New class of assets emerging in Nairobi's real estate
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Loading... - Simiyu Kibet
- 09 Nov 2022
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Nairobi’s real estate sector is experiencing a shift as a new class of assets emerges, including data centres, grade A offices, affordable housing and purpose-built warehousing even though global capital in emerging markets is waning.
Over the past decade, the city’s development pipeline has been through multiple cycles transforming Nairobi’s real estate sector especially retail sector development.
First came the commercial offices’ boom in Nairobi’s real estate sector at the start of the decade driven by global capital in emerging markets, then the retail boom halfway through this period and now, a shift in focus to alternative sectors focused around the themes of flexibility, accessibility and affordability especially in the grade A offices segment.
This is according to the Nairobi Development Pipeline Report by Pan-African real estate data company, Estate Intel in collaboration with Axis Real Estate Limited.
Tilda Mwai, Research Associate Estate Intel notes, “Initially, development cycles were being underpinned by the entry of global capital in emerging markets. However, Nairobi’s rising demographics have largely made the case for the shift in focus to alternative sectors such as data centres, flexible office spaces, neighbourhood shopping malls (plazas and supermarkets), purpose built warehousing and affordable housing presenting new opportunities to developers.”
Data Centres for example have seen their market supply increase to approximately 10 MW transforming Nairobi’s real estate sector. Interestingly, over 80 per cent of this stock has come up over the past 5 years, with the development pipeline looking even more promising at approximately 470 per cent of total stock.
The industrial sector, too, continues to be one of Nairobi’s leading real estate market sectors. Developers’ interest matched with occupiers’ demand especially in the SMEs, agricultural and FMCG sectors means that there are unlimited opportunities in the market for investors pushing Nairobi’s real estate sector changing faces.
With only 11 per cent of the total stock estimated at 17 million sq. ft under development, Nairobi’s real estate sector market remains largely undersupplied, especially with regard to purpose-built warehousing. As such, investors are increasingly exploring the space with private equity or investor-operator-type models.
Quite notably, over 80 per cent of the projects in the pipeline tracked by Estate Intel are already under construction, while the others remain conceptual despite a reduction in global capital in emerging markets.
On the other hand, traditional sectors, such as the office sector, are currently oversupplied while affordable housing remains out of reach for many. The retail sector development has stagnated.
The office segment in Nairobi’s real estate sector, for example, has an estimated 2,452,385 sq. ft under development in 2022. This accounts for approximately 20 per cent of total stock. Combined with low take-up activity, due to rising inflation pushing out global capital in emerging markets, the market has a clear existing supply glut. Read More…
