PROPERTY

Mixed used developments yielded more in 2020- Cytonn

However, on overall, MUDs recorded a 0.2 percentage points year on year decline in average rental yield to 7.1 per cent

In Summary
  • MUDs recorded an average rental yield of 7.1 per cent, 0.3 percentage points higher than the average of 6.8 per cent.
  • According to the report, Westlands was the best performing node recording an average MUD rental yield of 8.5 per cent.
Garden City Mall located along the Thika Super Highway
Garden City Mall located along the Thika Super Highway
Image: ENOS TECHE

Mixed use developments(MUDs) were the best performing properties in 2020 recording higher yields than single use retail, commercial office and residential spaces.

The Cytonn Nairobi Metropolitan Area Mixed-Use Developments (MUDs) Report-2020, shows that MUDs recorded an average rental yield of 7.1 per cent, 0.3 percentage points higher than the respective single use retail, commercial office and residential themes average of 6.8 per cent.

“The relatively better performance by MUDs is attributed to the prime locations, mostly serving the high and growing middle class supported by the concept’s convenience as it incorporates working, shopping and living spaces,” said investment advisors at Cytonn.

The retail, offices and residential spaces in MUDs recorded rental yields of 7.8, 7.3 and 6.2 per cent, respectively, compared to the single-use average of 7.5, 7.2, and 5.6 per cent, respectively.

However, on overall, MUDs recorded a 0.2 percentage points year on year decline in average rental yield to 7.1 per cent in 2020 from 7.3 per cent in 2019, attributed to a tough economic environment caused by the Covid-19 pandemic that constrained consumer spending.

This led to reduced demand of space in MUDs amid reduced disposable income and reduced investor appetite as investors adopt a wait and see attitude in the wake of market uncertainty.

Westlands was the best performing node recording an average MUD rental yield of 8.5 per cent with the retail, office and residential spaces recording rental yields of 9.8, 8.2 and 7.0 per cent, respectively, 2.0, 0.9 and 0.8 percentage points higher than the market averages of 7.8, 7.3 and 6.2 per cent, respectively.

This was attributed to availability of prime office and retail spaces resulting in relatively high demand, and, the area being a prime commercial node with high demand for commercial and residential space supported by the relatively good infrastructure.

Limuru Road and Karen came in second with an average MUD rental yield of 7.3 per cent each, largely driven by their attractiveness as retail destinations with malls such as Two Rivers and Galleria offering high quality retail spaces.

Eastlands performed poorly recording an average rental yield of 5.5 per cent attributed to low rental charges due to unavailability of quality space and relatively high competition from informal Mixed-Use Developments.