Written by AARON GAD ORENA
Are you looking to rent in upscale Kololo or Nakasero? Fear not. The latest report by Knight Frank, a top real estate consultancy firm, shows that a number of new apartments in Kololo, Naguru and Nakasero are nothing more than beautiful brick and mortar pieces, with no tenants due to the low demand, writes AARON GAD ORENA.
Knight Frank says it “registered a nine per cent year-on-year average decline in occupancy for the same suburbs from 81 per cent recorded in the second half of 2018 down to 72 per cent registered in the second half of 2019.”
Knight Frank in its Kampala Market Update for the second half of 2019 points to an 8.5 per cent year-on-year increase in the supply of new apartments, amid soft demand in the market, as part of the reasons some apartments remain empty.
The drop in rental fees has seen some tenants move from other suburbs like Ntinda and Muyenga to live in Kololo and Nakasero. While Knight Frank does not mention the exact percentage drop of rental fees in Kololo, Naguru and Nakasero, the report notes that overall rates decline by 1.25 per cent on average.
The report also pointed out that the prices at which landlords have fixed their properties and the offers they are getting from potential customers continues to vary widely.
“Generally, the variance between asking and achievable rents for apartments in the prime residential sector is widening in response to the increase in supply of private rented accommodation, putting downward pressure on rents,” it noted.
The pain has spread to the owners of office apartments too. Knight Frank recorded a three per cent year-on-year decline in occupancy rates (from 86 per cent in the second half of 2018 down to 83 per cent as at December 2019) for prime office space.
“This is mainly on account of a six per cent decline in demand by large space occupiers (more than 500 sqm) particularly multi-nationals and large corporates as well as the addition of approximately 18,000 square metres of prime office space during the first half of 2019, with the market absorbing only 20 per cent of this space during the second half of 2019,” Knight Frank noted.
Instead, a number of businesses have changed strategy in how they consume office space. Knight Frank says more property owners are now opting to lease out smaller office spaces for start-ups.
“The biggest percentage of office space was leased to government-funded projects in the road sector, start-ups particularly ICT and insurance firms accounting for 40 per cent, 20 per cent and 15 per cent of the leased space respectively,” the report notes.
Due to the leasing, prices for office space have tanked.
“With regards to rents, the increasing void rates in the leased office space sector has led to softer lease terms and conditions being achieved by tenants during lease renewals. In light of this, prime rents have fallen by approximately 10 per cent,” the report says.