NAIROBI, KENYA, AUGUST 13, 2018
Cytonn has today released their Nakuru Real Estate Investment Opportunity Report, which highlights that the real estate sector in Nakuru Town records the lowest rental yields among selected cities and towns in Kenya, with an average rental yield of 6.1%, compared to 8.6%, 8.4%, 8.1% and 7.8%, For Nyeri, Mombasa, Nairobi and Kisumu, respectively. The real estate sector in the town recorded total returns of 14.9%. For the specific themes, Mixed Use Developments (MUDs), had the highest returns, recording average rental yields of 8.9%, retail, commercial office and residential themes recorded average rental yields of 5.8%, 5.4%, and 4.2%, respectively.
“We have a neutral outlook on the performance of the real estate sector in Nakuru. However, the market has pockets of value in Mixed Use Developments, which have attractive returns with average rental yields of 8.9%, 2.8% points higher than the market average of 6.1%,” said Johnson Denge, Cytonn’s Senior Manager, Regional Markets when speaking about the overall opportunity in real estate in Nakuru Town. ”The performance of the real estate sector in the Nakuru Town is mainly bolstered by (i) Positive Economic Growth – According to the World Bank Survey 2015, Nakuru County GDP per Capita stands at USD 1,413, which is 4th highest in Kenya after Kiambu, Nyeri and Kajiado, (ii) Devolution – that has opened up Nakuru Town, attracting government institutions, private investors, and entrepreneurs to the county, (iii) Positive Demographics – as population has been growing at on average 3.1% per annum, compared to a Kenyan average of 2.6% p.a, and (iv) Infrastructural Development – In recent years such as the expansion of the Nakuru Nairobi Highway, and upgrading of roads linking several suburbs in the Town, ” noted John Keya, Research Assistant, Cytonn Investments.
Speaking on the performance of various real estate themes, Nancy Murule, Senior Research Analyst at Cytonn Investments, noted that “for the residential sector, the opportunity is in 3-bed apartments in both the high end and mid end segment in areas such as Milimani, Section 58 and Naka. The units record average rental yields of 5.0% and 5.5%, respectively, higher than the market average of 4.2% as well as high-annualized uptakes of 22.9% and 39.7%, respectively. For the commercial sector, the opportunity lies in Mixed Use Developments which have high occupancy rates of on average 81.6%, 16.6% higher than conventional office space at 65.0%, thus high yields of on average, 8.9% as compared to office at 5.4%. For land and site and service schemes, the opportunity is in areas such as Kiamunyi and Milimani that have a capital appreciation of on average 11.6% and 10.7%, respectively, as compared to a market average of 8.8%.”
Out of the five real estate themes under evaluation in Nakuru Town, two themes, that is MUDs and land have a positive outlook, two themes that is retail and the commercial office sectors have a negative outlook while one theme, that is residential has a neutral outlook, thus our outlook for the Nakuru Town real estate market is neutral.
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