For the past two decades, the Kenyan real estate market has grown exponentially as evidenced by its contribution to the country’s GDP which grew from 10.5% in 2000 to 12.6% in 2012 and 13.8% in 2016. The growth is driven by;
- Infrastructural developments such as improved roads, utility connections, upgrade of key airports;
- Stable GDP growth which has averaged at 5.4% over the last 5 years against a Sub- Saharan average of 4.1%;
- Demographic trends such as rapid urbanization at 4.4% p.a against the world’s 2.5% and population growth averaging at 2.6% p.a; and
- High total returns averaging at 25.0% against 12.4% in the traditional asset classes.
As the sector grows, it’s witnessing new trends due to the clientele changing its preference and international firms creating demand for something that is of world-class standard. Serviced offices are slowly gaining popularity due to the growing SMEs and as the dynamics of office space design and demands continue to unfold, more developers are offering semi-fitted offices by providing facilities such as partitions and kitchen cabinets. In a bid to reduce operating costs and provide a safe and healthy environment for workers, developers are increasingly employing green building technology as it has also been proven to increase employee productivity.
A smart office is also a new trend that has changed the office space area. With amenities like an equipped gym, Cafeterias and entryways for people living with disabilities. Nowadays, so as to meet the demands of clients, offices are designed to feel like home with modern facilities. Quality, ambiance, elegance, and serenity are the driving forces behind today’s growing modern offices.
With a rapidly growing population and more so, an increasing middle class, the residential sector has recorded the highest demand with the nationwide housing deficit standing at 200,000 units annually and an accumulated deficit of over 2 million units. However, the largest demand has been for affordable housing to cater for the 61% of urban dwellers who live in slums and shortage in student accommodation accounting for 40% of the deficit. Therefore, we have witnessed more developers increasingly applying low-cost housing construction methods such as alternative building technologies which are known to reduce construction costs by as much as 50%. In addition, with the demand for a live-work-play lifestyle, master planned communities are increasing with areas such as Kiambu and Machakos counties becoming hotspots. Notable master planned communities are the likes of Konza City, Tatu City, and Cytonn’s Newtown.
The hospitality sector is largely dependent on the tourism sector which has been experiencing rebounding volumes. For the first time in 2012, earnings recorded a 17.8% increase from Kshs 84.6 bn in 2015 to Kshs 99.7 bn in 2016, while the number of international arrivals rose by 13.5% from 1.2 mn in 2015 to 1.3 mn in 2016. The meetings, incentives, conferences, and exhibition (MICE) drive by the government has been a key role in driving international tourist arrivals who are a major backbone of the hospitality industry. In a bid to diversify their revenue streams, developers are converting typical sites to accommodation facilities for hotel purposes. Additionally, a new concept, dual-branding which involves having two concepts such as serviced apartments and a hotel in the same building is also gaining popularity among investors.
Infrastructural development has seen land values go up while a growing population has ensured sustained demand. In the hope that land values will increase in the future, investors are increasingly buying land with the intention of selling it in the future, a concept known as land speculation. The land could be put to temporary use that generates income on a regular basis, a concept known as land banking. Additionally, in order to attract buyers, developers are also using agribusiness as a value add to plots intended for sale and offering returns on a seasonal basis to clients. The concept, known as agribusiness, entails agriculture activities, agro-insurance, complete farm management services and guaranteed market of the produce.
In conclusion, with the continued interest in the Kenyan property market by both local and international players, continued investment in infrastructure and improvement of the legal environment, the Kenyan real estate sector is definitely poised for further growth in the long term.