Knight Frank Uganda has released a new market update which covers the performance of the Residential, Office, Retail and Valuation sectors during the first half of 2017. In 2017, Economists had forecast a strong expansion of East Africa’s third-largest economy – Uganda, spurred by a recovery in exports and increased public infrastructure spending. According to the IMF, this growth was expected to be primarily driven by public investments, with private investments still constrained by a lack of business confidence, uncertainty about regional markets as social unrest persists in South Sudan, one of Uganda’s biggest markets and trade partners, and the high cost of credit.
Knight Frank witnessed an increase in the supply of prime residential stock for rent on the market over the past 12 months. This supply is in the prime suburbs of Kololo, Nakasero Bugolobi, and Naguru. Kololo and Nakasero are seeing increasing redevelopment of old residential plots of between 0.50 – 1.00 acres, in line with the zoning regulations of these locations. Swimming pools, gyms, and children’s play areas have become standard facilities provided at the new residential developments. “There has been a noticeable increase in take up of residential apartments over the past 6 months, however this is not purely new demand, but mainly from tenants whose tenancy agreements have come to an end and are moving to newer and more modern accommodation, at nearly the same or just slightly higher rentals” said Managing Director, Judy Rugasira Kyanda. The report cites that sales transactions registered are still not at the pace they were at 2 – 3 years ago. Knight Frank witnessed numerous enquiries for houses in the UGX 350milion – UGX 650 million price range, but very few follow through to conclusion after the mortgage application stage. Potential purchasers are citing unaffordable interest rates when they go through with the loan application process.
Knight Frank research has registered an increment of 8% year on year growth in occupancy rates for Grade A/AB buildings in Kampala from 80% registered in H1 2016 to 88% in H1 2017 and that approximately 16,000 m2 of prime commercial Grade A/AB office space has been leased during H1 of 2017 in Kampala. The report cites that the comparative advantages for properties which are attracting tenants and or maintaining high occupancy rates are intelligent buildings which are energy efficient with adequate parking space, usually out of the core CBD areas, i.e North East of Kampala Road towards Yusuf Lule Road, Kololo and LugogoBy Pass.
In the first half of 2017, the retail sector experienced a slowdown in leasing activity as investor confidence was dampened by the challenges of Nakumatt, East Africa’s largest retailer by size, number of stores and area occupied. These challenges resulted in substantial financial liabilities to banks, suppliers and landlords alike. In spite of the Nakumatt woes, primary data from Knight Frank managed malls in Uganda reveals that footfall traffic grew by 20% in H1 2017 compared to the same period last year.
As regards Valuations, Knight Frank Uganda registered a 24% increment in valuations instructions in H1 2017 compared to the same period in 2016. This is partly attributed to a 27.5% increase in bank lending activity year on year in H1 2017 due to continued reduction of the Central Bank Rate which has forced financial institutions to reduce their lending rates.