The real estate sector has recorded increased activities in Q3’ 2021 attributable to the continued reopening of the economy, a new report by Cytonn shows.
The residential sector recorded improved performance with 0.7 percent points while the commercial office sector recorded average rental yields of 6.9percent, representing a 0.1percent point decline from 7 percent recorded in FY’2020, and 0.3percent points decline from 7.2 percent recorded in Q3’2020.
The retail market recorded average rental yields of 7.5perent, like FY’2020. The land sector recorded an average annualized capital appreciation of 1.7percent in Q3’2021, with land prices in the satellite towns realizing the highest capital appreciation at 4.5percent.
“Some of the factors that supported the improvement of the performance in the real estate sector include: government’s efforts to support affordable housing projects and avail affordable mortgages through the Kenya Mortgage Refinance Company, lending institutions such as banks and SACCOs continued efforts to support homeownership through affordable mortgage schemes with bespoke terms to diverse clients, aggressive expansions by local retailers such as Naivas and international retailers such as Carrefour taking up prime retail spaces left by beleaguered retailers such as Tuskys,” Wawira Antony, a Research Analyst at Cytonn Investments said.
However, some of the challenges impeding the performance of the sector include, continued oversupply of commercial office space in the Nairobi Metropolitan Area currently at 7.3 mn of SQFT as businesses have incorporated work from home measures as a continuing norm, existing oversupply of retail space in the NMA currently at 3.0 mn SQFT attributable to rising in e-commerce.
In the residential sector, apartments recorded an average total return of 6.1percent y/y, while detached units recorded an average total return of 4.8percent.
Detached units in Ngong were best performing with an average total return of 7.1percent.
Syokimau/Mlolongo came in second with an average total return at 6.6percent while Karen and Kitengela tied in third position with a total return 5.9percent.
For apartments, Dagoretti, South C and South B recorded the highest average y/y average total returns of 8.6percent, 8.2percent and 7.8percent, respectively.
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