Naivas, Quickmart expansion shaped real estate growth in Q1 of 2022; see highlights
In quarter one (Q1) of 2022, the Real Estate sector recorded notable activities compared to a similar period in 2021 anchored on the recovery of the Kenyan economy enabling increased Real Estate property transactions and boosting investor confidence.
Aggressive entry and expansion by local and international retailers such as Naivas, QuickMart, and Carrefour, took up spaces previously occupied by troubled retailers such as Tuskys and Nakumatt.
Naivas has laid plans to open three new outlets in the county with Kiambu Mall set for on April 14, 2022 at a space that was previously occupied by troubled Botswana retailer Choppies Supermarket which exited the Kenyan market in 2019 after losses.
The second store will be opened on the same day at Safari Centre in Naivasha while the third store will be opened in Meru on a date that is yet to be identified by the retailer.
“Kiambu and Naivasha branches will be opened on 14th of next month. Meru we shall advise,” Naivas chief commercial officer Willy Kimani told the Business Daily in an interview.
The upcoming stores will raise the retailer’s branch network across the country to 85 as its races to defend its market leadership against an aggressive QuickMart.
QuickMart opened three branches in the last two months.
Other key factors that have continued to shape the performance of the Real Estate sector include:
i. Continued focus on Affordable Housing by both the government and the private sector, for instance, the State Department of Housing and Urban Development partnered with Seascan Development Limited to construct 4,900 affordable housing units in a project dubbed Mowlem Estate in Nairobi’s Dandora area,
ii. Efforts by the government to provide affordable mortgages through the Kenya Mortgage Refinance Company aiming to increase homeownership. The firm rolled out a Ksh.10.5 billion Medium-Term Note (MTN) bond programme in January 2022, which recorded an oversubscription of 478.6 percent in the first tranche that aimed to raise Ksh.1.4 billion,
iii. Resumption of business operations by firms supported by the improved operating environment driving increase in office occupancies hence a better performance of the Commercial Office Sector,
iv. Positive demographics evidenced by Kenya’s relatively high urbanization and population growth rates of 4.0% p.a and 2.3% p.a, respectively, against the global average of 1.8% p.a and 1.0% p.a, respectively, as at 2020, driving increased demand for developments,
v. Improved infrastructure opening up areas for investment such as the Nairobi Expressway, and Nairobi Western Bypass projects, among many others, and,
However, a couple of challenges impeding performance of the sector include;
i. Reduced lending to the Real Estate sector evidenced by a 3.9 percent decline in gross loans advanced to the Real Estate sector to Ksh.456.0 billion in the year 2021, from Ksh.439.0 billion realized in 2020.
This is attributed to an increase in the number of Non-Performing Loans (NPLs) in the Real Estate sector by 21.6 percent to Ksh.74.7 billion in 2021, from Ksh.61.4 billion realized in 2020 according to the Central Bank of Kenya (CBK).
ii. Increase in prices of construction materials such as steel, paint, and cement which is expected to lead to a slowdown in the Real Estate sector according to the Architectural Association of Kenya,
iii. Travel Advisories in the country which is expected to have a downturn on the performance of the Hospitality sector, such as the Travel Advisory by the United Kingdom (UK) citing the heightened threat of terrorism in Kenya,
iv. The existing oversupply of space in some sectors. For example; Ksh.1.7 mn SQFT in the Kenyan Retail sector and 6.7mn SQFT in the Commercial Office sector,
v. Shift towards e-commerce affecting demand and uptake of physical Retail spaces, and,
vi. Continued poor performance of the REIT market in Kenya due to lack of Knowledge and interest of the financing instrument by investors.
Additional Source; Cytonne Report.