Nairobi ‘dormitory’ towns anchor real estate sector rebound


Nairobi ‘dormitory’ towns anchor real estate sector rebound
An aerial shot of Cytonn's Alma residential development in Ruaka town PHOTO | COURTESY

In Summary

  • Apartments in satellite towns averaged the highest return in the residential sector at 5.4 per cent while unserviced land in the town recorded a 7.2 per cent average surge in prices.
  • An acre of bulk land (unserviced) averaged Ksh.25.6 million during the quarter with Athi River town posting the lowest unit cost at Ksh.4.1 million.
  • In contrast, an acre of land in Kasarani will cost one Ksh.68.1 million and a premium Ksh.301.1 million in Kileleshwa.
   

Nairobi Satellite towns, regarded as the Capital’s dormitory for their popularity with the working class, have anchored the rebound of the real estate sector at the start of the year.

A new report covering the performance of the sector through the first quarter of 2021 to March by Cytonn investments shows improved residential sector and land returns anchored on the growth of the satellite towns.

Total return to investors in the quarter in the residential sub-sector for instance averaged 5.1 per cent from 4.7 per cent in 2019 while land recorded an annualized capital appreciation of 2.8 per cent.

Apartments in satellite towns averaged the highest return in the residential sector at 5.4 per cent while unserviced land in the town recorded a 7.2 per cent average surge in prices.

According to Cytonn Investment Real Estate Analyst Effie Otieno, satellite towns have drawn increased interest as individuals seek affordable price points.

“Satellite towns are witnessing increased activity supporting the performance of the real estate sector. People are trying to look for the affordable home option,” she told Citizen Digital in an interview.

“With the Nairobi Central Business District still accessible from the satellite towns, many would rather buy land and build in the towns. The attractiveness of the satellite towns has further been anchored on improved infrastructure.”

Price points in satellite towns have presented potential home owners and investors with attractive entry points to make the switch from the suburbs.

For instance an acre of bulk land (unserviced) averaged Ksh.25.6 million during the quarter with Athi River town posting the lowest unit cost at Ksh.4.1 million.

Ruaka meanwhile represents the premium options in the towns with an acre costing Ksh.93.4 million.

Serviced land in satellite towns is even cheaper at an average of Ksh.15 million with Thika town holding the most affordable parcel at Ksh.11.2 million per acre.

In contrast, an acre of land in Kasarani will cost one Ksh.68.1 million and a premium Ksh.301.1 million in Kileleshwa.

The UpperHill area still holds Kenya’s most expensive land parcels with an acre going for an average Ksh.488.8 million between January and March.

Besides residential properties and land, sectors such as retail and commercial offices remain on the slump from complications arising from the COVID-19 pandemic and market glut.

Retail spaces have for instance taken a beating from reduced consumer spending power which has cut the footfall to malls and other shopping centers in addition to online shopping eating into the segment’s market share.

Commercial offices with an oversupply of 6.3 million square feet at the end of 2020 have meanwhile suffered from reduced business expansion which has served to cut occupancy rate.

The pair of sectors saw their returns fall by 0.1 and 0.2 per cent respectively while occupancy rates were down at 0.2 per cent a piece.

Asking rents for commercial office spaces have declined to an average of Ksh.93 per square feet occupied from a higher Ksh.97 in March last year.

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