The East Africa Property Investment (EAPI) Summit will take place from May 17 to May 18 at the Radisson Blu hotel, Upper Hill, Nairobi. As a media partner, Property Flash is publishing a series of articles about commercial real estate in this growing region, and its exciting future. In this piece, we chat to Zaharaa Khanbhai, Head: Commercial Property Finance, East Africa, Absa Bank Kenya PLC.
Commercial real estate is thriving in Kenya, the largest market in the east African region, with a gross domestic product worth $118.1bn. The sector genuinely stands out as one of the most exciting in the country which is something that Kenyans can be proud of.
The country’s multi-layered economy, which is anticipated to be worth $151bn by 2028, and political stability, have helped to cement its position as a rising African star. A well-structured services sector which is strongly supported by key financial institutions as well as a healthy agricultural sector bode well for the future of the country.
Telecommunications companies, business process outsourcing centres, other information technology service providers and corporations are looking to rent offices and industrial and logistics properties across Kenya.
This is encouraging developers to build in well-located cities supported by financial institutions such as Absa which is actively funding real estate developments across the region.
For example, Grit Real Estate, dually-listed on the Mauritian and London Stock Exchanges, has set up its subsidiary, Bora Africa, to invest in warehousing, prime logistics, light industrial, manufacturing, and other projects in Kenya.
Zaharaa Khanbhai, the head of commercial real estate at Absa Bank Kenya shared her views on what is driving the demand for investing in and developing various types of commercial property across Kenya and the east African region.
Asset classes like industrial, housing, data centres and corporate and diplomatic housing are gaining momentum in Kenya.
“On the residential side, there are two subsectors increasing in demand, the first being purpose-built student accommodation on the back of an increase in demand for quality accommodation among higher learning institutions. Absa is proud to have signed a KES6.7bn financing arrangement with Acorn D-REIT Student Accommodation to support the development of up to 10 purpose-built student accommodation (PBSA) projects in Nairobi and its environs. The[SJ(1] second asset class is affordable housing, which has been driven by the government’s drive to reduce the housing deficit by 250,000 units per year,” she says.
The investment case for both specialisations of residential property is strong and will persist. Kenya’s population is young with a median age of 20-years-old. People need to live in decent homes. There is also youth coming from other African countries to study in Kenyan universities and at Kenyan software coding schools.
Next, specialised industrial property is also in demand.
“There is growing demand for light industrial warehousing space which has been spurred by the growth in e-commerce. We are also seeing more discussions around data centres and satellite hospitals,” says Khanbhai.
The commercial real estate industry in Kenya has also begun to attract a wider variety of owners, she explains.
“We are seeing a diversified pool of investors either acquiring or developing large scale real estate projects. We have seen an increase in the number of pension funds wanting to develop affordable housing units, Saving and Credit Co-operatives (Saccos) and international players coming in to acquire residential units, private developers with the help of private equity firms have established retail malls.
Real estate investment trusts (Reits) are being created and it is anticipated that some of them will list on the Nairobi Stock Exchange soon. Developers are also coming to the market which is attracting interest from multinational corporations. This encourages companies to provide accurate and detailed information to prospective investors.
Financial institutions encouraging ordinary East Africans to invest some of their savings in listed stocks which can provided them with consistent income returns.
Listed funds will also draw private equity to the east African region.
Private equity firms are looking for closed capital structures and listed property counters are seen as the vehicle to facilitate an exit once they have achieved their investment goals.
“Where they are looking for a trade out, the Reit market will become increasingly more relevant,” says Khanbhai.
“There are a few listed exchanges with only a handful of Reits in the local market, but the success of developer and asset manager, Acorn, is a good example of appetite for newer listings, which will be supported in local markets as private investors look for an exit,” she says.
It’s clear that east Africa is positioning itself as the next frontier for real estate investment in Africa.
The east African region includes countries with young populations and exciting GDP growth potential and Absa remains committed to delivering sustainable funding solutions as the demand for commercial property grows.
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