Nairobi, South C
Property Market Overview in Kenya.
Kenya achieved one of the African continent’s highest year-on-year GDP growth results at 5.8% for 2015. It also became the fifth largest economy in Sub-Saharan Africa after it revised its GDP at the end of 2014. Kenya, and in particular Nairobi, has headlined the East African region as its gateway and preferred destination for the regional headquarters of at least 100 multinationals and corporations. Unlike many of its commodity-dependent counterparts in West and Central Africa, Kenya is a resource-poor country with GDP well diversified across its agricultural, tourism, construction, retail and telecommunication sectors. This diversification has protected the economy against the negative risk impacts of the fall in global oil prices that began in 2014. The Nairobi Stock Exchange (NSE), the second oldest on the continent, is Africa’s fourth largest exchange in terms of trading volume, capable of making 10 million trades a day.
In the past, little effort was made by the national government in terms of infrastructure and service development to accommodate the influx of people migrating from rural parts of the country to Nairobi. The previous underinvestment in infrastructure development has meant significant dilapidation of the road network – potholes, gravel city roads and narrow lanes have resulted in Nairobi is one of the worst traffic cities in Africa. In light of these challenges, the government has responded to growing infrastructure demands by launching the development plan section of ‘Vision 2030’ which addresses two key issues. The first is to improve the physical infrastructure of urban cities, and the second is to direct growth away from Nairobi to create decentralised nodes well apart from the congested CBD. Locally this is referred to as the creation of ‘satellite cities’. The development of a new superhighway, Thika Road, now links the city of Nairobi to the north-east area of Thika, and this has been the catalyst for property developments such as Garden City and Thika Road Mall, as the road provides easy access and good visibility for commuters visiting these centres. Further projects will focus on creating ring roads around the city which, in time, will alleviate Nairobi’s inner-city congestion. Supporting the improved road networks are a proposed metro rail network and the development of a blueprint for a Mass Bus Rapid Transit System.
On the real estate front, Kenya, and specifically Nairobi, is experiencing an unprecedented development boom across all its commercial sectors. The resilience in the property market, thus far, has been underpinned by strong economic growth, stable inflation and the country’s aspiration of becoming a majority middle-income market. Limited availability of land is causing property prices to rapidly rise. Areas along major arterial routes and in Nairobi’s satellite cities, like Thika and Ngong Road, have reported land value appreciation of 100% and 200% respectively from 2007 to 2014. Increased supply in the office and retail sectors has redefined the Nairobi skyline, although some scepticism exists around the relative demand for all the new stock coming onto the market. Activity in the industrial space has been limited to owner-occupied developments located south-east of the CBD that comprises old, inefficient quasi-warehouse/ office type structures. With the government making strong advances in its infrastructure projects, developers are now exploring light industrial parks along Mombasa Road towards Jomo Kenyatta International Airport
To ensure sustained investment, Nairobi will need to embrace much more transparent real estate practices. As the majority of the commercial real estate and hotel property is held privately, access to information on market tracking, rents, vacancy performance measurement and transaction data is currently difficult to obtain.