MIP WEEKLY CONSTRUCTION INDUSTRY REPORT NO.33
PERIOD: APRIL 4 to 10, 2016
06/04/2016 : The Business daily, Page 20
Developer targets lower middle class with Ksh 2.5 m houses in Ruiru
- A Mombasa based low cost real estate firm has broken ground for a Ksh 100 million housing project in Nairobi area that will sell for Ksh 2.5 million a unit.
- Kenya Projects Ltd is putting up 50 two bedroom semi detached maisonettes in Ruiru
- The budget homes come with red-oxide floors as opposed to tiles, without kitchen fittings and wardrobes and shared walls and orientile roofing sheets, making them cheaper than convectional houses.
- The target market is the lower middle class .Research shows that the units currently in the market are not affordable to this group.
- The Ruiru maisonettes have a plinth size of 900 square feet on two floors, and a car park and small backside garden measuring 15 x 10 feet.
- The Ruiru project located near kamakis, about two kilometres off the Eastern bypass is scheduled to be completed in March next year.
- Ruiru area is a prime location for residential market due to the following factors:
- The market contributes 18% of the land supply in satellite markets, as per the 2015, Hass Consult report.
- As indicated in the Cytonn Qualitative Survey on Settlement Characteristics in Satellite Towns, Ruiru attracts middle income earners seeking residential areas for families, away from the busy Nairobi area, with purchases done through their personal savings.
- The relatively lower land prices in Ruiru provide an opportunity for large-scale housing development catering to the growing middle class.
04/04/2016 : The Business Daily, Page. 6
Two bedroom flats tenants hit hard in sharp urban rent rise.
- Tenants of two bedroom flats have experienced the fastest rise in rent over the past five years with renting costs of three bedroom maisonette rising at the slowest pace.
- Official data puts the average monthly rent of a two – bedroom flat at Ksh 20, 012 in March up from Ksh 15, 982/= in the same month of 2012, reflecting a growth of 25.2%.
- The flats are popular with middle class homes as the rents fits within their monthly budget.
- Three bedroom maisonettes preferred by rich tenants, are up by 14.6% to Ksh 32,797 over the same period, according to the Kenya National Bureau of statistics (KNBS), while a two- bedroom bungalow is up 15.3% to Ksh 27,759.
- This means developers of two-bedroom units have gained the most in terms of rate of returns on their investments.
04/04/2016 : The Standard, Wednesday Life, Page. 6
Housing glut yet to meet top end demands
- Nairobi is yet to meet the Market for top notch (Grade A) offices for boasting of outstanding features that comprise superior exterior and other interior finishes among others.
- High end spaces in high end Upperhill and Westlands in Nairobi can hardly satiate the Billionaire’s club market that demands exclusivity, 24 Hour security, good roads and ample parking lots that are manned, and entire builings under surveillance.
- Mr. James Hoddell, the CEO of Mentor Management Ltd, said in the firm’s report that multinationals are still looking for exclusive office blocks that send a “splendid luxurious and affluent statement about their reputation “to their prospective clients.
- The reality is that even in something of a building glut, developers are still offering very few office buildings that are the kind of offices that tenants want to lease.
07/04/2016 : The Standard, Home and Away, Page. 2
Marriot International to Open in Westlands, Nairobi.
- American hotel chain Marriott International has signed a tenancy agreement with Avic International Real estate, which will see the hotel set up shop in a Ksh 40 billion high rise complex being built in westlands, Nairobi.
- The complex will also serve as Avic International Africa headquarters; will be completed in six years, time.
- The upcoming hotel will have 365 rooms, with 50 being apartments and 315 being guest rooms.
- Apart from a 24 hour gourmet restaurant, the hotel will have a Chinese restaurant, a specialty cafeteria and Marriot bar.
- The deal was signed on March 29, 2016.
07/04/2016 : The Standard, Home and Away, Page. 2
Nairobi headed into an Oversupply of Offices- report.
- An office space glut is looming in Nairobi following record levels of new office buildings due to open in the capital this year, says a report by Mentor Management Ltd.
- According to the report, most new office buildings due for completion due for completion are on the outskirts of Nairobi. Oversupply of offices is likely to be seen in Upper Hill, Westlands and Waiyaki way.
- It could take the market over four years to absorb the supply.
- Congestion, which is severe in some areas in Nairobi, is fuelling the move of businesses to outer nodes around the city, seeing orgarnisations migrate to offices in Karen, Thika superhighway and Limuru road to cut commuting and parking costs.
07/04/2016 : Daily Nation, DN2, Page.42-43
UAP – Old Mutual Towers ready for occupation.
- Real estate firm Knight Frank has begun leasing floor space at the 33 story UAP – Old Mutual towers.
- The Ksh 4 Billion building in Nairobi’s upper Hill is mainly targeting high end clients looking for Grade A offices.
- Knight Frank says it has 309,000 square feet of lettable space, from a minimum of 3,000 square feet.
- The building has open plan office space that allow for flexible planning of work spaces.
- Other buildings under construction in upper hill include the Ksh 4 billion Kenya Re- building as well as the soon to be ready Ksh 2.1 Billion 21 storey KCB Plaza that will serve as the bank’s regional headquarters.
07/04/2016 : Daily Nation, DN2, Page.44
Kenolkobil suspends plans to build office block.
- Listed Oil Company Kenolkobil has put on holds plan to build a Ksh 1.5 Billion office block in Nairobi’s central business District citing a glut in the office rental market.
- The company has said that there has been a “cooling of the market “due to an “oversupply of office space” prompting the decision that the management said would be reviewed when market conditions improve.
- The building was to serve as its new headquarters, besides generating rental income.
- KenolKobil had earlier announced it would begin the construction of the 22- storey building on Haile Selassie Avenue in May.
07/04/2016 : Daily Nation, DN2, Page.44
Sale of Fusion capital’s Graceland housing project complete.
- Fusion Capital has completed the sale of its 80 unit, middle income housing project in Athi River and repaid the financiers of the construction loan.
- The private eqiuty fund said its investors had doubled their investment through returns from the sale of the Graceland Athi River housing project, which cost Ksh 600 million.
- The three bedroom houses, each with a servant’s quarters, were offered for sale at escalating prices through the construction period, with the last houses being sold for around Ksh 11 Million each.
07/04/2016 : Daily Nation, DN2, Page.45
Developers could get reprieve if construction levies are reviewed.
- Developers could get a major reprieve after President Uhuru Kenyatta called for an immediate review of the charges levied by the National Environment Authority (NEMA) and the National Construction Authority (NCA).
- The EIA fee structure was reviewed in 2013 to a minimum of Ksh 10,000 or 0.1% of the project cost but without an upper limit, making it more costly for developers of big projects. Previously the fee had a maximum of Ksh 1 million.
- The NCA construction levy was introduced in 2014 by the lands Cabinet Secretary Charity Ngilu and is payable for all projects worth more than Ksh 5 Million.
- In October 2014, the president directed that a maximum cap on EIA fees be introduced, saying that the regime where property developers pay a percentage of the value of the project as fees is punitive.
- But one and a half years later, that directive has not been implemented, with Nema seemingly reluctant to implement the presidential order.
07/04/2016 : Business Daily, Page 19
Britam Managers say too many malls have been put up in Nairobi
- The shopping mall sector has been hit by a glut that has reduced options for investors in the real estate business, Britam Asset Managers.
- The firm’s real estate tracker shows there is an oversupply in all types of retail space in Nairobi.
- Beyond the Two rivers Mall expected to open by the end of this year no further retail space will be required in Nairobi, as there will be an oversupply.
- Britam Asset Managers says investment opportunities have meanwhile shifted to the counties, industrial and residential real estate.
- The Industrial market in Nairobi absorbs around Ksh 3 Billion in a year in investments – excluding land costs – compared to Ksh 20 billion that goes into commercial office sector.
- The industrial market has changed markedly in the last three years, previously almost all industrial premises and warehouses were owner occupied, but this year, two thirds of the completions will be for sale or lease.
08/04/2016 : The Daily Nation, Page 3
Gloom for Depositors as Chase Bank crashes.
- More than 50,000 depositors with nearly Ksh 100 billion in chase bank and 1,400 employees were financially ruined yesterday after the bank was brought down by fraudulent transactions of the institution’s Ferrari driving officials.
- Distressed depositors whose Ksh 95 billion was locked up in the Bank crowded the shuttered entrances of the lender’s branches across the country hours after they got information the Central Bank of Kenya had taken over its operations.
- Thousands of pensioners are likely to take hit because pension funds sank billions in the Ksh 4.8 billion bond floated by the bank in May last year, shining the spotlight on the Capital Market’s Authority,(CMA), which approved the fundraising plan despite information that all was not well in the bank.
- Chase bank mostly marketed itself to youth, women and investment groups, making its collapse a devastating development for many families across Kenya.