NAIROBI, KENYA, 26TH FEBRUARY, 2019 Cytonn Real Estate, the development affiliate of Cytonn Investments, has released its Nyeri Real Estate Investment Opportunity Report for 2019, which highlighted that; Nyeri’s real estate market performance improved in terms of investment returns. The average residential rental yield came in at 5.1% in 2019, from 4.1% in 2017, with a slight decline in the commercial sector to 12.1% from 13.5% in 2017, and a growth in capital appreciation of land to 19.1%, from 17.3% recorded in 2017.
“Our outlook for the performance of the real estate sector in Nyeri is positive, with the investment opportunity being mainly in the land sector in site and service schemes, which recorded a relatively high capital appreciation of 19.1% per annum, and in the commercial sector given the relatively high yields of 12.1% per annum and the existing market gap for quality commercial buildings, ‘’ said Johnson Denge, the Senior Manager for Regional Markets at Cytonn Real Estate.
According to the report, the real estate market in Nyeri is expected to continue recording improved performance, supported by; i) devolution, which has continued to open up Nyeri town, attracting government institutions, private investors, thus creating demand for office space, retail space and residential units, ii) hosting of Mt. Kenya Regional Headquarters as it is centrally located, thus creating demand for office space, retail facilities and housing units, iii) a relatively high income, with Nyeri being ranked the 12th richest county in terms of GDP per capita in the country, at USD 958.0, which illustrates a high purchasing power thus a growing demand for property in Nyeri, iv) tourism, boosted by key attractions including national parks and Lady Baden Powell graves, resulting in demand for hospitality services, v) the growth of small and medium enterprises, boosted by the ease of doing business and vi) the improving infrastructure, which is expected to open up areas for development.
The residential sector in Nyeri recorded improved performance with an average rental yield of 5.1%, compared to the 4.1% recorded in 2017, attributed to an increase in demand, with the occupancies growing by 8.0% points from 82% in 2017, to 90% in 2019 in addition to an increase in rent prices. Residential properties are mostly for rent, with the National Housing Corporation, probably being the only developer who has adopted the build for sale model.
In the commercial sector, there has been increasing supply of space with one of the most recent completions being the County Mall which was opened in 2018, bringing to the market 65,000 square feet of mixed-use space. In terms of performance, the sector recorded an average rental yield of 12.1%, from 13.5% in 2017, attributed to the decline in occupancy rates from the 89% recorded in 2017 to 87% in 2019, resulting from the growing supply of space in the market. “Despite the slight decline in performance, Nyeri continues to outperform other markets such as Mombasa, Kisumu, Nairobi and Nakuru with a yield of 6.7%, 9.2%, 8.3% and 6.5%, respectively. This indicates that, in comparison to the other 4 regions, Nyeri offers a better investment opportunity for commercial property, attributed to low supply of quality office spaces in the market,” stated Beatrice Mwangi, a Research Analyst at Cytonn.
According to the report the land sector recorded a relatively high capital appreciation of 19.1% compared to the 17.3% recorded in 2017, attributed to increased demand for plots in site and service schemes as prospective homebuyers prefer to buy land and build their own houses.
Out of the three real estate themes evaluated in Nyeri, site and service schemes and the commercial sector had a positive outlook, while the residential sector had a neutral outlook, giving the real estate sector in Nyeri an overall positive outlook:
|
Theme |
Investment Opportunity |
Outlook |
|
Residential |
There’s an opportunity for investment in stand-alone units for sale, given the low supply, relatively high annual uptake of 23%, and higher yields of 5.6% compared to apartments at 4.5% For apartments, the focus should be on the rental units given the high demand for the same evidenced by the average occupancy rates of approximately 93%. |
Neutral |
|
Commercial Properties |
The market lacks grade A and B offices, with most offices being in a poor state of repair and lacking facilities such as lifts. This thus presents an investment opportunity for quality commercial buildings supported by the relatively high rental yield of above 10.0% and occupancy rates of above 80%. |
Positive |
|
Site and service schemes |
Site and service schemes present an investment opportunity in Nyeri, with increased demand for development land as prospective homebuyers prefer to buy land and build their own houses. |
Positive |
|
Source: Cytonn Research, 2019 |
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The detailed report is available online: Nyeri Real Estate Investment Opportunity 2019
APPENDIX: DETAILED PERFROMANCE FOR EACH MARKET SEGMENT
- RESIDENTIAL SECTOR: The residential market recorded an average rental yield of 5.1%, 1.0% points from the 4.1% recorded in 2017, attributed to the 17.0% and 8.0% increase in the monthly rent per square metre and occupancy rates, respectively. Standalone units recorded an average rental yield of 5.6% in 2019, 1.2% points higher than the 4.4% recorded in 2017, attributed to the increase in the monthly rent charged from Kshs 338 per SQM in 2017 to Kshs 378 per SQM, and occupancy rates from 73.0% to 87.0%, as most of the units have been enhanced by the owners before renting them out thus charging a higher rent price. On average, the apartments recorded a rental yield of 4.5% in 2019, 0.8% points higher than the 3.7% recorded in 2017, attributed to a 2.0% points increase in occupancy rates from 91% in 2017 to 93% in 2019, and a 21.3% increase in rent per SQM from Kshs 239 to Kshs 290 per SQM,
- COMMERCIAL SECTOR: Commercial properties in the market recorded a 1.4% points decline in rental yield from 13.5% recorded in 2017 to 12.1%, attributed to the decline in occupancy rates from 89% recorded in 2017 to 87% recorded in 2019, resulting from a growing supply of space in the market with some of the new buildings introduced into market in the last 2 years being; the County Mall off Baden Powell’s Road and KDS center along Kimathi Street,
- SITE AND SERVICE SCHEMES: Site and service schemes recorded an average annual capital appreciation of 19.1% in 2019, 1.8% points higher than the 17.3% recorded in 2017, attributable to the growing demand for development land. The most common plots for sale in the market are quarter acre plots and an eighth of an acre plots, whose price ranges from Kshs 0.4 mn to 1.4 mn, and Kshs 2.0 mn to Kshs 4.5 mn, respectively.
