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A look at a new class of assets emerging in Nairobi’s real estate sector
Over the past decade, Nairobi’s development pipeline has been through multiple cycles. According to Nairobi Development Pipeline Report, Nairobi’s rising demographics have largely made the case for the shift in focus to alternative sectors such as data centres among others. Tilda Mwai, Research Associate at Estate Intel joins CNBC Africa more.
Wed, 28 Sep 2022 15:13:09 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- Significant focus on alternative sectors like data centers and warehousing
- Growing demand for niche-specific products driven by rising demographics
- Impact of macroeconomic factors on the real estate sector and the future of retail hubs in Nairobi
Nairobi's real estate sector is experiencing a shift towards alternative sectors such as data centers, warehousing, and niche differentiated products, according to the Nairobi Development Pipeline report. The report, which takes stock of the market's development cycles over the past decade, highlights the changing dynamics in the real estate landscape in the Kenyan capital. Tilda Mwai, a Research Associate at Estate Intel, provided insights into the emerging trends and the impact of market forces on the sector during an interview with CNBC Africa.
One of the key points discussed in the interview was the significant focus on alternative sectors in Nairobi's real estate market. Data centers, in particular, are experiencing a surge in development activity, with over 470% of the total stock currently under development. This trend reflects a shift away from traditional sectors like retail, where over 65% of the pipeline is either sold or on hold. Mwai emphasized the vibrant development pipeline in alternative sectors compared to the more traditional segments.
Another emerging trend in Nairobi's real estate market is the growing demand for niche-specific products driven by rising demographics and market cycles. Affordable housing, flexible office spaces, convenience retail centers, and purpose-built student housing are gaining traction in the market. Mwai noted that while traditional office markets like Westlands have seen limited rent growth, more differentiated office buildings are experiencing higher occupancy levels, indicating a shift in tenant preferences.
The interview also touched on the impact of macroeconomic factors such as election-related uncertainties, currency fluctuations, and inflation on the real estate sector. Mwai highlighted a 'wait and see' attitude among both occupiers and developers due to the uncertainties in the market. Currency fluctuations have led to a preference for dollar-denominated leases by landlords, a trend that was previously uncommon in the Nairobi market.
Despite these challenges, Nairobi continues to lead in retail hubs across Sub-Saharan Africa, with a significant amount of retail space available in the city. The future trend of the retail sector will depend largely on the economic environment and consumer confidence. Mwai emphasized that real estate trends are closely tied to economic performance, indicating that a thriving economy will continue to drive growth in the retail sector.
In conclusion, Nairobi's real estate sector is experiencing a transformation with a shift towards alternative sectors and the emergence of niche-specific products. As the market dynamics evolve and adapt to changing consumer preferences and economic conditions, developers and investors in Nairobi will need to navigate these trends to capitalize on the opportunities presented by the evolving real estate landscape.
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