Saturday July 20 2024
Report reflects promising prospects for most property markets in Africa, as they steadily return to pre-Covid figures in prime rents, transactions and average yields across major segment sectors
Uganda has overtaken other East African Community partners in high-end office rent prices due to a recent boom in demand.
At the same time, Kenya continues to take the lead in retail shop rents for informal traders, according to the latest Knight Frank report on real estate market trends across the continent.
Average monthly rents for office space in Uganda’s largest business cities Kampala and Entebbe, have risen to $16.50 per square metre, against $15 in Tanzania and $13 in Kenya, the report says, attributing the increase to rising occupancy levels triggered by improved economic circumstances.
Tanzania and Kenya have experienced drops in prime central business district office rates over the past four years, by 12 percent and 15 percent, respectively, due to oversupply.
Still, they expect a reversal of the trend this year on the back of rising demand.
Read: Property glut hits city rents across Africa
Meanwhile, Kenya’s $41 average rate for retail office space in middle-class and suburban areas remained far above Uganda’s $25 and $18 in Tanzania.
Uganda led in industrial office and warehouse rents at $7psm, compared with $6 in Kenya and $5 in Tanzania.
In terms of average monthly lease rents for prime four-bedroom residential homes, Uganda was the lowest in the region, at $2,000, against Kenya and Tanzania at $3,500 each.
Prevailing real estate rates for the other five EAC member states were not included in Knight Frank’s 2024–25 Africa Report, covering the 19 countries where the firm has an established presence.
According to Knight Frank’s managing director for Africa and the Middle East, James Lewis, the report reflects promising prospects for most property markets in the continent.
They steadily return to pre-Covid pandemic figures in prime rents, transactions, and average yields across major segment sectors.
“The office sector, in particular, is witnessing increased demand for Grade A stock, which, overall, shows an average occupancy rate 10 percent higher than lower-grade offices,” said Mr Lewis.
Evolving trends have also been noted in the retail and industrial sectors, with more focus on modernising shopping centres for better consumer experiences and adapting to the growing demand for storage and distribution facilities equipped with modern logistics infrastructure in line with the rise of e-commerce.
Affordability, however, remains a key concern for most households aspiring to transition from renting to owning residential property, as the report points out.
South Africa, still regarded as the continent’s economic leader, was singled out as having the highest prime residential rates, at $6,500 per month, followed by Nigeria and Ethiopia ($5,000), and then Ghana and Tunisia ($4,500).
South Africa’s next-door neighbour, Botswana, offered the cheapest residential rates, at $1,400.
Elsewhere in Africa, Cote d’Ivoire was cited as the most expensive country for renting prime office space ($35, at par with Egypt) and industrial office space ($12). Ghana and Tunisia top the list in retail shop rates ($60).
Malawi’s relatively low real estate rents across the board compared with most other countries were highlighted as indicative of a seriously struggling economy.
Read: Retail space driving real estate growth in East Africa
Uganda is the only country with an entire stand-alone chapter in the report, which takes an in-depth look at shifting retail shopping trends in Kampala and Entebbe from “necessity-driven downtown markets to leisure experiences in modern shopping centres.”
Economic fluctuations
It shows that retail office space in Uganda has increasingly shifted from informal to formal over the past decade, with 30,000 square metres of formal retail space added to the Kampala and Entebbe markets in the past three years alone, to take the combined total past 300,000 square metres.
“The evolving needs of retailers and consumers will continue to fuel this expansion over the next decade,” says Knight Frank Africa managing director Judy Rugasira Kyanda.
The report also highlights the growing popularity of office space in Uganda that conforms to environmental, social, and governance (ESG) standards, prompting more developers to “refurbish older buildings to Grade A standards to help sustain demand and occupancy levels.”
In Kenya, according to the report, the real estate landscape remains resilient despite economic fluctuations, with office occupancy levels rising by five percent over the past year to reach 77 percent.
Read: Uganda’s real estate sector remains resilient
“Driven by occupiers’ preference for flexibility, developers are meeting increased demand by expanding the supply of co-working space in the market, particularly in Nairobi’s Westlands, Kenya’s primary office hub,” the report states.
Kenya’s retail and residential property markets have also seen heightened demand for convenience retail outlets and prime residential units.
“More retailers are turning their attention to smaller neighbourhood retail centres in residential areas rather than well-established malls, predominantly situated in affluent neighbourhoods, due to evolving consumer spending behaviour patterns,” the report notes.
Prime residential market rents rose five percent in the last 12 months, with expatriates’ earnings in US dollars underpinning demand for more luxurious rental properties, despite their short supply, while Kenya’s industrial sector, “historically marred by lacklustre performance,” was enjoying a boost from several government initiatives.
The report paints a mixed picture of challenges in Tanzania resulting from decreasing occupancy rates for formal office space in favour of informal retail tenancy juxtaposed against a residential market buoyed by rent rises based on increasing demand for luxury homes from expats in particular.
“The office sector remains a tenants’ market that maintains a dominant position.
“Keenly aware of these challenges, landlords have become flexible with lease terms, offering rent reductions and proactively renegotiating rents to safeguard occupancy levels, which currently stand at approximately 70 percent,” the report says.
It adds that Tanzania’s retail market is predominantly small-scale, primarily domestic retailers, “a trend entrenched in long-standing consumer shopping habits that have hindered the flourishing of larger malls in the country.”
While there is a strong demand for warehouses in Dar es Salaam’s prime industrial area, a subsequent oversupply of these facilities has curbed rental growth with monthly prime rents remaining stable at $5 per square metre since 2020.
At the same time, housing rents in prime areas like the Oysterbay and Masaki suburbs in Dar es Salaam have risen by between 15 percent and 20 percent over the past two years, triggering a 21 percent increase in rents across the commercial capital.
Source link : https://www.theeastafrican.co.ke/tea/business/uganda-cbd-office-rent-up-kenya-tanzania-see-price-decline-4696672?view=htmlamp
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Publish date : 2024-07-20 14:30:29
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