Kampala beats Nairobi in average rental yields

BUSINESS | RENT

Kampala is a more attractive market for real estate investors than Nairobi due to the lower rates for land and rent and higher effective demand, a new report by the Cytonn investments indicates.

The report titled: "Kampala Real Estate Investment Opportunity: A pearl of Opportunity" is a culmination of surveys carried out in the Kampala City Centre and neighbourhood areas, such as Nakawa, Makindye, Kawempe and Rubaga.

The report revealed average rental yield rates of 6.8%, 10.6% and 10.2% in residential, office and retail space in Kampala, which beats its counterpart Kenya's Capital City of Nairobi with yields at 5.6%, 9.3% and 10.0%.

While presenting the report at the Protea Hotel in Kampala, Johnson Denge, the Cytonn Investments Real Estate Services Manager, noted that residential and office markets are developer's markets driven by strong demand, high pricing and limited supply, while the retail market is a tenants market driven by low demand and increased vacancies.

"The returns are mainly as a result of relatively low supply of quality office space, hence enabling the developers to charge prime rents. The retail theme, though having an attractive yield of 10.2%, has witnessed increased supply and hence increased vacancy rates with average occupancy rates of 71.2%, the lowest across all themes," reads the report in part.

The report which was released today, however pointed out that Kigali has the highest yields, with an average of 9.2%, 12.9% and 13.1% for residential, office and retail themes.

According to the report, commercial office theme in Kampala has the highest returns with rental yields of on average 10.6% and 86.0% occupancy levels.

It also revealed that the upper middle income zones of Naguru, Lubowa and Ntinda have the highest returns with average rental yields of 7.4% and that in  retail, the market has a large supply with community malls having the highest returns with average rental yields of 11.8%.

Dande said the company invests in different sectors such as education, hospitality and technology. He said the company intends to invest over $100m in Uganda and this will create employment opportunities to the population and urbanization among other benefits.

"Corruption, mediocrity and ethnicity are some of problems facing the investment. We are considering training the population right from colleges and from there we give them jobs immediately. We have identified partners whom we are going to work together," he stated.