Serviced apartments average occupancy in the Nairobi Metropolitan Area (NMA) increased by 13.5% points to 61.5% in 2021, from the 48.0% recorded in 2020 due to improving business environment.
- Distribution of Serviced Apartments in the Nairobi Metropolitan Area
Westlands and Kilimani have the largest market share of serviced apartments within the Nairobi Metropolitan Area, at 37.9% and 24.3%, respectively. The number of serviced apartments in the region increased by a 7-Year CAGR of 8.5% to 6,044 apartments in 2021, from 3,414 apartments in 2015.
The table below indicates the percentage market share for serviced apartments in the Nairobi Metropolitan Area;
|
Nairobi Metropolitan Area (NMA) Serviced Apartments Market Share 2021 |
|
|
Area |
Percentage Market Share |
|
Westlands & Parklands |
37.9% |
|
Kilimani |
24.3% |
|
Kileleshwa & Lavington |
15.5% |
|
Upperhill |
9.7% |
|
Limuru Road |
6.8% |
|
CBD |
2.9% |
|
Thika Road |
1.9% |
|
Spring Valley |
1.0% |
|
Total |
100% |
Source: Online Research
- Performance of Serviced Apartments in the Nairobi Metropolitan Area – Rental yield and Occupancy
Serviced apartments within the NMA recorded an average rental yield of 5.5% in 2021, 1.5% points higher than the 4.0% recorded in 2020. Westlands and Kileleshwa were the best performing nodes in 2021, with a rental yield of 8.3% and 6.4%, respectively, compared to the market average of 5.5% due to high demand. Thika Road was the least performing node with a rental yield of 3.5%, 2.0% points lower than the market average of 5.5% and we attribute this to the relatively low charge rates for apartments within the area.
In terms of occupancy, there was a notable improvement with occupancy rates increasing by 13.5% points to 61.5%, from 48.0% recorded in 2020. Serviced Apartments in Westlands and Nairobi CBD recorded the highest occupancy at 68.8% and 66.6% respectively, while Thika Road recorded the lowest occupancy at 56.4%.
The table below indicates the average occupancy and rental yields for the different nodes in the Nairobi Metropolitan Area;
|
Nairobi Metropolitan Area Serviced Apartments Performance 2021 |
||
|
Node |
Occupancy |
Rental Yield |
|
Westlands |
68.8% |
8.3% |
|
Kileleshwa & Lavington |
57.1% |
6.4% |
|
Kilimani |
60.0% |
5.8% |
|
Limuru Road |
60.5% |
4.9% |
|
Nairobi CBD |
66.6% |
4.9% |
|
Upperhill |
61.1% |
4.5% |
|
Thika Road |
56.4% |
3.5% |
|
Average |
61.5% |
5.5% |
Source: Cytonn Research 2021
- Performance by Typology
In terms of performance by typology, studio units recorded the highest average rental yield at 6.2%, mainly attributed to the relatively high monthly charges/SQM at Kshs 3,044, compared to 1, 2 and 3 bedroom units at Kshs 2,571, 2,574 and 2,476, respectively. The performance of studio units is also supported by relatively high average occupancy at 62.4% compared to 2 and 3 bedroom units at 57.7% and 57.5%, respectively.
The table below shows the summary performance according to typology;
|
Summary per Typology |
||||
|
Typology |
Average Size per SQM |
Monthly Charges per SQM (Kshs) |
Occupancy (%) |
Rental Yield (%) |
|
Studio |
43 |
3,044 |
62.4% |
6.2% |
|
One Bedroom |
75 |
2,571 |
71.4% |
5.9% |
|
Two Bedroom |
102 |
2,574 |
57.7% |
5.6% |
|
Three Bedroom |
150 |
2,476 |
57.5% |
5.1% |
|
Average |
92 |
2,664 |
62.2% |
5.7% |
|
||||
Source: Cytonn Research 2021
- Recommendation and Outlook:
|
Serviced Apartments Sector Outlook |
||
|
Measure |
Sentiment |
Outlook |
|
Serviced Apartments Performance |
|
Neutral |
|
International Tourism |
|
Neutral |
|
MICE Tourism |
|
Neutral |
|
Supply |
|
Neutral |
Given that the 4 key metrics we track (performance, tourism, MICE and supply) are neutral, we thus have a NEUTRAL overall outlook for the hospitality sector. Investment opportunity lies in Westlands and Kileleshwa which were the best performing nodes with a rental yield of 8.3% and 6.4%, respectively, compared to the market average of 5.5%.
