KENYA, AUGUST 13, 2018 — Kenya’s town of Nakuru has the lowest rental yields among selected cities and towns in the country, despite the real estate sector being a high-return investment area.
The town located in the Rift-Valley has an average rental yield of 6.1 per cent trailing other major towns.
Nyeri has the highest yield at 8.6 per cent followed by Mombasa with an 8.4 per cent yield.
The country’s capital city of Nairobi has the third highest rental yield of 8.1 per cent while Kisumu comes in fourth with a 7.8 per cent.
A survey by investment firm- Cytonn shows the real estate sector in Nakuru town recorded total returns of 14.9 per cent.
For the specific themes, Mixed Use Developments (MUDs), had the highest returns, recording average rental yields of 8.9 per cent, retail, commercial office and residential themes recorded average rental yields of 5.8 per cent, 5.4 per cent and 4.2 per cent 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 per cent which is 2.8 per cent points higher than the market average of 6.1 per cent ,” said Johnson Denge, Cytonn’s Senior Manager, Regional Markets.
He was speaking during the release of the survey dubbed “Nakuru Real Estate Investment Opportunity Report”, which highlights the overall opportunity in real estate in Nakuru Town.
The performance of the real estate sector in the Nakuru Town is mainly bolstered by positive economic growth, devolution, positive demographics and infrastructural development.
According to the World Bank Survey 2015, Nakuru County GDP per Capita stands at US$ 1,413, which is fourth highest in Kenya after Kiambu, Nyeri and Kajiado.
Devolution on the other hand has opened up Nakuru town, attracting government institutions, private investors, and entrepreneurs to the county.
The town’s population has also been growing on average 3.1 per cent per annum, compared to a Kenyan average of 2.6 per cent while recent infrastructural developments continue to make the town attractive.
“These include 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: “For the residential sector, the opportunity is in three-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 per cent and 5.5 per cent respectively, higher than the market average of 4.2 per cent as well as high-annualized uptakes of 22.9 per cent and 39.7 per cent Murule affirmed.
For the commercial sector, the opportunity lies in mixed use developments which have high occupancy rates of an average 81.6 per cent, 16.6 per cent higher than conventional office space at 65.0 per cent, thus high yields of on average 8.9 per cent as compared to office at 5.4 per cent.
“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 per cent and 10.7 per cent respectively, as compared to a market average of 8.8 per cent,” she added.
Out of the five real estate themes under evaluation in Nakuru Town, two themes, that is MUDs and land have a positive outlook.
Retail and the commercial office sectors have a negative outlook while one theme, that is residential has a neutral outlook, thus the firms’ outlook for Nakuru Town real estate market is neutral.
