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Nairobi Office Space Investors Pocket Lowest Returns in Region – report

Peter Musila 2 years ago

Investors in commercial property did not find it soft last year as they didn’t reap as anticipated as compared to their peers in East Africa.

According to the latest report by Africa Horizon, investors pocketed eight per cent for office, nine per cent for retail and 8.5 per cent for logistics property.

Investors in Tanzania made a nine per cent on office space and 10 per cent return on retail space and logistics. However, Investors in Uganda made the highest profits in comparison with the three countries.

Kenya recorded low returns in rental office space as per a recent report by the Nairobi Metropolitan Area Commercial Office Report by Cytonn in which they linked the low performance with high supply than available demand in the market.

The report argues that more investors and developers have been working on constructing office buildings something which has led to an office stock of nine million square feet against a demand of 3.8 million square feet.

“We have a negative outlook for the commercial office theme in the Nairobi Metropolitan Area, and thus investment in the sector should be geared to the long-term horizon for gains when the market picks up, “Cytonn’s senior manager for regional markets Johnson Denge said.

However, warehouse investors in the country had less to worry about as profits hit nine per cent compared to 7.5 per cent in 2017 which is considerably better performance.

Logistics sector played a vital role with the formal retailers emerging to be the significant drivers of growth leading to the need for large centralised warehouses having that they have gained critical mass countrywide.

Returns remained stable in 16 locations, and also recorded a rise in six places while 13 markets recorded declines till the end of 2018 according to Knight Frank’s study.

Africa publicised deals worth below US$2 billion in the year 2018 including assets in South Africa.

“We envisage rising investor demand for those African locations that can demonstrate something of a counter-cyclical nature, combined with rising domestic wealth,” the Africa Horizons report said.

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