Nairobi Real Estate Moment: 2021

  • The Nairobi Expressway construction that will span from the Jomo Kenyatta International Airport to Westlands, has reached downtown Nairobi and is causing disruptions to real estate and traffic .. some changes to retail include..

  • Changes to Malls – many of which are largely idle above the first floor. Quite a bit of foot traffic there is from bank customers visiting their branches which have now been relocated to the third and fourth floors of Nairobi malls.

Other real estate stories.

  • An EFG Hermes report on Nairobi real estate found the demand for affordable houses has a disconnect that has seen prices are softening in Nairobi – at high-end residential (-27% below 2017 peak), and commercial properties (-13% off-peak). Also, the tough Nairobi office market is very visible (vacancy rates of 22% compared to 9% in 2011) with exposure to some financing banks including KCB and Housing Finance.
  • Orbit Group and Grit Group have partnered on a 25-year $53.6 million sale & leaseback transaction for a light industrial (warehouse and manufacturing) property on Mombasa Road, supported with a $25 million loan from the IFC. Orbit Products Africa, controlled by the Sachen Chandaria family, is a leading contract manufacturer for brands in personal care and home care products and its clients include Reckitt Benckiser, Unilever, Colgate and Henkel. They will expand the plant by an additional 14,741 m2 warehouse space and improve it to modern FMCG industry standards to achieve an IFC EDGE green building certification on completion. As part of the deal, $31.5 million will be a “perpetual note”, raised from Ethos Mezzanine Partners GP and BluePeak Private Capital and additional proceeds from this will be invested in the St Helene Private Hospital in Mauritius, an idea that was conceived by Catalyst Principal Partners. Grit Real Estate Income Group is listed in London and Mauritius 
  • A Knight Frank report, the “Africa Logistics Review” finds that Nairobi had the best real estate market between 2018 and 2021 for prime warehousing and logistics.  “Nairobi recorded the highest increase in average prime rents across Africa, from USD 4.70 psm in 2018 to USD 6 psm ” – and developers have grown over 170,000 square meters in the last five years. Kenya has the highest concentration of special economic zones (SEZ) in Africa (61 of the 180 SEZ’s). The country is also making good progress to grade A warehousing and in growing a real estate investment trust (REIT) ecosystem.  Also because of high land values in Nairobi, developers have sought towns/areas beyond traditional industrial hotspots Read more.
  • Speaking of REITs .. Acorn Project (Two) LLP, the Issuer of the Acorn Medium-Term Green Note (MTN) Program, closed the final tranche on 16th July 2021, raising Kshs 2.096 billion against the target of Kshs 1.438 billion representing a subscription rate of 146%.  As part of this transaction, the Acorn green bond was converted into the Acorn Student Accommodation Development REIT (ASA D-REIT). Read more.
  • The Architectural Association Of Kenya reported on development challenges within the Nairobi metropolitan area. A decade after an electronic construction-permitting system covering Nairobi, Mombasa, Kiambu, Machakos, Kisumu, Kajiado and Kilifi was deployed with the support of the World Bank Group, it is plagued by frequent disruptions and system downtime. In Nairobi, the system has not been operational for more than three months of 2021 and in a survey of AAK members, 46.7% of the respondents indicated that they had to wait for over 6 months for their applications to be processed or granted approval.
  • Kenya’s Lands Ministry is doing a digitization of title deeds through a National Land Information System (NLIMS), referred to as ArdhiSasa with a goal to have all land records digitized by the end of 2022.  The Lands Cabinet Secretary indicated that the Ministry has scanned and digitized 30 million documents in Nairobi.
  • A Cytonn Real Estate report on properties in the years 2020 found that “residential units in Thindigua, Syokimau and Rosslyn recorded the highest returns to investors and land asking prices recorded an overall annualized capital appreciation of 2.3%.” According to the report, Gigiri was the best performing office node in FY’2020, followed by Westlands and Karen, In the retail sector, Westlands and Karen were the best performing nodes while in hospitality, Westlands-Parklands was the best performing node. Read more in the report.
  • Cytonn is now doing a restructuring and has applied to wind down two funds – the Cytonn High Yield Solutions LLP and Cytonn Real Estate Project Notes LLP through administration and has invited creditors to submit their debt claims, with proof, to Kereto Marima who is the appointed administrator – by November 29, 2021.
  • Hotels are not doing well with many iconic sites closed or on sale due to Covid-19 and the resultant curfews and travel bans that have affected the flow of tourists into Kenya.
  • Many hotels expect a steady recovery once the curfew is lifted (which happened in October 2021). See a survey of hoteliers by the Central Bank of Kenya.

Some hotels that are gone: Intercontinental and the Nairobi Dusit/ D2 which recovered after the January 2019 terror attacks only to succumb in the Covid-19 aftermath.

Some hotels currently closed: Mt Kenya Safari Club, Norfolk, Radisson Blu.

Some hotels on sale: Outspan, Treetops (should the Queen buy the hotel ahead of her 100th birthday?), Fairview and Country Lodges, Jumuia (Nakuru).  

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