Players in the construction and property industries refer to last year as a year of equilibrium in demand and supply. Though there was a reported slowing down toward the end of last year in anticipation of the elections. Looking back to 2007/2008 elections where there was violence, foreign capital stayed away and is eyeing the situation this time around with caution.
Those watching the property/development sector are doing so with interest in the extraordinary amount of international companies moving into the country. This naturally results in a greater demand for buildings.
A saying has emerged: “everyone in Kenya has become a real estate expert.” So looking for skilled advice is a little more challenging. This is where Actis owned Mentor Management comes in. In an interview with HowWeMadeItInAfrica,James Hoddell, chief executive explained that to his mind there are very few competitors in this market, at least those who do the full development and project management. “We are experiencing a real estate boom that is set to continue for years.” People are realising that you can’t just build whatever you feel like and sell or rent it.
Mentor Management has two notable developments currently on the table. One is the Garden City development. Upon completion it will be the largest mall in East Africa. It includes residential units, a public auditorium, a hotel and offices. The other is Nairobi Business Park, which has a substantial waiting list. Hoddell is at pains to point out that projects like these are bringing in much needed foreign capital.
Foreign retailers in particular are sitting up and taking notice. Last year Mentor signed the first unit for Massmart in Kenya that will employ several hundred people. They are currently touring South Africa and Dubai to meet retailers winning them over to Kenya. Retail is a big growth area in Kenya.
It’s clear that the expanding population coupled with the growing economy is driving this property boom. If there weren’t tenantsfor these buildings, no one would be building them. Hoddell points out that for 20 years there was inadequate availability of property, there was very little development and the economy had stalled. But now, there is a renewed impetusin re-starting the economy. There is growth in Indian and Chinese investment as well as other international money, like the Actis fund.
“This is a relatively cost effective market to operate in. It is a cheap country to build in; it has a developed construction industry with developed sets of consultants and a functioning real estate market, which a lot of African countries don’t have.” Says James Hoddell.
One challenge faced by developers is the acquisition of land is becoming punitively expensive. The expectation of owners some may argue is unrealistically high. It gets to a point where profitability is reduced such that it is not worth developing. This despite the rise of rentals. Regardless the property and retail sectors in Kenya are alive with the sound of investment.
Source: HowWeMadeItInAfrica
