The placement and offer prospectus by GRIT real estate group which is expected to list on the London Stock Exchange has expressed confidence of improved business sentiment in the country in 2018 banking on return to normalcy in the country and possibility of amendment to the interest rate cap laws.
Kenya went up by 12 places, from 92nd to 80th, in the World Bank’s 2018 Ease of doing Business report making the country the third most competitive market in Africa after Mauritius and Rwanda. However, slow registration of property and issuance of construction permits remain the biggest drags on the economy.
Grit real estate, which commissioned the study for its share placement exercise, holds significant commercial real estate in the country particularly in the retail and industrial sectors which were highlighted in the report.
Oversupply in the retail sector has resulted in slowed uptake of new retail space as well as stagnating prime rents. This has resulted in an increasingly competitive market which has prompted some landlords to offer incentives in a bid to attract tenants into recently completed centres. It’s typically a tenant’s market. The current market conditions are likely to continue as new stock comes onto the market and landlords seek to fill these vacancies.
Currently monthly rental rates for retail space in quality malls within Nairobi currently range between US$32.5sqm/month and US$48 sqm/month on average. Despite upward movement in rental prices in recent years, attributable to increased development quality and interest from international retailers, there is likely to be downward pressure on rentals as the local retail supply reaches saturation.
In the industrial sector, average warehousing prices in the market currently range from US$3.65 to US$4.70 per sqm. Prices are likely to increase in light of the shortage of high quality warehousing space and as more high quality accommodation becomes available within the local market.
Future growth in demand is expected to be driven by continued entry into the market by foreign retailers together with the development of key infrastructure such Lamu Port and the LAPPSET corridor by the government, which are intended to solidify Kenya’s position as a gateway into the rest of East Africa.
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In addition, the recovery in Kenya’s economic conditions could see the country’s food processing sector, as well as exports, play a significant role in generating demand for industrial assets in the market, in addition to the current growing retail demand.
Despite the recent rise in demand for warehousing in established industrial nodes, speculative development remains low. However, there are major master planned industrial projects in the pipeline as developers seek to meet the needs of occupiers who require grade A, modern industrial facilities that meet international standards.
Industrial supply in Kenya primarily comprises older, basic warehousing stock that is owner occupied.
Kenyan real estate market was ranked at grade B+ with a stable outlook by real estate firm JLL in the study that was designed for GRIT real estate’s London Stock Exchange listing. Data from the Kenya National Bureau of Statistics shows that the economy grew by 4.9% in 2017, the slowest growth recorded in five years which was attributed to adverse weather conditions and a prolonged electoral process.
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