments is tied to domestic currency lending,” said Niyi Adelaye, commenting on the technicalities of importing finance brought about by volatile currency exchange rates in countries like Nigeria.

The stability of market fundamentals will depend on how fast people recover their livelihoods.

Landlord-Tenant Contest

Thomas Schultz, Director of Africa Real Estate for Investec said the shape of an investor before the crisis will determine how one comes out from the crisis.

“We’re collectively in survival mode, we really want to get through this together,” said Schultz regarding the landlord-tenant debate.

He said taking legal action on delinquent tenants is the wrong approach at the moment. “You don’t want to be chasing your tenants in court 3-6 months from now,” he added.

“Interest waivers would undermine financial institutions. There is no one size fits all solution for the situation. Developers and banks have to meet in the middle,” said Standard Bank’s Niyi Adeleye.

CDC’s Ilaria Benucci also advised that landlords would do well to maintain flexibility and engagement with tenants.

Deals &amp; Valuations

“It’s difficult to have a crystal ball now. There are still tenants progressing with the paperwork but it has become difficult to do the physical work. Most clients however, have put off all activity,” said Thomas Schultz of Investec.

The panel agreed that the crisis could have an adjusting effect on market valuations to more sensible levels both in terms of price and discount rates.

Future Outlook

Ilaria Benucci said housing is expected to be the more relevant after now with a possible spike in demand for low human density assets, logistics and storage.

Landmark CEO Paul Onwuanibe said the aftermath of the pandemic may tilt the markets more in favour of impact investments.

“People will be more cautious about investing in offices and retail that are operated traditionally,” said Paul.

He said real estate investors must usually make some core assumptions, and some of those assumptions might change in Africa post-COVID-19 where sustainability, social and environmental impact could increasingly play a part in the reason for the decision on where to invest capital.

On how long the crisis may last, CDC group’s Ilaria Benucci said, “It’s difficult to draw a conclusion right now. I don’t see this ending 3-4 months from now, what we expect is a gradual lifting of the situation.”

The webinar was co-hosted by API events CEO Kfir Rusin and JLL Head of International Capital for sub-Saharan Capital, Thomas Mundy.

 Read; <a style="color: #ff6600;" href="https://estatecloud.co.ke/proposed-bill-provides-relief-for-tenants-mortgage-owners/">Proposed bill to cushion tenants and mortgage owners</a>

Property experts speak on impacts of COVID-19 on real estate investments

Kenya’s warehousing market is projected to reach over USD 700 million by 2023 according to Ken Research. The country should consider building more Inland Contained Depots to account for the shift in cargo handling form the Coast to Nairobi, an SGR driven move.

The research foresees congestion at Nairobi’s ICD, a problem for port authorities and logistics firms. Such a difficulty could create inefficiencies for supply chains that depend on the facility, and ultimate customer dissatisfaction.

In a measure, the Nairobi County government has announced plans to reduce levies for foreign investors as it seeks to transform the city into a global investment destination. Kenya has also promised global investors facilitation to acquire land for setting up SEZs. The SEZs will be established in Mombasa (including Dongo Kundu Free Port), Lamu and Kisumu.

Accounting for the International Trade Agreements, bilateral and free trade agreements with various countries, along with involvement in initiatives such as COMESA, ACP, AGOA and the recent Pan-African Trade act (AFCTA), the research foresees a substantial improvement in trade.

These could accelerate demand for industrial property over the next few years which could make for a boom in logistics property. Already, there’s not enough quality warehousing space to enable firms move things around according to industry sources. Modern warehousing in Kenya is largely underdeveloped since the country’s logistics industry is still at the growth stage.

Analysts at <a style="color: #ff6600;" href="https://www.kenresearch.com/automotive-transportation-and-warehousing/logistics-and-shipping/kenya-warehousing-market-outlook/248566-100.html">Ken Research</a> in their latest publication “Kenya Warehousing Market Outlook to 2023 – By Closed Normal, Open Yard, Closed Ac and Cold Storage; Contract and Owned Warehousing; Industrial Warehouses, ICD and Cold Storage” believe that the Freight Forwarding market in Kenya is expected to grow due to increasing foreign trade, market entry of international players and the booming horticulture industry.

Related; <a style="color: #ff6600;" href="https://estatecloud.co.ke/global-logistics-property-sailing-steady/">Global logistics property sailing steady</a>

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Estate Cloud

Global Trade Centre (GTC) Tower Appoints Knight Frank As Leasing Agent

By Estate Cloud - over 1 year ago - Kenya

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