Kenya Real Estate Market Witnessed ‘subdued’ Performance in H1’2019 – Cytonn

Cytonn Investments Management Plc says it will appeal against the High Court directive that dismissed their petition that sought to challenge the Capital Markets Authority directive limiting their projects under its asset managers unit to 10 per cent.

Edwin H. Dande - Chief Executive Officer at Cytonn Investments speaking during the Investments Analysts and Investors Open Day.

Kenya’s real estate market remained subdued during the first half of the year, with a similar trend expected throughout the year, according to Cytonn Investments’ H1’2019 report besides the sector recording increased activity.

During the period, “The residential, commercial office and retail sector recording average yields of 4.9%, 7.8%, and 8.2%, respectively, from 5.5%, 9.3% and 9.7%, respectively, in H1’2018.”

Cytonn attributes this to oversupply within the commercial office and retail sectors with a surplus of 5.2mn SQFT and 2.0mn SQFT, respectively, as at 2018, and inaccessibility of financing by both developers and off-takers.

The residential sector expected to continue experiencing minimal demand in the high-end and upper mid-end sectors mainly driven by incoming expatriates. “However, the lower mid-end sectors will continue to exhibit fast growing demand from the majority of Kenyans seeking to buy affordable homes amidst a tough financial environment.”

The commercial sector is expected to retain a negative outlook attributable to an oversupply of 5.2mn SQFT of office space thereby reducing occupancy rates translating to decline in rental yields. 

“Pockets of value in the sector are in differentiated concepts such as serviced offices and offices in mixed-use developments (MUDs) that attract yields of 13.4% and 8.2%, respectively.”

The retail sector is also expected to have reduced development activity of malls supply in 2019 due to the current oversupply of 2.0mn SQFT. 

“However, our outlook for the sector is neutral as the sector continues to attract both local and international retailers to cushion the retail real estate sector performance through increased occupancy rates.”

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