Market News

Karen gives highest returns to commercial real estate as Upper Hill declines


A section of Upper Hill in Nairobi. FILE PHOTO | NMG

Upmarket Karen estate in Nairobi has the highest percentage returns to commercial rental buildings, a report by Cytonn Investments research arm says.

Karen rental yield or return stands at 10.8 per cent with each square foot averaging Sh117 compared to Westlands’ 10.0 per cent yield and a price of Sh111 per square foot.

The investment firm said Upperhill rental yield had fallen to 9.0 per cent, which is below the average of 9.5 per cent for commercial properties in Nairobi, Mombasa Road and Thika Superhighway.

The analysts pointed out that Upper Hill’s appeal had slumped due to traffic congestion and lack of enough amenities along its key ways such as Ngong Road and Mbagathi Way.

“Upper Hill is losing its appeal as the ideal location for corporate headquarters due to inadequate amenities and traffic congestion along its key access ways such as Ngong Road and Mbagathi Way,” said Cytonn.

Upper Hill recorded a lower rental yield, but its attraction could be improved by better infrastructure as well as addition of retail and residential spaces.

“Upper Hill will have to be reinvented through improvement of infrastructure, and diversification into other themes such as residential and retail spaces in order to boost real estate performance in the node,” said Cytonn.

Westlands had increased attractiveness as a commercial hub relative to Upper Hill with a rental yield of 10 per cent due to closeness of high standard social amenities such as schools and malls.

“In our view, Westlands is a preferred location by corporates as it is: an upper middle-income neighbourhood and is in close proximity to other high-end neighbourhoods such as Loresho, Parklands and Springvalley, its proximity to Diplomatic Police Unit, and has a wider range of high standard social amenities such as schools and malls, including Sarit Centre and Westgate,” the researchers said.

Thika Road and Mombasa Road had the lowest returns for investors at 8.7 per cent each.

In terms of occupancy as at the end of September, Nairobi’s central business district had the highest level at 92.1 per cent.