Serviced apartments command strong rental yields of about 12%, compared to residential yields which stand at 4.9%.
Investment firm, Cytonn Investments has announced the launch of its first serviced apartment complex in Westlands, Nairobi.
Dubbed, CySuites is operated by Trianum, the complex offers 32 two-bedroom apartments, 6 one-bedroom apartment, and 2 penthouses.
This aims to meet the needs of short and extended stays to both business and leisure travelers.
This marks, Cytonn Investment’s entry into the hospitality sector which they say, “Serviced apartments have continued to gain traction in Kenya especially for use by holiday guests who are travelling as families and for business travelers looking for mid to long-term accommodation.”
Edwin Dande, chief executive Cytonn Investments describes the launch of the CySuites Apartment as the firms’ “First step of what we hope will be the leading brand in serviced apartments.”
Dande said the firm through comprehensive research that the team undertakes, they have been able to deliver various residential projects and they continue to execute more.
“The next place to invest, is in the serviced apartments,” said Dande. “Its clear that the economy is struggling right now but it is also a no question that the Kenyan economy remains promising because we have a strong entrepreneurial culture,” he noted.
“Demand for serviced apartments continues to grow, evidenced by occupancy rates of up to 88%, according to our latest research data. Serviced apartments command very strong rental yields of about 12%, compared residential yields which stand at 4.9%. If you add another 8% of capital appreciation, we are targeting a total return of 20% per annum. We saw this as an opportunity and decided to capitalize on it,” he said.
“On an annual yield, it gives between 18% to 20% depending on occupancy,” he added.
Richard Ngatia, Kenya National Chamber of Commerce and Industry (KNCCI) president the guest of honour, hailed the CySuites stating that it will not only create job opportunities but also play a pivotal role in spurring the country’s tourism and hospitality sectors. “The hospitality sector has continued to be a key driver of the Kenyan economy evidenced by the continued contribution by accommodation and food services. This has been driven by strong demand for hospitality services and facilities. CySuites is a great development that offers spacious and luxurious living areas and it will be a great place for tourists to come and enjoy their stay while in the county. More importantly, it creates employment opportunities for our youth, both directly and indirectly,” said Ngatia.
Demand for high-end hospitality facilities in Nairobi has been high evidenced by data from the Kenya National Bureau of Statistics (KNBS) Economic Survey Report 2019, according to which, upmarket facilities recorded 1.4 mn bed-nights in 2018, 108.7% higher than other lower-class facilities within Nairobi, which recorded 657,000 bed-nights.
“Investors are therefore increasingly focusing on serviced apartments due to their enhanced performance,” Cytonn observes.
According to the Nairobi Metropolitan Area Serviced Apartments Report, by Cytonn Real Estate, serviced apartments recorded improved performance with an average yield of 7.4 percent in 2018, compared to 5.3 percent recorded in 2017.
They attribute the rise to increased demand, which resulted in increased occupancy rates with an average of 80% in 2018, compared to 72% recorded in 2017.
Shiv A. Arora, Head of Private Equity and Real Estate at Cytonn, stated that “Serviced apartments as a concept has gained popularity in the recent years also outside the business travel space, as more leisure travelers are finding that serviced apartments are easily available and offer a credible and cost-effective alternative compared to other types of accommodation.”