Knight Frank reports increased uptake in Kampala property market

by Business Times correspondent
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Knight Frank, the property management and consultancy firm, says Uganda’s sustained economic growth during the second half (H2) of 2023, contributed to new uptake of both apartment and office space across Kampala although excitement over the spin-offs from the oil and gas development has ebbed slightly. 

Revised annual gross domestic product (GDP) estimates from the Uganda Bureau of Statistics indicate that the economy grew by 5.2% in 2022/23 as compared to 4.6% in 2021/22 with the services sector as the biggest GDP contributor at 42.4%, followed by the industrial sector at 26% and the agricultural sector at 23%.

According to its H2 2023 Kampala Property Market Performance Review and Outlook, the firm reports, ‘In the period under review, the prime residential market maintained relative stability achieving a four percent rise in the average monthly rents for two-bedroom apartment units, while rent for three-bedroom apartment units increased by one percent on a year-on-year comparison’.

Knight Frank says prime occupancy rates have increased by six percent. The growth in average rentals is attributed to prime apartment units that have recently been completed and come onto the market offering larger living spaces and better amenities thus commanding higher rates.

Those expatriate staff, unable to find stand-alone houses for occupation within their rental budget or alternatively those who prefer community living, are opting for apartments thus contributing to the rise in occupancy levels.

However, the initial optimism surrounding the prime residential market demand driven by the oil and gas sector has moderated as actual demand falls short of projected levels. 

Recognizing this shift, landlords are now adopting a more diversified approach, exploring alternative tenant segments such as those affiliated with UN agencies, financial institutions, High Net Worth Individuals, and development organizations, to optimize occupancy rates.

Demand persists for apartment units for sale within a price range of $150,000 to $200,000 in the prime and semi-prime areas (a radius of 10-12 kilometres from the city centre) with a good quality of workmanship and finishes. These locations include Mbuya, Kyambogo, Makindye, Mutungo, Muyenga, Ntinda, and Luzira, among others.

Outlook reports that demand for prime office space persisted with prime rents recorded at $16.5 and $ 15.0 per square metres per month for Grade A and Grade AB, respectively. ‘This represents a 10% rental increase for Grade A and 12% surge for Grade AB as compared to H2 2022 rental levels. There has been a general improvement in occupancy for Grade A and AB properties across board with vacancy rates reducing by 1% as compared to H2 2022’.

The Investment (rental) office sector showed a distinct segmentation in terms of size preferences. The dominant segment comprised tenants seeking units under 200 sq mts, accounting for 47% of inquiries.

While demand for larger spaces diminished significantly, with only 29% and 24% seeking spaces in the 200-1,000 sq mts and above 1,000sqm segments, respectively. This disparity is partly due to reduced demand from FDI’s and oil and the gas sector which had driven demand for large office spaces over the past few years.

Office space demand is growing into other sectors.

While core sectors like consultancy services, NGOs, finance, health sciences, and IT, remain strong, newer entrants in the renewable energy sector, and lottery companies are emerging. 

Similarly, client portfolio adjustments are driving increased property sales, be it for portfolio optimisation, sector diversification, or capitalizing on property value appreciation.

The retail sector registered growth in H2 2023 as measured by turnover, occupancy, and footfall performance. On an annual basis, footfall figures decreased by five percent while turnovers from general retail recorded a 14% increase with average occupancies increasing by 3.79% across Knight Frank managed malls. 

The healthy performance was on account of promotions during the period under review which included Black Friday promotions and the festive season sales in select stores.

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