The rapid urbanisation is expected to drive Kenya and the entire East Africa region's construction sector growth, players now say.
Opportunities exist in middle-income residential houses, student housing, corporate accommodation and data centres, as well as performing retail and office sectors.
Real estate investors meeting in Nairobi, for the 10th Annual East Africa Property Investment Summit, are upbeat about the opportunities within the region that have seen an increased interest in the sector.
For instance in Kenya, about 13 million people live in the urban areas with the number expected to hit about 38 million in the medium-term to long-term.
Speaking at the Summit, Absa Bank Kenya managing director Abdi Mohammed noted that as East Africa experiences rapid urbanisation, the demand for affordable housing will continue to soar.
“There is also growing awareness of the importance of sustainable development with developers increasingly incorporating green technologies and sustainable building practices in their projects, meeting the growing demand for eco-friendly properties,” Mohammed said.
He said investors and developers who keep abreast of these trends and adapt their strategies accordingly are likely to succeed in the “exciting and rapidly evolving market”.
About 60 per cent of the people in urban areas live in informal settlements.
Property analysts, who however remain cautiously optimistic, are also projecting a strong demand for light industrial and warehousing property.
The segment is expected to provide a new frontier for investors to acquire new assets and increase returns in the short-term.
“While it is still in its infancy, A-grade industrial real estate in the region has shown outstanding performance potential to be able to weather any downturns expected,” said Donald Borthwick of London-listed Grit Real Estate Income Group.
The region’s maturing sub-segments are also supporting allocations and strategy.
These include retail, student housing and industrial that appear to exhibit a higher level of maturity than other regions in the continent, except South Africa.
“Nairobi’s position as the hub of East Africa has also enhanced occupier demand,” said Tilda Mwai, research associate at Estate Intel–a platform that provides data to companies interacting with the African real estate and construction industry.
So far, Kenya has seen a nine per cent increase quarter on quarter in the number of registered businesses in Q1 2023, resulting in 37,176 registrations.
“Key occupiers in the financial services and tech sectors are continuing to drive demand in the commercial sector pointing to cautious optimism on the traditional real estate sectors as well,” said Mwai.
