Opinion and Analysis

Why Kenya’s real estate sector is robust

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Michael Turner

Michael Turner. 

By Michael Turner

Posted  Tuesday, July 9  2013 at  16:40

In Summary

  • There are a number of factors that suggest that the boom is real, and here to stay.
  • In East Africa and in Kenya specifically, the property market is responding to demand that has been created by the expanding middle class with disposable income and able to service their mortgages.

That the property market in East Africa has witnessed a boom in the last few years is without a doubt. What is uncertain in many peoples’ minds however is whether this is a boom or a bubble.

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There are a number of factors that suggest that the boom is real, and here to stay.

In East Africa and in Kenya specifically, the property market is responding to demand that has been created by the expanding middle class with disposable income and able to service their mortgages.

This emerging middle class desires and demands quality infrastructure- they want well designed properties with great finishing and in safe and secure locations and they are willing and have the ability to pay premium prices for their choices.

East Africa’s GDP growth has averaged five per cent in the last five years and is projected to continue on the growth trajectory. The multiplier effect has seen investors increasingly wanting to back this market.

Let me for instance shine the spot light on Nairobi. The significance of the city as an investment, transport and financial centre in the greater East African community region cannot be gainsaid.

The number of multinationals and NGOs that have either set up their operations or plan to relocate there, in addition to fast- growing domestic Kenyan businesses, have ensured that Nairobi continues to attract investments into the commercial office sector.

Actis has two ongoing projects- the second phase of the Nairobi Business Park and Garden City, the upcoming mixed-used development scheme along Thika Road both of which are attractive Grade A buildings.

The recent report titled ‘Hot Spots 2025: Benchmarking the Future Competitiveness of Cities’ by the Economist’s Economic Intelligence Unit ranked Nairobi fifth out of seven African cities that made it to a list of 120 most competitive cities in the world.

This ranking reflects the city’s appeal as a magnet for capital, businesses, and talent. With Kenya already on the path towards a devolved government, the demand for residential, commercial and industrial property can only rise.

To date, investors and governments have been unable to satisfy the demand and bridge the yawning housing gap; the housing deficit is estimated to be 100,000 units per year.

The myriad of opportunities in the sector were the topic of discussion at a recent real estate forum in Nairobi.

During the annual event – which was the first ever GRI forum to be held in Africa, international investors and real estate developers heard and brainstormed on the potential they see and how to unlock it, what’s driving the growth and how to make the most of this market.

Actis has led the way in raising a significant level of capital for investment in commercial real estate. For instance, in 2012, we held a final close of $278million for our second fund, Actis Africa Real Estate 2 fund.

The funds were raised for investment in retail and office developments in East, West and Southern Africa, excluding South Africa. In Kenya, part of the funds will be used to finance our newest investment, Garden City.

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