2024-02-09-莱坊-Kenya_Market_Update_2nd_Half_2023_8页_1mb

Kenya Market Update Summary (Q3 2023 Report)

Overview

This update from Knight Frank examines Kenya's real estate market for H2 2023, highlighting resilience despite economic headwinds. Key themes include environmental sustainability, currency depreciation, and projected growth, with a focus on sectors like residential, office, and hospitality.

Key Economic Indicators

• The Kenyan economy faced challenges due to a weakening shilling and high CBK lending rates, rising from 10.5% to 12.5% in 2023.
• GDP growth slowed in 2023 to around 3.0%, down from previous years, with sub-Saharan Africa experiencing a deceleration to 2.9%.
• Inflation decreased from 7.88% to 6.63% in 2023, staying within the CBK's 2.5-7.5% target range, driven by stricter monetary policies.
• Kenya is projected to grow at 5.0% in 2023 and 5.2% in 2024, though global economic risks persist.

Real Estate Performance

• Residential: Prime residential prices increased, driven by expatriates and high-net-worth individuals. Average monthly rents for prime properties range from KES 140,000-500,000, with a low vacancy rate of 5-10%. Sales market slowed due to currency depreciation and high borrowing costs.
• Office Sector: Occupancy rates rose to 76.5% in H2 2023, up from 71.5% in H1. New developments increased, but speculative projects slowed due to economic uncertainty. Prime office rents stagnated at USD 1.2 per sq. ft.
• Retail: Retail centres saw stable demand, with major chains expanding outlets. Prime retail rents range from KES 250-800 per sq. ft. High penetration didn't translate into market expansion, as consumers prioritized convenience and e-commerce.
• Hospitality: Occupancy rates improved to 57% in Q3 2023. Hotels near JKIA saw higher demand during peak periods. Recovery from COVID-19 continues, with new developments expected in 2024 despite visa challenges and operational costs.

Capital Markets

• The bond market attracted investors due to rising interest rates, with the Islamic sukuk bond approved for KES 3 billion. Government fiscal policies aim to stabilize the economy.
• The stock market experienced capital flight, with foreign investors divesting stocks, leading to low demand for shares. REITs like FAHARI I-REIT were delisted due to lack of interest.
• Equity investments declined, offset by fixed-income opportunities, supporting economic stability.

Infrastructure and Policy

• Significant investments in infrastructure under Vision 2030, including the Nairobi-Mombasa Expressway and SEZs like Nairobi Gate. Public-private partnerships (PPPs) are key drivers.
• CAIPs (County Aggregation and Industrial Parks) are being developed in all 47 counties to boost industrialization.
• Climate initiatives focus on renewable energy (87.5% renewable electricity) and green financing, aligning with global stocktake at COP28.

Investment Trends

• Alternative markets, such as affordable housing and healthcare, saw interest from private equity and developers. Projects include over 15,000 affordable units and hospital developments.
• Data centres, green manufacturing, and industrial parks are expanding, supported by foreign direct investment.

Challenges and Risks

• Currency depreciation and high interest rates increase borrowing costs, deterring investment.
• Economic slowdown and global competition pressure growth, with Kenya facing challenges from neighboring countries in industrialization.
• Delays in policy implementation and land conversion processes hinder development.

2024 Projections

• Kenya expected to grow moderately at 5.0% through 2024, with focus on sustainable development and infrastructure.
• Recovery in hospitality and real estate is anticipated, driven by new projects and industrial growth, but risks from economic volatility remain.