Ideas & Debate
Rethinking real estate amid Covid-19 impactTuesday March 09 2021
The Covid-19 pandemic has impacted many industries in Kenya, including real estate. It has not been business as usual as tenants, landowners and developers alike have been forced to rethink the value they want to get out of property be it profitability, livability and most importantly safety.
Since the pandemic, a number of trends have emerged in the sector.
Data from the Ministry of Lands and Physical Planning shows that land transfers decreased by almost half in 2020 as compared to a similar period in 2019. There were 3,988 transfers in 2020 compared to 6,162 the previous year.
The land transfers were lowest in March when the first case of Covid-19 was reported in the country. However, land transfers increased significantly in August 2020. Analysts opine that the transfers observed from the last quarter of the year were from backlogs caused by the pandemic.
At the same time, leases and subleases also increased as the year progressed.
BUYING HABITS OF WEALTHY KENYANS
During the pandemic period, buying habits of the super-rich have also shifted. According to a recent wealth report by Knight Frank released in February 2021, wealthy Kenyans are seeking second homes away from the traditional posh estates such as Kileleshwa, Runda and Kitisuru in Nairobi in search of more privacy, outdoor space, and areas they can acquire at lower prices.
The rich Kenyans have been observed to be relocating to Tigoni in Kiambu County and Miotoni in Karen, Nairobi. They are also said to be fleeing the congested estates, citing likelihoold of contracting Covid-19 as the virus spreads rapidly among people living closely.
With the growing trend, the two towns have been listed among the top towns that will develop in the next few years as the homes purchased as spacious and gives them flexibility to convert spaces into home offices.
LANDLORDS BUILDING SMALLER HOUSES
A trend observed before the corona pandemic was that landlords were building units with smaller spaces.
A report by the Kenya National Bureau of Statistics (KNBS) 2020 showed developers were targeting low-income earners in a rush to attract tenants, with 3,940 one-room units built in the city in 2019 alone.
With the pandemic that saw many people lose their jobs and unable to pay rent, tenants looked to downsize to more affordable living quarters.
This only drove the craze by the landlords moving to construct more single-rooms, bedsitters and one-bedroom units that are appealing to the masses.
With the recovery of the economy and the adoption of remote work, housing units that are easily transformed to working areas will be attractive to potential customers.
Whereas smaller units may perform well with low-income earners, spacious apartments that accommodate a work, live-play lifestyle will also pick up among the middle-class.
REVISION OF LAND RATES IN NAIROBI
Owning land in Nairobi is about to become an even more expensive affair, with landowners expected to pay higher rates. A proposal by City Hall seeks to revise the valuation of land from the current Valuation Roll of 1982.
The new rates will be based on between 0.1 and 0.115 percent of the current value of undeveloped land.
During the period, consumer behaviours have changed, with many taking to online shopping. This has in turn led retailers to rethink their strategies away from the brick-and-mortar plan.
In adopting a hybrid system where they develop their online presence as well as grow the delivery capacity, retailers have gone to rent spaces which are considered central such the Nairobi CBD to fulfil orders conveniently while having their bases in areas with cheaper rent.
We expect to see more retailers taking a hybrid approach to expansion and market entry going forward, by combining online platforms and delivery channels with a smaller traditional bricks and mortar footprint.
The lockdowns imposed as part of containment measures made many companies realise how effective remote working can be for both the employers and employees. The pandemic will change the way office space is utilised.
Commercial office properties may consider leasing out their office space as serviced offices to attract budding SMEs and international companies in the wake of reduced occupancies in traditional offices.
With restriction of movement in the Covid-19 pandemic, physical house hunting became nearly impossible.
This saw property developers take up virtual reality to showcase their houses to potential clients. Potential buyers can now take virtual tours from anywhere in the world. Not only do they save endless hours spent commuting between various properties, they are also not restricted by borders. Technology will continue to make the real estate industry easier to navigate.
Real estate leaders will be defined by what they do in the medium term to manage crisis, respond, recover, and thrive with respect to partnerships with the national government and county governments to develop more affordable housing units; prioritising safety and wellbeing of people and tenants; short-term liquidity needs; remote working considerations, including, location and access to information, internal controls, and information technology resource constraints
Muriithi is head of sales and marketing, Centum Real Estate