South African property management firm Broll has entered the Kenyan market in an effort to benefit from the growing number of foreign retailers seeking space to conduct business in the East African country
Fellow South African firm Game is among the foreign retailers seeking space in Kenya after it confirmed that it would become a tenant in Garden City Mall on the outskirts of Nairobi.
The Garden City development, which has been scheduled for completion in 2017, will include a 50,000 square metre retail shopping mall, 500 homes, a three-acre park, hotels and restaurants, cinema halls, exhibitions centres, clinics and a fun areas for children.
South African supermarket chain Massmart has also been searching for business space in Nairobi and is expected to be joined in the Kenyan retail market by US fast food chain KFC, retail chains Foschini, Edgars and Subway, who have all been planning to get a slice of the Kenyan retail market.
"Kenya’s retail property market is growing and the list of new retailers entering the market is increasing. The market is ripe for growth," observed Broll Kenya's recently-appointed managing director Jonathan Yach.
According to Knight Frank’s Africa Report 2013, the annual yield from Kenya’s retail market is 10 per cent, while that of residential market is six per cent. Industrial and office properties have a 12 per cent yield.
A 2013 report by Broll Property Group stated, "Research suggests that retail property investments are outperforming residential property investments, thanks to a strong and growing demand."
Investors have been flocking into the property markets in Kenya aiming to fill the insatiable demand for office, industrial and residential space.
Actis Capital LLP, a London-based private equity firm, has invested more than US$300mn in the East African region and has planned to invest at least US$200mn in the next four years, primarily within real estate.
The firm manages US$5bn globally across emerging markets in Asia, Africa and Latin America.
Actis' investments in East Africa include the redevelopment of Nairobi Business Park and the Garden City project.
"This is an exciting development that has the potential to be an enduring landmark in East Africa," Actis investment principal Koome Gikunda observed of the Garden City development. "A combination of world-class designs, acres dedicated to public green space and a value-focused tenant mix will draw visitors from all over Nairobi and as well as the wider region.
Elsewhere, Russian Renaissance Group and Kenyan investors have invested US$100mn into Tatu City, which will see the transformation of a coffee farm on the outskirts of Nairobi into an urban district consisting of housing, private schools, shops, offices and a hospital.
Renaissance Partners invested US$100mn to purchase the land and invested more funds to develop master plans and acquire approvals to develop Tatu City.
The developers expect to attract additional funding to invest in a private infrastructure system that would be mostly separate from Nairobi's aging sanitation, road and electrical systems. They plan to eventually build a self-contained city within a city, with housing prices starting at US$50,000.
The entire project will be expected to take a decade and about US$5bn to complete.
Several projects smaller than Tatu City are in various stages of financing and development, including Migaa Estates, a planned 774-acre gated golf estate 10 miles from Nairobi's city centre, and Bahati Ridge, a planned gated neighbourhood of 337 homes built around a man-made lake.
Other foreign investors have also set eyes on real estate in the country, including PepsCo Ltd, who has established a US$28mn bottling plant in the county, and European furniture chain IKEA.
Mwangi Mumero
