FOR IMMEDIATE RELEASE
“RESIDENTIAL UNITS IN NGONG, KITENGELA, RUIRU, AND JUJA RECORD THE HIGHEST Y/Y AVERAGE RETURNS TO INVESTORS AND LAND RECORDS AN OVERALL ANNUALIZED CAPITAL APPRECIATION OF 5.7%.”
NAIROBI, KENYA April 3rd 2023
Cytonn Real Estate, the development affiliate of Cytonn Investments, has released their Q1’2023 Markets Review. The report highlights the current state of the Real Estate sector in terms of uptake, rental yields, capital appreciation, and total investor returns. The Real Estate sector recorded notable growth in terms of activity compared to a similar period in 2022, attributable to the continued growth of the Kenyan economy enabling increased Real Estate property transactions. In the Nairobi Metropolitan Area (NMA), the residential sector recorded improved performance with a 0.4% points y/y increase in average total returns to 6.1% from the 5.7% recorded in Q1’2022. The commercial office sector recorded average rental yields of 7.6% in Q1’2023, representing a 0.3% points y/y increase from 7.3% recorded in Q1’2022. The retail sector recorded average rental yields of 8.0% in Q1’2023, representing a 0.1% points y/y increase from 7.9% recorded in Q1’2022. The land sector recorded an average annualized capital appreciation of 5.7% in Q1’2023, with un-serviced land prices in satellite towns realizing the highest capital appreciation at 14.2% y/y.
“Some of the key factors that have continued to shape the performance of the real estate sector include: i) improving infrastructure opening up areas for development, ii) continued investor focus on affordable housing, and, iii) government efforts to enable access to affordable mortgages rates, e.g. from Kenya Mortgage Refinance Company, iv) aggressive expansion efforts by retailers, v) recovery of the hospitality sector, vi) positive demographics,” Stated Kennedy Waweru, a Research Analyst at Cytonn Investments.
There are, however, a couple of challenges dragging the sector gains behind, such as; i) constrained financing to developers following an increase in Non-Performing Loans (NPLs), ii) rising construction costs, iii) existing oversupply in some sectors, e.g. 1.7 mn SQFT in the Kenyan retail sector and 5.8 mn SQFT in the Nairobi Metropolitan Area commercial office sector, iv) tough economic environment affecting the purchasing power of people, and, v) continued poor performance of the REITs market in Kenya.
In the residential sector, detached units recorded average total returns of 5.8% y/y, while apartments recorded average total returns of 6.4% y/y. Detached units in Ruiru, Juja and Runda recorded the highest average y/y returns at 7.5%, 6.6%, and 6.5%, respectively, while apartments in Ngong, Kitengela and Imara Daima recorded the highest average y/y total returns of 7.6%, 7.5%, and, 7.4% respectively.
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(All Values in Kshs unless stated otherwise) |
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Cytonn Report: Detached Units Performance: Top 5 markets |
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Area |
Average of Price per SQM Q1'2023 |
Average of Rent per SQM Q1'2023 |
Average of Occupancy Q1'2023 |
Average of Uptake Q1'2023 |
Average of Annual Uptake Q1'2023 |
Average of Rental Yield Q1'2023 |
Average of Price Appreciation Q1'2023 |
Total Returns |
|
Ruiru |
68,423 |
348 |
87.4% |
83.7% |
18.1% |
6.2% |
1.3% |
7.5% |
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Juja |
67,415 |
295 |
86.6% |
83.6% |
16.5% |
5.8% |
0.8% |
6.6% |
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Runda |
212,650 |
828 |
95.3% |
97.0% |
10.1% |
4.6% |
1.9% |
6.5% |
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Syokimau/Mlolongo |
75,735 |
320 |
88.8% |
90.8% |
18.5% |
4.5% |
2.0% |
6.5% |
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Ngong |
60,676 |
305 |
90.0% |
96.3% |
12.4% |
6.3% |
0.1% |
6.4% |
Cytonn Research
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(All Values in Kshs unless stated otherwise) |
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Cytonn Report: Apartments Market performance: Top 5 Markets |
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Area |
Average of Price per SQM Q1'2023 |
Average of Rent per SQM Q1'2023 |
Average of Occupancy Q1'2023 |
Average of Uptake Q1'2023 |
Average of Annual Uptake Q1'2023 |
Average of Rental Yield Q1'2023 |
Average of Price Appreciation Q1'2023 |
Total Returns |
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Ngong |
66,960 |
367 |
84.6% |
84.8% |
12.4% |
5.3% |
2.3% |
7.6% |
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Kitengela |
61,718 |
293 |
85.5% |
87.5% |
11.5% |
4.9% |
2.6% |
7.5% |
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Imara Daima |
80,608 |
392 |
86.2% |
86.7% |
11.0% |
5.2% |
2.2% |
7.4% |
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Ruaka |
108,765 |
570 |
77.1% |
83.8% |
22.1% |
5.1% |
2.1% |
7.2% |
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Ruiru |
89,601 |
492 |
87.0% |
83.6% |
14.1% |
5.7% |
1.4% |
7.1% |
Cytonn Research
In the commercial office sector, Gigiri, Westlands, and Karen were the best-performing submarkets in Q1’2023 recording rental yields of 8.7%, 8.4% and 8.3%, respectively, attributed to; i) the presence of well-developed infrastructure and amenities enhancing investments, ii) high concentration of top-quality office spaces commanding premium rental rates thus resulting in attractive yields for investors, iii) sustained demand for quality office spaces supported by the presence of international organizations, multinational companies and embassies in the areas, iv) serene environment providing excellent office locations away from the hustle and bustle of the city centre, and, v) ease of accessibility of these areas which has made them popular choices for businesses.
In the retail sector, Kilimani, Karen, and Westlands stood out as the best-performing nodes with average rental yields of 9.8%, 9.5%, and 8.9%, respectively, surpassing other nodes. The exceptional performance is attributed to the availability of high-quality retail spaces that command high rents, as well as the presence of quality infrastructure services in those areas.
For the land sector, un-serviced land in the satellite towns of Nairobi recorded the highest y/y capital appreciation of 14.2%, mainly due to affordability which entices both buyers and investors. Average asking land prices per acre for un-serviced land in satellite towns came in at Kshs 14.5 mn, compared to Kshs 403.4 mn per acre in Nairobi suburbs.
The outlook of the Real Estate sector is positive for one Sector-Land, neutral for five Sectors-Residential, Commercial Office, Retail, and Hospitality and negative for one Sector-Listed Real Estate. Therefore, our overall outlook for the Real Estate sector is NEUTRAL, supported by; positive demographics, improving infrastructure, continued focus on the affordable housing front, and improved access to mortgages. The performance of the sector is likely to be constrained by the existing oversupply in the commercial office font and the retail sector, reduced consumer purchasing power brought about by the tough economic environment and subdued performance of the REIT investment asset class.
Below is a summary of the Q1’2023 sectorial performance:
Key: Green – POSITIVE, Grey – NEUTRAL, Red – NEGATIVE highlights sectorial outlook
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Theme |
Cytonn Report: Thematic Performance and Outlook Q1’2023 |
Outlook |
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Residential |
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Neutral |
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Commercial Office |
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Neutral |
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Retail |
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Neutral |
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Hospitality |
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Neutral |
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Land |
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Positive |
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Listed Real Estate |
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Negative |
For more details, see the report.
Notes to the Editor:
Cytonn Investments is an independent investment management firm with offices in Nairobi - Kenya and D.C. Metro - U.S. We are primarily focused on offering alternative investment solutions to individual high net-worth investors, global and institutional investors and Kenyans in the diaspora interested in the high-growth East-African region. We currently have over Kshs 82.0 billion of investments and projects under mandate, primarily in real estate.
Cytonn Real Estate is Cytonn’s development affiliate, which is focused on developing institutional-grade real estate targeted at specific institutional, high net-worth and Diaspora investors. Collective, Cytonn Investments and Cytonn Real Estate manage over Kshs. 82 billion of real estate projects.
For more information, kindly contact:
Clifford M. Mulama
Brand and Communications
+254 (713) 840 107
Cytonn Investments Management Limited, 6th Floor, The Chancery, Valley Road, P.O. Box 20695 – 00200, Nairobi, Kenya.
rdo@cytonn.com | +254 (0) 20 4400420 | +254709101000
