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Burble Burst? Not the Kenyan Real Estate Market

The  Kenyan Real Estate Market is not anchored on Mortgages. The strength of the growing mortgage market  remains under 30% of  loan portfolios , this is despite  its exponential increase  in Kenya. That alone  will not cause a market collapse, at-least not in the medium term.

Image Courtesy: Bitcoin.com

What we are witnessing from Q4,2016 is the cyclical nature of Real Estate which will eventually result to an eminent Market correction ; Rising demand, market peaks, falling markets and bottoming out.

Real Estate Cycle
Image Courtesy: CA, Reality

One-stop shops no longer in vogue? What next for brick and motor retailers and landlords?

We live in the information age. Consumers are empowered by information on what to buy, where to buy and at what cost. As such, rather than going to one place to buy everything, consumers are increasing bargain hunting online or at warehouse clubs.

Begs the question, is there still relevance in one-stop shopping outlets? Relevance of malls?

Consumer tastes continuously evolve; from preference to big box stores to online bargain hunts. Retailers who succeed, have demonstrated evolution and investment parallel to their consumers. Some customers go for among others value pricing, some for luxury and others for the experience.

As a landlord, who are you targeting for your brick and motor?

Successful retailers are becoming increasingly aware that they cannot be everything (one-stop) to every customer. Rather, their focus should be hinged on the core goods that their customers come in for and not the things these customers can buy online or can find in warehouse clubs.

Image Courtesy; Jeff Ostrowski | Palm Beach Post 

There are successful retailers who have retained their brick and motor outlets. These retailers are the ones who have curved their niche in experiential retail to attract and retain the modern day consumer via value pricing , luxury or aspirational shopping.

Day to Day is a discount retail store in Dubai with focus on value . Goods retail between 1-10 AEDs or 1-20 AEDs. Items are highly discounted.

Image courtesy: Touristino

Louis Vuitton is a boutique store which targets luxury consumers.

Image Courtesy ; Forbes

Aspirational shopping which targets to incite excitement among shoppers by hinging on lifestyle marketing

Credits;

https://www.us.jll.com/en/trends-and-insights/investor/three-things-retailers-can-learn-from-the-sears-bankruptcy

Purpose Built Real Estate Investments, Why Now?

Commercial Real Estate Investments in Kenya are at a critical cross road.  The residual supply from FY20 further exacerbated by current economic tail winds, givebacks which are funneling space back to the market and negative demand shocks from Covid-19 spell an overall bleak outlook for real estate investors in the medium term.

The persistently bullish tenant driven commercial real estate market will be characterized by ; further softening of already suppressed rentals, rental abatements, higher break rights and built- out allowances.

Despite the bleak outlook, pockets of value exist in the commercial real estate market segment for differentiated  real estate products. i.e. Purpose Built Real Estate

Workplace – The New Normal

Futuristically, does the office have a new purpose apart from remaining that space from which businesses foster creativity and innovation, cultural connection and advance learning?

Image Courtesy CBRE

The future role of the physical office remains the biggest question corporate executives must answer today. It now emerges that a hybrid Workforce and flexible workplaces is a combination which will ensure that the strong commercial synergism from humans innate sociability which underpins the future of work is harnessed.

The future of the office – how will it unfold?

The Market is on 6’s and 7’s – that heady mix of facts and opinion driving decision making around the future of work.

Do we bolt on old ways of doing things and hope for the best? Will we survive? Is the workplace really ready to adopt Working from Home (WFH) ? If not, do we continue embracing the drudgery of the commute- work- commute axis ?

Image Courtesy: Africa Business Community

Back of the envelop numbers suggest nearly 8 in 10 employees want to continue working from home half the time.

My thoughtful reflection:

The new norm of office space occupation must be efficient and account for flexible office hours. Only the agile, innovative and adaptable workplace enabled businesses will thrive. All pointers to a tee on increased adoption of remote working:.

Although most employees might work from home full time, a sweet spot is 2-3 days a week. A majority of employees want a mix to ensure that their face to face collaboration and the social time is achieved at work , as their heads- down time is achieved from home. (Global work from home experience survey 2020) .

Credits:

The EMEA Occupier Update

James Maddock , Head – Occupier Services Cushman & Wakefield

Global Workplace Analytics

Airbnb’s . Coping strategies that matter during Covid-19

Image Courtesy:©Ranjit’s Airbnb , Nyali- Kenya

The Holiday Apartment accommodation segment has had exceptionally rapid, far-reaching and extra ordinary success in the past decade. This is in comparison to traditional hotel accommodation.

Airbnb success has spawned its competitors including Hotel Chains to re-think moving into similar business. Hyatt, Marriott International and the Hilton have been exploring options to venture into the home- rental business.

Due to the Corona Virus Pandemic, the Tourism Industry has been grounded . Reservations for home- rentals which has largely been exclusively by foreign tourists have stopped. Its unlikely that these foreign tourists will book overseas home-rentals in the foreseeable future.However, domestic tourists are likely to travel hence look for great bargains in home- rentals.

Image Courtesy: The Guardian – An increase in Home rental business

What this means for owners of home rental business is that they must adapt to the situation.

Some of the coping strategies ;

  1. Target domestic tourists in their marketing strategies due to the inevitable pent up demand for home -rentals due to desire for local travel with an aim by domestic tourists to pamper themselves.
  2. Embrace flexible and Instant booking and cancellation policies.
  3. Adopt appropriate SEO’s
  4. Embracing longer term tenancies rather than the more profitable short-term lets

Avic International’s Global Trade Center: Why Nairobi’s A-Grade commercial office rentals may hit an all-time low .

Image Courtesy : Sahara Tribune

There is a palpable sense that Avic International’s GTC’s scheduled offload into Nairobi’s  Real Estate Markets stock by Q4,2020 will have huge impact in the commercial office market – specifically, the A- Grade segment.

With an estimated 120,000SQM addition of A-Grade and Hotel Office space by Avic, further softening of the already deflated rentals is inevitable. With an exception of Premium class premises such as Vienna Court, A-Grade space rentals currently average at USD $11/SQM/M which is anticipated will soften to lows of between USD $9 -$10 /SQM/M in the medium term.

The current tenant driven Commercial Real Estate Market will remain bullish exhibiting increased flexibility of lease terms and concessions favoring tenants .