The real estate sector is expected to continue recording activities supported by; i) continued focus on affordable housing, ii) the continued expansion by local and international retailers, iii) the improvement of services in the land sector due to the digitization of land records, iv) the continued launch of infrastructure projects by the government opening up areas for real estate investment.

SAFARICOM’S Crystal Rivers Mall and Gated Community in Nairobi. -Advent Valuers Ltd

NAIROBI, Kenya: During the month, the following industry report was released and the key take-outs were as follows:

#ThemeReportKey Take-out
1General Real EstateQuarterly Economic Review October-December 2020·       According to the Central Bank of Kenya, the real estate sector recorded a 6.4% increase in the gross non-performing loans in Q4’2020 to Kshs 61.4 bn from Kshs 57.7 bn in Q3’2020 attributed to layoffs, business closures affecting the commercial office and retail sectors, and travel restrictions triggered by the pandemic affecting the performance of the hospitality industry. For more information, see Cytonn Weekly#15/2021

  II. Residential Sector

During the month;

  1. The county government of Mombasa in partnership with property developer Buxton Point Apartment Limited began demolitions at Buxton Estate, located in Mombasa County, to pave way for 1,860 affordable housing units which will comprise of modern one, two and three bedroom units, to sit on a 14-acre piece of land. For more information, see Cytonn Weekly #16/2021.

  III. Retail Sector

French retailer Carrefour supermarket, opened a new outlet in Nairobi Garden City Mall along Thika Road taking up space that was vacated by Shoprite Supermarket. This marks the 4th outlet opened by the retailer during the year and its 13th outlet country wide with 11 outlets within Nairobi. 

The decision to open a store in the Nairobi-Thika Road is supported by; i) availability of prime retail space after the exit of Shoprite supermarket, ii) a rising middle class along Thika Road who come as potential clients, iii) high footfall with Garden City being a destination mall, and, iv) improved infrastructure with the area being served by Thika Road.

In terms of performance, Thika Road posted an average rental yield of 5.6% which is 1.8% points lower than the retail sector average of 7.4%. The retailer is however leveraging on availability of quality retail space, and, affordability as their main reason for moving to Thika Road. The Thika Road average rent per SQM in Q1’2021 came in at Kshs 148 compared to the market average of Kshs 166.

The table below shows the retail performance of various nodes including Thika Road according to the Cytonn Q’1 2021 Markets Review;

Nairobi Metropolitan Area Retail Market Performance
AreaRent Kshs/SQFT Q1’ 2021Occupancy (%) Q1’ 2021Rental Yield Q1’ 2021
Westlands20584.5%10.1%
Karen21982.6%10.1%
Kilimani17383.8%8.7%
Ngong Road17875.0%7.6%
Kiambu road16370.8%6.7%
Mombasa road13973.0%6.0%
Satelite towns13872.4%6.0%
Thika Road14866.8%5.6%
Eastlands13266.0%5.5%
Average16675.0%   7.4%

Source: Cytonn Research 2021

The table below shows the summary of the number of stores of the key local and international retail supermarket chains in Kenya;

Main Local and International Retail Supermarket Chains
Name of RetailerCategoryHighest number of branches that have ever existed as at FY’2018Highest number of branches that have ever existed as at FY’2019Highest number of branches that have ever existed as at FY’2020Number of branches opened in 2021Closed branchesCurrent number of Branches
NaivasLocal4661692071
QuickMartLocal1029373040
Chandarana FoodplusLocal1419200020
CarrefourInternational6794013
CleanshelfLocal910111012
TuskysLocal5364640613
Game StoresInternational223003
UchumiLocal3737370352
ChoppiesInternational1315150132
ShopriteInternational244031
NakumattLocal6565650650
Total 25731333410177167

Source: Online research

Other notable highlights during the month include;

  1. Naivas Supermarket opened a new outlet in Nakuru taking up space previously occupied by Tuskys marking its fourth outlet in Nakuru and 71st countrywide. Cleanshelf Supermarket also opened a new branch in the same town taking up space left by Ukwala marking its first outlet in Nakuru and 12th countrywide. For more information, please fee Cytonn Weekly #15/2021, and,
  2. Artcaffe Group, a restaurant chain based in Kenya, announced plans to open four new outlets within the Nairobi Metropolitan Area in Kileleshwa, Freedom Height Mall in Lang’ata, ACK Gardens in Upperhill, and at Hardy in Ngong. For more information, see Cytonn Weekly #15/2021.

We expect the performance of the retail sector performance to be cushioned by the continued expansion by local and international chains supported by; i) relatively high population growth rate and urbanization growth rate of 2.2% and 4.0%, respectively according to the World Bank, ii) investor confidence due to the ease of doing business in Kenya, having been ranked position #56 by World Bank, iii) the growing middle class with increased purchasing power, and, iv) improving infrastructure.

   IV. Hospitality Sector

During the month;

  1. The United States of America (USA) retained the highest travel advisory on Kenya after the Centre for Disease Control (CDC) issued a Level Four Travel Health Advisory to American nationals due to the steep rise in Covid-19 cases in the country. For more information, see Cytonn Weekly #14/2021, and,
  2. The Kenyan government and the United Kingdom (UK) announced plans to form a joint committee to review the travel restrictions that triggered a tit-or-tat travel blockade between UK and Kenya over rising Covid-19 risk levels. For more information, see Cytonn Weekly #14/2021.

V. Land

During the week, President Uhuru Kenyatta officially launched the National Land Information Management System (NLIMS) marking the culmination of years of digitization of land records in Kenya.

The launch of the digital land platform named ‘Ardhi Sasa’, which will be first rolled out in Nairobi then in other counties in phases, coincided with the opening of the National Geospatial Data Centre, an online depository that will contain all the land records in Kenya. The land digitization program will enable Kenyans to;

  • Conduct land searches in real time thereby allowing for identification of the land’s location, ownership, size and past records,
  • Apply for title deeds directly through the system unlike in the past where one had to do this physically. This will reduce delays and inconveniences that were common in the land registries,
  • Sell land and conduct nearly every land transaction at the click of a button hence reducing human interaction, delays and other inconveniences Kenyans had to endure in the land registries,
  • Phase out the use of brokers and hence reduce cases of fraud and exploitation by fraudsters and middlemen while carrying out land transactions, and,
  • Reduce corruption and illegal transactions while assisting investigative agencies such as the Ethics and Anti-Corruption Commission (EACC) in curbing land related fraud.

The Ministry of Lands is currently transferring all parcels of land registered under repealed laws to the Land Registration Act of 2012 in order to implement the new system. The Land Act of 2012 aimed to amend, consolidate and streamline land laws and to ensure that land and land-based resources are managed and administered in a sustainable manner.

While all land parcels will be transferred to the new regime, their ownership, size, and other interests will remain unchanged. The new digital platform also comes with the introduction of the Registry Index Maps (RIMs) in place of the old system that utilized deed plans.

The RIMs system displays all land parcels within an area as opposed to a deed plan used in the former system that captured data on one specific parcel hence making it easier to note any changes or alterations.

This new platform will help to make transactions involving land easier and more transparent while reducing fraudulent transactions such as land grabbing that have plagued the sector for decades.

   VI. Infrastructure

The Government of Kenya, through the State Department of infrastructure released Kshs 3.1 bn to complete tarmacking of the 192.0 km Kabati-Migwani-Mbondoni road in Kitui. The road will join the Lamu Port-South Sudan-Ethiopia Transport (LAPSSET) corridor hence linking Machakos, Makueni and Kitui counties to the coastal and northern areas such as Tharaka-Nithi, Meru to Moyale. For more information, see Cytonn Weekly#16/2021.

  VII. Listed Real Estate

During the month, the Fahari I-REIT closed the month trading at an average price of Kshs 5.7 per share, representing a 16.2% decrease compared to the previous month’s closing price of Kshs 6.8 per share, and a 1.7% decrease YTD from Kshs 5.8 per share.

The REIT is expected to continue recording subdued performance due to; i) declining performance of the real estate market in the wake of the pandemic and lockdown restrictions, ii) insufficient institutional grade real estate assets, iii) lack of investor appetite in the instrument, and iv) general lack of knowledge about the instrument.

The real estate sector is expected to continue recording activities supported by; i) continued focus on affordable housing, ii) the continued expansion by local and international retailers, iii) the improvement of services in the land sector due to the digitization of land records, iv) the continued launch of infrastructure projects by the government opening up areas for real estate investment.

However, the hospitality sector is expected to be negatively affected as a result of travel restrictions by countries such as USA and UK which are key tourist markets for Kenya’s tourism sector.

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