Kenya’s capital city Nairobi continues to put pressure on market price as the demand for retail space is on the rise. A report by Africa Horizons indicated that yields from the retail space were highest at 9 per cent, marginally more than 8.5 per cent logistics and 8 per cent for office retail.
The report also revealed a high demand for grade A warehousing in Nairobi at Ksh 600 per square metre monthly rent. This increased higher than that of predominant stock of older units which lacked modern features like intermodal facilities and cross-docking. There is increased market activity with the entry of international retailers into the Kenyan market and the expansion efforts by local retail as they take advantage of the attractive rental rates. More investors are expected to shift focus to county headquarters with higher retail demand such as Kiambu and other areas within Nairobi. Increase of development is also based on demand from international retailers and investors as well as an improved financial environment.
Knight Frank Kenya managing director Ben Woodhams stated that yields in each property market align to risk profiles. Retail is much riskier in Nairobi hence the proportionately higher yield. In 2019 the retail real estate sector was based on occupancy rates, rental yields as well as supply and demand. Knight Frank report showed the need for large centralised warehouses gained critical mass countrywide. Moreover, other reports suggest that Africa will continue to remain a compelling investment destination targeting key centres.
Increased income might favour sectors exposed to consumer logistics, most especially the retail space.
Developers are however shifting focus to Nairobi satellite towns such as Kitengela, Rongai, Kiambu and county headquarters where land is readily available at relatively affordable prices, thus resulting in increased supply. Improved infrastructural development such as electricity, improved roads, sewer construction and main water connection have opened up Nairobi satellites towns and county headquarters to increased development resulting in the construction of warehouses and malls with space demand.
Africa recorded more than 700 separate inward investment projects half of them were invested by corporations based in France, UK, Germany, US and China. The investment destinations were international. Over half of the projects were accounted for in South Africa, Kenya, Nigeria, Morocco and Ethiopia.
Within the last six years over 20 recognized local and international retailers have aggressively penetrated the Kenyan market. This is supported by a widening middle class and provision of high-quality spaces meeting international standards and as well as infrastructure.