Why It is Not the Right Time to Invest in Real Estate

  • An image of Affordable Housing Project
    Apartments under the affordable housing project located at Park Road, Ngara in Nairobi.
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  • Outgoing Knight Frank CEO, Ben Woodhams has cautioned that the real estate sector is facing stagnation as developers are replicating plans that were successful in other regions. 

    Knight Frank is a multinational real estate company. Woodhams noted that  one of the recent problems the real estate is facing is the oversupply of rental offices by property developers.

    These investors hinged their plans on the hope that the country's economy would grow from Kenya's second President, Mwai Kibaki's era. The growth, they believed, would create more demand for office spaces. 

    “When somebody sees success in one place, they think they can replicate it somewhere else, but it doesn’t always work,” Woodhams noted. 

    Cars pictured at a traffic light along Kenyatta Avenue in Nairobi
    Cars pictured at a traffic light along Kenyatta Avenue in Nairobi
    Simon Kiragu

    He further stated that the company enjoyed success from 2003 to 2015, but grappled with the current stagnation of growth in property markets which started in 2016.

    “We were growing every year, taking in more buildings more staff but for the first time in 2016 that growth stopped.

    "We had an oversupply in retail and office space yet we kept on growing because that's all we had done and we certainly realized that our turnover was going down,” he remarked.

    Woodhams, who will be succeeded by veteran real estate expert Mark Dunford, however, advised that the high-end segment in real estate has wider profit margins.

    He urged investors to focus on the high-end market to make more money. 

    Motorists Along the Busy Ngong Road in Nairobi. Wednesday, March 4, 2020.
    Motorists drive along Ngong Road in Nairobi, on Wednesday, March 4, 2020
    Simon Kiragu
    Kenyans.co.ke

    "You can’t make money in the mass market owing to our small team. The market is flooded by briefcase brokers, and we can’t compete with them, so we tend to focus on the high-end side." 

    Mwenda Thuranira, CEO of Myspace properties, while speaking to Kenyans co. ke explained that his company utilised the gaps in apartments and rental spaces for convenience stores.

    "At Myspace properties we have noted growth in rental apartments in the first quarter of this year. We have partnered with supermarkets in providing spaces for their market expansions," he stated

    He agreed that the oversupply of mega malls led to stagnation of growth. However, his company has been very strategic in its approach to the property market.

    ‘’We have kept in mind the increased activity of our competitors in the high-end real estate. We have introduced programs meant to improve shopping experiences in high-end areas. So far, we have recorded a 70 per cent bookings, proving that there is demand in certain areas in the real estate.’’ he elaborated.