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Kenya’s real estate market will be driven by sustainable projects

Kenya’s real estate market will be driven by sustainable projects

Due
to increased demand, sustainable projects are expected to be the driving force
behind Kenya’s property market.

Buildings
that fail to comply with environmental, social, and governance (ESG)
regulations risk becoming “irrelevant” in the future, according to
real estate professionals such as developers and bankers.

This
was revealed at the East Africa Property
Investment (EAPI
) event, which was held under the theme A Renewed Focus.
According to host Kfir Rusin, the summit aimed to provide leaders a chance to
outline their strategies around a new set of increasingly established and
resilient fundamentals.

Continued
infrastructure development and new real estate regulatory reforms, as well as
Nairobi and Rwanda’s Kigali establishing themselves as regional economic and
innovation hubs, are among the fundamentals.

Other
causes include the government’s continuous focus on launching and completing
affordable housing initiatives, as well as ESG principles guiding investor,
consumer, and occupier behavior.

Meanwhile,
other commercial entities continue to make contributions to the real estate
sector, but all with an emphasis on ESG compliance.

Somaya
Joshua, Absa Bank’s Head of Commercial Property Finance for the Africa Region,
noted that more funding has been offered to Kenya in the real estate sectors of
offices, retail, housing, and industrial.

“We’ve
seen a rise in interest in ESG projects and noteworthy success on qualifying
structures in other regions, where we’ve been able to arrange specific
milestones into transactions that, if achieved, may result in a financing advantage
to clients on a case-by-case basis.”

“Typically,
these advantages come to clients once they fulfill particular targets in terms
of solar capacity, water usage, and socially important issues like
transformation and housing,” she explained.

Future
developments, according to Gerhard Zeelie, Divisional Executive at Nedbank
CIB’s Property Finance Africa, risk becoming irrelevant if they are not ESG
compliant. “Investors in Europe, the United States, and the Middle East
are all focused on ESG, and assets that do not comply with fundamental ESG are
unlikely to be marketable,” he said.

Nedbank
was actively investigating prospects in Kenya and the wider region, according
to Zeelie, with a particular focus in retail and light logistics.

Niyi
Adeleye, Head of Real Estate Finance, Africa Region, Standard Bank, stated that
it is becoming increasingly important to evaluate all aspects of ESG, not just
the environmental aspect.

“From
an African perspective, we believe it is critical to consider all of the
measures’ characteristics (environmental, social, and governance) since they
remain current and relevant as the sector grows across markets,” Mr
Adeleye added.

According
to Mr Adeleye, Standard Bank’s preferred real estate segments must be relevant
to domestic and international capital sources over the medium to long term
horizon, while also improving quality of life, enhancing the creation of social
and commercial real estate infrastructure, and achieving environmental and
social impacts.

The
bank aims to assist in the growth of these markets’ real estate capital
ecosystems.

“We
see interest in the industrial sector, cheap residential sector, corporate
lodging, demand-matched commercial assets, and new asset classes like digital
real estate, student housing, and other comparable alternative segments”
in this regard, he said.

According
to Estate Intel Research Lead Tilda Mwai, a flight to quality and the need for
flexibility are also driving the regional real estate market. These are driving
demand in a variety of industries.

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“In
Nairobi’s office market, for example, despite a supply glut, Grade A offices
have continued to outperform other classes, with certain office parks, such as
the Garden City business park, reporting occupancy rates of up to 90%.”
Kampala and Dar es Salaam are in the same boat. We expect demand for Grade A
offices to increase as a result of the surge of oil and gas occupiers expected
in these areas,” she said.

These
developments are also affecting the logistics industry, with demand for
purpose-built storage increasing over the last five years, prompting global
investors and developers like as GRIT and agile to set its sights on the
region.

Ms
Mwai stated, “We expect this dynamic to continue to play out in the
market.”

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