The real estate sector average total returns came in at nine per cent/Courtesy
NAIROBI, Kenya, Jan 6 – The real estate sector last year recorded a subdued two per cent growth in rental yields and occupancy rates compared to 2018.
According to a report by Cytonn Real Estate the slow growth was attributed to sluggish demand for property during the year owing to the prevailing tough operating environment.
The company further noted that the sector has retained a neutral outlook in the increased supply in market and continued limited access to financing for both developers and off-takers.
“We retain a neutral outlook for the real estate sector mainly constrained by increased supply in the market and continued limited access to financing for both developers and off-takers,” it stated.
Factors such as delayed issuance of construction permits and oversupply in select sectors namely, commercial office and retail with a surplus of 5.2mn SQFT and 2.0mn SQFT.
It however expects the market to improve as the interest rate cap regime comes to an end,“We expect the market to improve as the interest rate cap regime comes to an end, “it affirmed.
The report highlights, the real estate sector average total returns came in at nine per cent with commercial office, retail, residential, mixed-use developments, and serviced apartments sectors posting average rental yields of 7.5 per cent , 7.8 per cent, 5.0 per cent 7.3, per cent and 7.6,per cent respectively, while capital appreciation for existing properties came in at 2 per cent.
However, residential and serviced apartment sectors continued to perform well in terms of rental yield, recording increase of 0.3 per cent points and 0.2 per cent points, (5 per cent and 7.6 per cent as at 2019 from 4.7 per cent and 7.4 per cent in 2018).
The sector mean while, has pockets of value in themes such as housing for lower-middle to low-income earners in Satellite towns such as Ruiru, Athi River and Ruaka have delivered above market rental yields market rental yields such as serviced offices and serviced apartments with 13.4 per cent and 7.6 per cent.
Mixed-use developments where office and retail spaces recorded an average rental yields of 7.9 per cent and 8.1 per cent, respectively, 0.4 per cent points and 0.3per cent points higher than their respective single-use market averages of 7.5 per cent and 7.8 per cent.
The highest performance in last year averaging at 7 .8 per cent were areas such as Athi River, Thinigua and Langata posting returns of up to 8.5 per cent.
