Serviced Apartments

Serviced apartments in the Nairobi Metropolitan Area (NMA) increased in number by a 5-Year CAGR of 10.4% to 5,593 in 2019, from 3,414 in 2015.

Westlands and Kilimani recorded the largest market share of serviced apartments within the Nairobi Metropolitan Area, recording market shares of 37.6% and 26.7% respectively according to a Cytonn Research.

This is attributed to the areas proximity to the Nairobi CBD and other major business nodes such as Upperhill and Westlands, good security (UN Blue Zone status), and favourable expatriate environment.

According to a Cytonn, these locations are also attractive due to the presence of international organizations such as International Committee of the Red Cross (ICRC), Oxfam and Save the Children International with expatriate staff.

Currently, there are at least 824 serviced apartment units development in the pipeline set for completion by 2020.

Out of these, 463 units are located in Kilimani alone while another 270 units are located in the Westlands area.

Serviced apartments within the NMA recorded an average rental yield of 7.6% in 2019 compared to 7.4% recorded in 2018.

The research attributes the increase to a 2.3% increase in monthly charges per SQM, from Kshs 2,742 in 2018 to Kshs 2,806 in 2019 due to increased demand for serviced apartments by business and leisure travelers.

Improved performance has been supported by the stable political environment and improved security, making Nairobi an ideal destination for both business and holiday travelers.

Westlands & Parklands was the best performing node, recording an average rental yield of 10.8%, 3.2% point higher than the 7.6% market average.

“Thika Road (Muthaiga North, Mirema and Garden Estate) recorded the lowest rental yield at 4.0% because of the relatively low market rates for apartments within the area, given its unpopularity, due to lack of modern and quality serviced apartments in the area, the significant distance from main commercial zones, in addition to not being mapped within the UN Blue Zone thus not attractive to expatriates due to security concerns,” reads the research.

Overall, rental yields for serviced apartments slightly improved in 2019 to 7.6% from 7.4% the previous year, supported by the growing number of tourist arrivals during the year.

Studio units recorded the highest average rental yield at 13.7% as a result of the relatively high occupancy rates at of 83.9%, compared to 1, 2 and 3 bedroom units at 83.8%, 76.4% and 75.5% respectively, and the relatively low supply of studios.

There were approximately 5,505 serviced apartment units in Nairobi as at 2019 with an additional 1,377 apartments set for completion by 2021.

The serviced apartments market has been negatively affected by the effects of Covid-19 in 2020, with many investors counting losses for a major portion of the year.

Read; Serviced apartments market records increasing growth