Multinationals seek residential homes in less affluent suburbs

Leases dominated by the US dollar have extended to the regions of Naalya, Kiwatule and Najjera

Kampala, Uganda | THE INDEPENDENT | According to the latest report from property management firm Knight Frank, multinationals with lower rental budgets are now opting for residential apartments in the less affluent suburbs of greater Kampala.

The report, released on July 15, says dollar-dominated leases for residential apartments have spread to Naalya, Kiwatule and Najjera.

“This suggests that multinationals with lower rental allowances are now moving to more affordable areas,” the report notes.

This market has historically been concentrated in the affluent suburbs of Nakasero, Kololo, Naguru, Mbuya and Bugolobi, extending to Muyenga, Ntinda, Lubowa, Munyonyo, Mutungo and Luzira.

The report says demand for residential space in the suburbs has persisted due to a slight drop in rents and the high quality of new stock available.

The report notes that the prime residential market has opened up to increased sales and rental activity, thanks to the return of expatriates to the country and growing activity in the oil and gas sector.

Apartments in the upscale neighborhoods of Kololo, Naguru and Nakasero were in high demand, with notable interest in 1 and 2 bedroom homes. Thus, prime residential occupancies increased by 3%, while rents remained relatively stable.

Tenants, however, continued to negotiate harder rents and, in most cases, owed them to occupying many residential units.

Rising demand in prime office market

Meanwhile, the prime office market has seen an uptick in rental activity in the first half of 2022, driven in part by the full reopening of the economy, increased seed funding, improvement in activity in the services sector and the signing of the final investment decision last February. year for the development of the oil and gas sector.

Demand, according to the report, came from a wide range of sectors including; Financial services, technology/telecoms, oil and gas, healthcare, NGOs, business and professional services, start-ups, industry/logistics, legal and government agencies.

Retail market performance, measured by footfall and revenue, improved by 6% and 8% respectively in the first half of 2022 compared to a similar period in 2021 due to the full reopening of the economy.

While a notable increase in retail activity was seen on a year-over-year comparison, general grocery store revenue growth and average mall footfall are remained subdued, posting negative growth of 20% and 23% compared to pre-covid figures respectively.

The industrial market, meanwhile, remained resilient, supported by government initiatives aimed at boosting the country’s industrialization and potential investments in the oil and gas sector.

The Uganda Investment Authority has designated 2022 and 2023 as the year of boosting domestic investment with a focus on helping small and medium enterprises (SMEs) to grow, connect with important local investors and international markets, provide them with equipped workspaces in industrial parks, and provide training and other capacity-building programs.

Regarding the office market, the segment is likely to see a review of escalation clauses in rental agreements amid growing discussions among stakeholders on the subject due to limited revenues.

The report notes that the reviews will likely incorporate biennial rates versus the annual indexation rates that were the market standard. However, this will likely happen on a case-by-case basis rather than as a general rule.

According to Patience Taaka, research analyst at Knight Frank, the continued rise in raw material and energy costs is expected to lead to high operating costs, which will translate into higher service charges, thus increasing the costs of total occupancy.

Looking ahead, the report notes that environmental, social and governance (ESG) is set to take center stage in the real estate market as investors, occupiers and employees emphasize green development strategies. .