This archive report was first published on 15 July 2021.
Deloitte has released a report on the Economic Impact of the COVID-19 pandemic on East African economies, highlighting the effects on Kenya's real estate sector.
According to the report, Kenya's office sub-sector was affected mainly by the COVID-19 pandemic, with slowing demand and high supply levels leading to a decline in rental yields from 7.8% to 7.3% in the first and fourth quarters of last year.
The pandemic has also led to a shift towards working from home models, resulting in a slowdown in demand and enabling tenants to negotiate for lower rental agreements.
Deloitte's report notes that Kenya's real estate sector growth has been turbulent over the past five years, ranging from a high of 12.2% growth in 2016 to a low of 5.6% growth in 2018.
As a result, rent for office space is expected to decline to US$ 8.7 per square meter in 2021, compared to US$ 8.8 per square meter in 2020 and US$ 9.5 per square meter in 2019.
On the other hand, retail rental rates are expected to decline to US$ 14.6 per square meter in 2021, due to an oversupply of retail space, constrained spending power among consumers, and a growing trend towards online shopping.
Deloitte's report also notes that the industrial sub-sector experienced a stagnation of rental yields in 2020, but is expected to spur industrial space demand between 2021-2024, leading to an increase in industrial rental rates to US$ 3.7 per square meter in 2021.
Commenting on the East Africa macro-economic environment, Deloitte East Africa Financial Advisory Leader Gladys Makumi said, “We expect the East African economic activity to pick up in 2021 with a 3% growth in comparison to 0.9% in 2020.”
