Cytonn Real Estate, the development affiliate of Cytonn Investments, has released their H1’2021 Markets Review, a report that highlights key performance and activities of real estate and real estate related sectors. According to the report, the real estate sector recorded increased activities following the reopening of the economy which saw an improved business environment. The residential sector recorded improvement in performance with average total returns registering a 0.8% points half-yearly increase to 5.5%, from 4.7% recorded in FY’2020. The commercial office sector recorded a 0.1% decline in rental yields to 6.9% in H1’2021, from 7.0% recorded in FY’2020. The retail sector recorded a 0.1% improvement in rental yields to 7.6% in H1’2021, from 7.5% recorded in FY’2020. The land sector continued to show resilience despite the pandemic recording an overall annualized capital appreciation of 1.6%.
“Some of the factors that supported the improvement of performance in the real estate sector during the period under review include: i) government’s aggressiveness to implement affordable housing and infrastructure projects despite the pandemic, ii) efforts by the Kenya Mortgage Refinance Company (KMRC) together with other financial institutions to provide mortgage loans to Kenyans, iii) local and international retailers’ aggressiveness in taking up prime retail spaces left by troubled retailers, iv) relatively high urbanization and population growth rate, and, v) Launch of the National Land Information Management System (NLIMS) aimed at streamlining land transactions in Nairobi,” stated Fidelis Wanalwenge, a Research Analyst at Cytonn Investments.
However, challenges impeding performance of the sector include; i) partial lockdowns and travel restrictions imposed in the country that affected performance of the hospitality sector which heavily relies on tourism sector, ii) reduced demand for office spaces as organizations still embrace the remote working strategy, iii) reduced consumer purchasing power attributed to the tough economic condition brought about by the COVID-19 pandemic, iv) the existing oversupply of 2.0 mn SQFT in the retail sector and 7.3mn SQFT in the commercial office sector, and, vi) the existing vacancy rates despite the slight occupancy increase rates for the retail spaces recorded in H1’2021, due to the shift towards online shopping.
In the residential sector, apartments recorded average total returns of 5.6% y/y while detached units recorded an average total returns of 5.4% y/y. Detached units in Ruiru, Kitisuru and, Redhill recorded the highest average y/y returns at 6.6%, 6.5% and, 6.5%, respectively, while apartments in Waiyaki Way, Parklands and, Ruaka recorded the highest average y/y total returns of 8.1%, 7.6% and, 7.5% respectively.
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(All Values in Kshs unless stated otherwise) |
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Detached Units Performance; Top 5 Markets |
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Area |
Average of Price per SQM H1'2021 |
Average of Rent per SQM H1'2021 |
Average of Occupancy H1'2021 |
Average of Uptake H1'2021 |
Average of Annual Uptake H1'2021 |
Average of Rental Yield H1'2021 |
Average of Price Appreciation H1'2021 |
Average Total Returns H1'2021 |
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Ruiru |
79,138 |
332 |
83.9% |
83.5% |
24.9% |
5.0% |
1.6% |
6.6% |
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Kitisuru |
203,113 |
615 |
92.5% |
90.3% |
15.0% |
3.8% |
2.7% |
6.5% |
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Redhill & Sigona |
97,843 |
446 |
90.9% |
90.9% |
15.4% |
5.2% |
1.3% |
6.5% |
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Syokimau/Mlolongo |
75,406 |
367 |
75.7% |
85.1% |
16.8% |
4.4% |
2.1% |
6.5% |
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Ridgeways |
152,100 |
775 |
84.5% |
86.2% |
13.4% |
5.2% |
1.2% |
6.3% |
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Runda Mumwe |
152,949 |
635 |
85.2% |
80.1% |
14.1% |
4.3% |
2.0% |
6.3% |
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Loresho |
148,543 |
673 |
87.8% |
82.0% |
10.7% |
4.8% |
1.5% |
6.3% |
Cytonn Research 2021
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(All values in Kshs unless stated otherwise) |
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Apartments Performance; Top 5 Markets |
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Area |
Average of Price Per SQM H1'2021 |
Average of Rent per SQM H1'2021 |
Average of Occupancy H1'2021 |
Average of Uptake H1'2021 |
Average of Annual Uptake H1'2021 |
Average of Rental Yield H1'2021 |
Average of Y/Y Price Appreciation H1'2021 |
Total Returns H1'2021 |
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Waiyaki Way |
87,563 |
520 |
78.8% |
77.9% |
21.7% |
5.6% |
2.5% |
8.1% |
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Parklands |
117,472 |
689 |
84.8% |
83.2% |
14.7% |
5.6% |
2.0% |
7.6% |
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Ruaka |
105,633 |
514 |
63.7% |
76.0% |
19.0% |
5.5% |
2.0% |
7.5% |
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Dagoretti |
87,565 |
514 |
86.7% |
89.7% |
17.4% |
6.3% |
1.1% |
7.4% |
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South C |
113,751 |
598 |
86.3% |
64.1% |
14.1% |
5.9% |
1.2% |
7.1% |
Cytonn Research 2021
According to the report, Gigiri and Karen were the best performing submarkets in H1’2021 recording rental yields of 8.2% and 7.9%, respectively against a market average of 6.9% attributed to their serene environments hence attracting prime, developments and rental prices, relatively good infrastructure, and low supply of commercial office spaces within the markets.
In the retail sector, Westlands and Karen were the best performing nodes recording average rental yields of 9.7% and 9.5%, respectively compared to the overall market average of 7.6% in H1’2021. The performance is attributed to presence of affluent residents who have a high consumer purchasing power with the areas hosting high end income earners, relatively good infrastructure, and, relatively high occupancy rates of above 80.0% against the market average of 75.7%.
For the land sector, the asking prices for the low-rise areas recorded the highest annual capital appreciation of 4.9% attributable to high demand in the areas. These areas have also remained attractive due to their exclusivity and privacy with the areas being attractive for family units as they are sparsely populated.
With the positive outlook for land sector, negative outlook for the commercial office sector and neutral outlook for the residential, retail, MUDs, hospitality and REITs sectors, our overall outlook for the real estate sector is NEUTRAL with performance expected to be supported by; government aggressiveness on affordable housing initiative, improved infrastructure activities, positive demographics, improved mortgage availability, and improved retail space uptake. However, performance of the sector is likely to be constrained by reduced demand for office and retail spaces due to remote working and online shopping, reduced purchasing power of people due to the tough economic conditions, high mortgage interest rates, and the existing oversupply in the retail and commercial sectors. Below is a summary of the H1’2021 sectorial performance:
Key: Green – POSITIVE, Grey – NEUTRAL, Red – NEGATIVE highlights sectorial outlook
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Theme |
Thematic Performance and Outlook Q1’2021 |
Outlook |
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Residential |
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Neutral |
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Office |
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Negative |
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Retail |
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Neutral |
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Mixed-Use Developments (MUDs) |
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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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Neutral |
For more details, see the Cytonn H1’2021 Markets Review.
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. 82.0 billion of real estate projects.
For more information, kindly contact:
Kevin Namunwa Teresiah W. King’ara
PR and Communications Brand and Communications
+254 757 35 3315 +254704597107
Email: knamunwa@cytonn.com tkingara@cytonn.com
Cytonn Investments Management Limited, 6th Floor, The Chancery, Valley Road, P.O. Box 20695 – 00200, Nairobi, Kenya.
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