The real estate residential sector has witnessed numerous trends that are gradually being embraced with changing times and customer preference, with individuals looking for developments with unique features that help improve their quality of life. Lifestyle communities aim at offering a comprehensive and luxurious work, live and play environment and are differentiated by their location, unit size and designs, quality of finishes, array of amenities and facilities and thus have an associated feel of prestige. This week we shall focus on the lifestyle community concept with the aim of explaining what they are, highlighting their performance within the Nairobi Metropolitan Area and providing recommendations on their viability as a real estate investment. We shall look into;
- Introduction to Lifestyle Communities,
- Lifestyle Communities in the Nairobi Metropolitan Area and Factors Driving Them,
- Challenges facing Development of Lifestyle Communities,
- Performance of Lifestyle Communities within the Nairobi Metropolitan Area,
- Pros and Cons of Lifestyle Communities, and,
- Future of Lifestyle Communities in Kenya & Conclusion.
I. Introduction to Lifestyle Communities
A lifestyle community, also known as a common-interest community, is a residential neighbourhood with one or more unique features aimed at enhancing the quality of life for its residents by offering convenience, comfort and all-round luxury. The setting is mainly communal with large shared common spaces. The main unique features include but are not limited to fitness facilities such as; gyms, walking and biking trails, swimming pools, golfing amenities and boating facilities etc, and for these communities privacy and security are a top priority for most residents.
II. Lifestyle Communities in the Nairobi Metropolitan Area and Factors Driving Them
Development of lifestyle communities offering salient features has been on an upward trajectory as the need for convenient modern lifestyle by Kenya’s growing middle class creates a ready market. The developments provide prestige and exclusivity sought by affluent individuals in the context of high rise residential units in targeted markets such as; Westlands, Kilimani, Limuru Road, Thika Road and Upperhill. Some of the key lifestyle communities include;
- The Alma: The project is located in Ruaka encompassing 477 modern apartments. It comprises of one, two and three bedroom apartments (standard and premium) priced at Kshs 7.9 mn, Kshs 12.4 mn, Kshs 16.4 mn and Kshs 17.5 mn, respectively. Amenities within the development include; swimming pool, roof-top gardens, children’s playing fields, day care and nursery, clubhouse with a glass walled gym, aerobics and lounge area, a commercial hub that features a mini market, restaurant/café, beauty spa and pharmacy among others;
- Enaki Residences: The project is located in Rosslyn and sits on a 22.0-acre piece of land with the residential resort occupying 9.6 acres. Residential units comprise of one, two, three and four bedroom units priced at approximately Kshs 12.5 mn, Kshs 16.4 mn, Kshs 29.1 mn and Kshs 49.0 mn respectively. There are also studios priced between Kshs 6.5 mn and Kshs 8.9 mn and duplexes priced at Kshs 34.4 mn, Kshs 49.2 mn, Kshs 54.5 mn and Kshs 60.2 mn depending on size and the location of the unit within the building. Amenities at Enaki include; a grand reception lobby, concierge, fully walkable site, golf cart route, designated guest parking, staff lounge & facilities, caretakers flat, resident stores, gym and juice bar;
- Mi Vida Homes: Mi Vida, located at Garden City, along Thika Road, sits on 4.5 acres overlooking the Garden City Mall. The development, which is set for completion in 2021 will have a total of 208 units. It consists of one, two and three bedroom units priced at Kshs 8.4 mn, Kshs 12.0 mn and Kshs 15.7 mn, respectively. Mi Vida Homes’ amenities include; an indoor gym with yoga and fitness studio, a multipurpose sports court, barbeque deck, swimming pool, integrated intercom system and a 300 metre outdoor jogging track among others;
- Riverbank: The Riverbank development is located in Ruaka and sits on 11.0 acres at Two Rivers MallIt consists of 160 units of one, two and three bedroom apartments, priced at Kshs 16.0 mn, Kshs 20.0 mn and Kshs 26.5 mn, respectively. Amenities at Riverbank include; sports club with fully equipped gym, seven-a-side soccer pitch, tennis courts, a basketball court, and swimming pools among others;
- Le Mac: Le Mac is a 27 storeys development located off Old Waiyaki Way in Westlands on a 1.3-acre plot., consisting of 170 units. The development is a mixture of 81 SQM one bedroom, 114 SQM two bedroom and 146 SQM three bedroom apartments, priced at Kshs 17.0 mn, Kshs 25.0 mn and Kshs 30.0 mn, respectively. Amenities at Le Mac include; ground floor lounge café, gym, sauna, panoramic sky restaurant and infinite heated swimming pool;
- Purple Haze: The project is located along Kitale lane, off Dennis Pritt Road in Kilimani. It sits on a 2.0-acre plot, with differentiated two, three and four bedroom units. The two bedroom units range from 140 SQM- 169 SQM and are priced between Kshs 23.5 mn to Kshs 27.5 mn, while the three-bedroom unit sizes range between 169 SQM- 175 SQM and are priced between Kshs 27.5 mn - Kshs 29.5 mn. The 416 SQM and 492 SQM four bedroom units are priced at Kshs 78.0 and Kshs 80.0 mn, respectively. Amenities at Purple Haze include; a swimming pool, club house, gym, sauna and a roof garden among others;
- One West Park: One West Park is located off Mpaka road in Westlands. The development consists of 145 apartments and 380 parking spaces on 0.8 acres. The units are 190 SQM for a two bedroom, 209 SQM for a type (A) three bedroom and 227 SQM for a type (B) three bedroom, 255 SQM for a four-bedroom unit and 311 SQM for a penthouse, and are priced at Kshs 24.0 mn, Kshs 30.0 mn, Kshs 34.0 mn, Kshs 45.0 mn and Kshs 72.0 mn, respectively. Amenities include; two heated swimming pools, two heated generators, a jogging track, social hall, games room and a fully equipped gym;
- The Ridge: Located in Ridgeways, the Ridge sits on a 9.9-acre piece of land fronting the Northern Bypass. The residential development consists of 54 SQM one bedroom, 99 SQM two bedroom, 124 SQM three bedroom and 225 SQM four bedroom apartments, priced at Kshs 9.6 mn, Kshs 18.1 mn, Kshs 24.1 mn and Kshs 30.5 mn, respectively. Amenities at the Ridge include; a swimming pool, children’s playgrounds, landscaped courtyards, a health club, retail and office space consisting of a mini-mart, convenience stores, salon and laundry among others;
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Nairobi Metropolitan Area Lifestyle Communities Developments Summary |
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Name of development |
Location |
Residential Typology & Unit Sizes (SQM) |
Size (SQM) |
Residential Unit Price (Kshs) |
Price per SQM (Kshs) |
|
Enaki Residences |
Rosslyn |
1 bedroom(Townside) |
59 |
10.9 mn |
184,158 |
|
1 bedroom (Parkside) |
62 |
12.5 mn |
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|
2 bedroom (Townside) |
89 |
21.6 mn |
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|
2 bedroom (Parkside) |
94 |
16.4 mn |
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|
3 bedroom |
218 |
29.1 mn |
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|
4 bedroom |
291 |
49.0 mn |
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|
Mi Vida Homes |
Thika Road |
1 bedroom(A) |
56 |
8.4 mn |
141,227 |
|
1 bedroom(B) |
58 |
8.9 mn |
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|
2 bedroom |
86 |
12.0 mn |
|||
|
2 bedroom (DSQ) |
94 |
13.1 mn |
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|
2 bedroom (DSQ) |
99 |
14.0 mn |
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|
3 bedroom |
123 |
15.7 mn |
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|
Riverbank |
Ruaka |
1 bedroom |
87 |
14.0 mn |
152,670 |
|
2 bedroom |
130 |
20.0 mn |
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|
3 bedroom |
185 |
26.5 mn |
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|
Le Mac
|
Westlands |
1 bedroom |
81 |
17.0 mn |
221,551 |
|
2 bedroom |
114 |
25.0 mn |
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|
3 bedroom |
146 |
30.0 mn |
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|
Purple Haze
|
Kilimani |
2 bedroom (A) |
140 |
23.5 mn |
169,152 |
|
2 bedroom (B) |
169 |
27.5 mn |
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|
3 bedroom (A) |
169 |
27.5 mn |
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|
3 bedroom (B) |
172 |
29.5 mn |
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|
4 bedroom (A) |
416 |
78.0 mn |
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|
4 bedroom (B) |
492 |
80.0 mn |
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|
One West Park
|
Westlands |
2 bedroom |
190 |
24.0 mn |
158,044 |
|
3 bedroom (A) |
209 |
28.0 mn |
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|
3bedroom (B) |
227 |
32.0 mn |
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|
4 bedroom (A) |
255 |
45.0 mn |
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|
4 bedroom (B) |
311 |
72.0 mn |
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|
The Ridge |
Ridgeways |
1 bedroom |
54 |
9.6 mn |
172,740 |
|
2 bedroom |
99 |
18.1 mn |
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|
3 bedroom |
124 |
24.1 mn |
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|
4 bedroom |
225 |
30.5 mn |
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|
The Alma
|
Ruaka |
1 bedroom |
51 |
7.9 mn |
133,471 |
|
2 bedroom |
87 |
12.4 mn |
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|
3 bedroom (Standard) |
117 |
16.4 mn |
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|
3 bedroom( Premium) |
117 |
17.5 mn |
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Source: Online Research
Some of the major factors supporting the growth of lifestyle communities include;
- Demographic Growth: Kenya’s urbanization and population growth rates have remained relatively high at 4.0% and 2.3%, compared to the global average of 1.9% and 1.1%, respectively. This rising population presents an ideal market for lifestyle communities in urban areas and opportunities for real estate solutions to meet the growing demand while presenting comprehensive living conditions,
- Growth of the Middle Class: Kenya’s growing middle class demands for comprehensive and ideal living conditions given the increased disposable income. The middle class prefers solutions that are comprehensive and offer great convenience thus the growing preference for lifestyle communities,
- Presence of Salient Amenities: Lifestyle communities boast of top-notch amenities such as gyms, walking and biking trails, swimming pools, golfing amenities, reliable supply of water, sauna and security which offer convenience and a prestigious feel to the residents,
- Benefits of Economies of Scale: Due to the relatively large scale of amenities for many occupiers in the units, developers are able to offer amenities and services at a relatively lower unit cost, therefore benefiting both the developer and the buyer, and,
- Improved infrastructure: The continuous improvement of road networks such as the recent dualling of Ngong Road, the ongoing construction of Nairobi expressway and upgrading of Waiyaki way and construction of the Northern Bypass, opens up areas for development of investment grade real estate which encourages developers to explore lifestyle communities as an option, as they offer relatively high returns.
III. Challenges facing Development of Lifestyle Communities
Despite the numerous factors that have supported the growth of lifestyle communities, their development has been constrained by a number of factors, key among them being;
- Lack of Development Funding: Developers face barriers to adequate financial access which more often leads to project delays as they mostly rely on traditional sources of funding such as bank funding which is hard to secure due to the risk of defaults, while structured financing for real estate developments such as Real Estate Structured Notes and Real Estate Investment Trusts face slow uptake due to lack of sufficient market knowledge on the products,
- Inaccessibility to Mortgage Funding: Limited access to mortgage funding due to stringent requirements for borrowers to meet eligibility criteria coupled with inflexible mortgage maturity for buyers hinders uptake of units within lifestyle developments,
- Poor Urban Planning: Infrastructure remaining underdeveloped such as inadequate sewerage systems and water supply systems discourages development of lifestyle communities due to the high development costs accrued trying to ensure the environment is aesthetically appealing in order to attract clientele hence limiting developers, and,
- High Development Costs: Lifestyle communities are mostly located in prime areas with high land costs. This coupled by the need to deliver high quality designs and finishing leads to high development costs, thus a key hindrance to some developers.
IV. Performance of Lifestyle Communities within The Nairobi Metropolitan Area
We sampled lifestyle developments in key neighbourhoods among them; Westlands, Kilimani, Limuru Road, and Thika Road. These areas have continued to record growth of lifestyle communities supported by; i) relatively good transport networks, ii) proximity to social amenities, i.e, presence of malls such as Garden City Mall and Two Rivers Mall, iii) proximity to commercial nodes offering convenience for the working population, and, iv) hosting expatriates and majority of the growing Kenyan middle-class with increased disposable income thus demand for convenient and comprehensive lifestyles.
According to our analysis, lifestyle communities’ average total returns stood at 7.7%, 3.0% points higher than the residential market average of 4.7% according to Cytonn Annual Markets Review 2020. The average price per SQM came in at Kshs 157,952 while the average occupancy stood at 80.2%. In terms of total returns, one-bedrooms apartments were the best performing with an average returns of 10.1%, followed closely by two-bedroom apartments at 9.4%, while three and four-bedroom apartments came in at 6.6% and 4.7%, respectively. The good performance of one and two bedroom apartments is supported by their high demand as rental units. The performance of three-bedroom apartments was affected by 0.9% price correction attributable to the slowdown in demand amid reduced disposable income and thus focus on more affordable options. Four bedroom apartments recorded low rental yields averaging 4.2% respectively, attributed to relatively low occupancy rates at 77.0%, compared to the market average at 80.2%. Nevertheless, four-bedroom apartments had the highest average annualized uptake which stood at 21.7% while three, two, and one bedrooms recorded average annualized uptakes averaging 21.3%, 21.2% and 19.1%, respectively. The concept remained resilient recording an average price appreciation of 0.1% despite the tough economic environment.
The table below shows the performance of lifestyle communities in the Nairobi Metropolitan Area in 2021;
(All values in Kshs unless stated otherwise)
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Nairobi Metropolitan Area Market Performance of Lifestyle Communities 2021 |
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|
Typology |
Average Price |
Average Monthly Rent |
Average Price per SQM |
Average Rent per SQM |
Average Occupancy |
Average Annualized Uptake |
Average Rental Yield |
Average Price Appreciation |
Average Total Returns |
|
|
1 bed |
10.6 mn |
92,500 |
161,212 |
1,393 |
78.3% |
19.1% |
9.7% |
0.4% |
10.1% |
|
|
2 bed |
17.5 mn |
139,883 |
154,532 |
1,072 |
82.4% |
21.2% |
9.0% |
0.4% |
9.4% |
|
|
3 bed |
25.7 mn |
176,154 |
144,422 |
974 |
82.9% |
21.3% |
7.4% |
(0.9%) |
6.6% |
|
|
4 bed |
66.8 mn |
295,000 |
171,641 |
720 |
77.0% |
21.7% |
4.2% |
0.5% |
4.7% |
|
|
Grand Average |
|
175,782 |
157,952 |
1,040 |
80.2% |
20.8% |
7.6% |
0.1% |
7.7% |
|
|
· The average total returns came in at 7.7% with an average rental yield of 7.6% and an average price appreciation of 0.1% · One bedroom units recorded the highest rental yield at 9.7%, followed by two bedroom units at 9.0% · The average occupancy stood at 80.2% while the average price per SQM came in at Kshs 157,952 |
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Source: Cytonn Research
The table below shows the comparison between performance of lifestyle communities in 2021 and the general residential market in the Nairobi Metropolitan Area in 2020;
(All values in Kshs unless stated otherwise)
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Nairobi Metropolitan Area Market Performance Summary |
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|
Metric |
Lifestyle Communities |
FY’20 Residential Market |
Difference |
|
Average Price Per SQM |
157,952 |
116,774 |
32.8% |
|
Average Rent Per SQM |
1,040 |
543 |
91.3% |
|
Average Rental Yield |
7.6% |
4.9% |
2.7% points |
|
Average Y/Y Price Appreciation |
0.1% |
(0.2%) |
0.3% points |
|
Average Total Returns |
7.7% |
4.7% |
3.0% points |
|
· Lifestyle communities performed better in terms of total returns averaging 7.7%, 3.0% points higher than the residential market average of 4.7% · Lifestyle communities’ average price per SQM and rent per SQM came in at Kshs 157,952 and Kshs1,040, which are 36.1% points and 80.4% points higher than the residential market averages of Kshs 116,774 and Kshs 543, respectively |
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Source: Cytonn Research
V. Pros and Cons of Lifestyle Communities
Some of the advantages of lifestyle communities include:
- Security: Lifestyle communities provide a safe environment for residents owing to tightly guarded gates and perimeter walls. Residents with children are assured of the security and safety of their kids as they play within the neighbourhood,
- Cost Reduction due to Shared Facilities and Programs: Lifestyle communities provide shared facilities such as swimming pools, fitness centres, kids’ play areas and golf grounds which make them convenient and relatively affordable to home owners. In addition, the sharing creates familiarity and oneness within a particular community,
- Convenience: Lifestyle communities are developed with or around facilities that make life easier and better for its residents. Basic amenities such as shopping malls, schools, hospitals, churches and social services can be easily accessed at residents’ discretion,
- Maintenance is a Management Responsibility: These communities have a dedicated maintenance team which is available round the clock and given the pooled resources, the cost of services reduces significantly, and,
- Full Capital Gains on Re-sale: Investors are guaranteed of relatively high returns on re- sale of the property boosted by the proper maintenance and comprehensive amenities.
Despite the above benefits, there are a few disadvantages associated with lifestyle communities and they include;
- Less Freedom for Decorating and Design- For some communities, guidelines regarding home’s exteriors, landscaping, and maintenance present too much control and some homeowners feel they are being deprived of their right to freedom of expression, and,
- Restricted privacy: Residents live too close together and this limits their privacy compared to standalones in which on has their own compound and space.
VI. Future of lifestyle communities in Kenya & Conclusion
The lifestyle community concept has continued to gain popularity in Kenya supported by the growing demand for developments offering a comprehensive lifestyle that incorporates live, work and play, in addition to the relatively good returns to investors compared to the overall residential market. On the residential part, the best typologies to invest in would be one-bedrooms followed by two-bedrooms owing to their high returns supported by their high rental returns and resilient unit prices amid reduced transaction volumes in the market. With benefits outweighing shortcomings, we expect the real estate sector to continue recording increased development of lifestyle communities supported by; i) relaxed zoning regulations that enable development of high density building which allow for the provision of an array of amenities, ii) Kenya’s growing middle class thus demand for convenient, social and modern lifestyles, iii) improvement of infrastructure opening up more areas for development, iv) increased foreign investments supporting development with Kenya’s ranking by the World Bank in the ease of doing business having improved by 5 positions to #56 in 2020, and, iv) investors aiming to cash in on the high returns achievable from the developments. However, we expect the tough economic environment, market uncertainty, and the reduced disposable income to affect uptake of units within the lifestyle communities in the short term.
Disclaimer: The views expressed in this publication are those of the writers where particulars are not warranted. This publication is meant for general information only and is not a warranty, representation, advice or solicitation of any nature. Readers are advised in all circumstances to seek the advice of a registered investment advisor.
