Retail space in Nairobi yields top dollar for real estate firms

Demand for retail space at the heart of Nairobi City continues to soar putting pressure on the prices, a report by Knight Frank reveals.

The report dubbed Africa Horizons 2018 shows that yields from retail space were highest at 9%, marginally more than 8.5% logistics and 8% for office space.

Africa Horizons 2018 also shows that demand for Grade A warehousing in Nairobi is at its highest commanding monthly rents of Ksh600 per square metre almost double that of the predominant stock of older units that lack modern features such as cross-docking and intermodal facilities.

Speaking during the release of the report, Knight Frank Kenya Managing Director Ben Woodhams averred that yields in each market segment align to risk profiles.

“With retail being much riskier in Nairobi currently hence the proportionately higher yield,” said Woodhams.

According to the report, top residential investment opportunities across the continent include student accommodation with Zambia, South Africa and Kenya being cited as education hotspots.

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Knight Frank’s report shows that in Kenya, formal retailers have emerged as a major driver of growth owing to their increasing need for large centralised warehouses as they gain critical mass countrywide.

Conversely, healthy economic prospects suggest that Africa will remain a compelling investment destination for those targeting key centres.

In addition to the office markets in these locations, the report notes, rising wealth will favour sectors exposed to consumer logistics, and selectively, retail.

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

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In 2018, Africa recorded more than 700 separate inward investment projects, half of which originated from corporations domiciled in the US, UK, France, China and Germany.

The investment destinations were broad although South Africa, Morocco, Kenya, Nigeria and Ethiopia accounted for over half of the projects, according to the report.