MIP WEEKLY CONSTRUCTION INDUSTRIAL REPORT NO. 23

Period: January 25 to 31, 2016

Pan African Housing Lender Shelter Afrique has begun the second phase of its Athi River based mixed development featuring one to three bedroom units.
The development will have 40 three bedroom, 60- one bedroom and 100 two bedroom units priced at between Ksh2.5m and Ksh 6.5 m.
The partners are investing Ksh 755m in the joint venture. The lender added that it will use joint ventures and partnerships to roll out more major projects this year.

According to Hass Property Index, the average rent for an apartment in Nairobi fell slightly in the last quarter of 2015 for the first time since the index was launched in 2000.
The rise in land prices, especially in Nairobi County, has increasingly resulted in developers putting up many apartments where stand-alone houses stood in order to make sufficient use of land.
The result has been a surge in the number of apartments, which now account for 60% of the rental property. This has led to increased supply of apartments in the last five years.
The supply is not relative to demand so the apartments stay long periods without being taken up, thus the rents stay the same or have to be reduced.

According to the Kenyan Bankers Association Housing Price Index (KBA –HPI), the fourth quarter of 2015 represented the sustenance of the stability in house prices. The quarter saw prices rise by 1.14% compared to the 1.25% increase in the third quarter.
Demand for houses on offer continued to be influenced by the location of the house (therefore the kind of social amenities available), a preference for gated communities (implying the importance of convenience and security) and the characteristics discerning households.
The preference of apartment to bungalow and maisonettes is reflected in their relatively higher price movements than those of the other two house categories. With apartments targeting the middle class, their popularity is a function of their relative affordability.

Plans to develop an 11,000 acre mixed use real estate development in Kiambu County that is associated with President Uhuru Kenyatta’s family have kicked off.
The project dubbed Northlands and set to dwarf similar projects like Tatu City, will incorporate low to high income residential areas, commercial space, a central business district, schools, industrial area and agricultural zone.

Lancet Kenya is going into Real estate business through its Sacco, Lancet Cooperative Society. The firm is planning to break ground with its first 700 million gated community to be located near Jomo Kenyatta International Airport and will comprise 200 apartment units.
The 200 units will be made up of two bedroom and three bedroom apartments in the first phase of the project being undertaken at Katani area of Mavoko.
The second phase, also comprising 200 apartments units, will start soon after the completion of phase one, expected to take about two years.

According to report by Hass consult, areas that were considered remote like Kitengela, Kiserian and Athi river are now giving better returns to investors compared to Karen, Ridgeways, Muthaiga, Lavington and Runda.
Rapid development of apartments around the city has generally slowed down growth of rental return on residences.
Land prices in satellite towns have risen more than six fold, and are expected to continue to appreciate as infrastructural developments near completion.

According to Cytonn Monthly Report, some of the prospective aspects expected to drive growth in 2016 include:
- The growing middle class.
- Huge housing deficit of over 200,000 units per annum
- Continued investment in infrastructure
- Widespread economic growth with SMEs employing up to 85% of the workforce
- The youth bulge and rapid urbanization which have created opportunities for development to cater for their needs
- Devolution and political goodwill with a slowdown in selected markets in 2017 due to the elections.
With the continued development of office space, Cytonn’s Research team sought to find out if there is potential over supply of offices in Nairobi and as a result reduction in the rents.
Commercial office sector has grown rapidly in the last five years in both size and returns with completed office space increasing from 1.6 million square feet in 2011 to 5.4 million square feet in 2015, 27.5% annualized growth. Occupancy levels have remained high across all office nodes and classes averaging at between 89- 90%. Grade B offices had the highest average occupancy of 90%. With the CBD having the highest average occupancy percentage of over 95%. In terms of rents, grade A offices have the highest rents averaging at Kshs 118 per square foot. Gigiri has the highest grade A rent at an average of Kshs 140 per square foot, with the lowest being in Mombasa road at Kshs 81 per square foot.