Residential, Serviced Apartments Sectors in Nairobi Offers Best Returns on Investment – Report

Demand for serviced apartment and retail segments remains vigorous in Nairobi. 

CySuites apartments by Cytonn Real Estate

Demand for serviced apartment and retail segments remains vigorous in Nairobi. 

Residential and serviced apartment sectors in terms of rental yield, recorded y/y increase of 0.3% points and 0.2% points, respectively, to 5.0% and 7.6% as at 2019 from 4.7% and 7.4%, in 2018.

Cytonn’s Annual Market Review for 2019 indicates that the sectors outperformed other subsectors such as commercial office, residential, mixed-use developments even as the average returns in the real sector was recorded at 9%.

The residential and serviced apartment sectors continued to perform well in terms of rental yield, recording year on year increase of 0.3% points and 0.2% points, respectively, to %% and 7.6% as of 2019.

“Which is 0.2% points higher attributable to increased demand for serviced apartments by both guests on business and leisure travels, thus triggering an increase in charge rates, as well as a stable political environment and improved security making Nairobi an ideal destination for both business and holiday travelers,” reads part of the report.

The Annual Market Review for 2019 highlights the current state of the real estate sector in terms of uptake, rental yields, capital appreciation, and hence, total investor returns. 

According to the report, the real estate sector average total returns came in at 9.0% with commercial office, retail, residential, mixed-use developments, and serviced apartments sectors posting average rental yields of 7.5%, 7.8%, 5.0%, 7.3%, and 7.6%, respectively, while capital appreciation for existing properties came in at 2.0%.

“We retain a neutral outlook for the real estate sector mainly constrained by increased supply in the market and continued limited access to financing for both developers and off-takers,” Wacu Mbugua, Senior Research Analyst at Cytonn, said