The serviced apartments industry is becoming the fastest-growing sector within Kenya’s hospitality industry with an overall average occupancy in Nairobi Metropolitan Area increasing by 13.5% points to 61.5% in 2021, from the 48.0% recorded in 2020, Cytonn Investments reports.
According to the 2021 ‘Nairobi Metropolitan Area (NMA) Serviced Apartments’ report carried out by Cytonn Investments, serviced apartments recorded an average rental yield of 5.5% in 2021, 1.5% points higher than the 4.0% recorded in 2020.
This is attributed to the increase in monthly charges per SQM by 0.7% to Kshs 2,549, from Kshs 2,533 recorded in 2020.
“The performance improvement is attributable to increased demand for hospitality facilities and services as a result of the reopening of the economy, the return of international flights, and focused marketing of serviced apartments to local clients. Most serviced apartments have also been issuing discounts to attract and maintain clients,” the report reads.
In the report, Westlands and Kileleshwa were the best performing nodes in 2021, with a rental yield of 8.3% and 6.4%, respectively compared to the market average of 5.5%. Thika Road was the least performing node with a rental yield of 3.5%, 2.0% points lower than the market average of 5.5%.
During the year, studio units recorded the highest average rental yield at 6.2%, mainly attributed to the relatively high monthly charges/SQM at Kshs 3,044, compared to 1, 2 and 3 bedroom units at Kshs 2,571, 2,574 and 2,476, respectively.
“The performance of studio units is also supported by relatively high average occupancy at 62.4% compared to 2 and 3 bedroom units at 57.7% and 57.5%, respectively.”
However, the sector has a neutral outlook due to the slow recovery from the effects of the Covid-19 pandemic with expectations of full recovery to pre-COVID levels expected by 2024.
“Given that all our key metrics are neutral, we have a neutral overall outlook for the hospitality sector. Investment opportunities lie in Westlands and Kileleshwa,” Cytonn advises.
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