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12 June, 2017
Real Estate

Cytonn?s Nairobi Metropolitan Area Land Report 2017

The report focuses on the performance of land in the Nairobi Metropolitan Area between 2011 and 2016. It is based on research conducted in 18 suburbs and 11 satellite towns in the Nairobi Metropolitan Area. Investment grade real estate and investment grade land refers to the investment in real estate and land based on market research and market fundamentals, as opposed to speculative investments. Land prices had positive growth rates across all areas in the Nairobi Metropolitan Area, growing with a 5-year Compounded Annual Growth Rate (?CAGR?) of 19.4%, and a 5-year price change of 2.5x over the same period.

Below is the land price appreciation summary, as covered in the report:

  • Commercial zones such as Kilimani, Upperhill and Westlands recorded the highest capital appreciation, increasing with a 5-year CAGR of 24.3%,
  • Site and service schemes in Satellite towns such as in Athi River, Syokimau, Mlolongo recorded a 5-year CAGR of 20.4%
  • Un-serviced land in Satellite towns such as Ongata Rongai, Ruaka and Athi River recorded a 5-year CAGR of 20.0%,
  • High rise residential areas such as Ridgeways, Kileleshwa and Kilimani recorded a 5-year CAGR of 17.7%, and,
  • Low rise residential areas such as Spring Valley, Kitisuru and Karen recorded a 5-year CAGR of 14.6%.

Table 1: Capital Appreciation for Nairobi Metropolitan Area

All values in Kshs millions, unless stated otherwise

Summary of Capital Appreciation - Nairobi Metropolitan Area

Location

2011 Price*

2016 Price*

5-YR CAGR

Nairobi Suburbs - Commercial Areas

156

458

24.3%

Satellite Towns - Site and Service Schemes

6

15

20.4%

Satellite Towns - Un-serviced Land

9

21

20.0%

Nairobi Suburbs - High Rise Residential Areas

54

120

17.7%

Nairobi Suburbs - Low Rise Residential Areas

56

106

14.6%

Average

 

 

19.4%

·  Average land prices  in Nairobi Metropolitan Area grew by a 5-year CAGR of 19.4% between 2011 and 2016

·  Areas zoned for commercial use recorded a 5-year CAGR of 24.3%, compared to residential areas that recorded a 5-year CAGR of 16.2%, indicating increased demand for commercial developments as compared to residential developments

*Asking prices of land are per acre. Source: Cytonn Research

Table 2:  Capital Appreciation for Commercial Areas

All values in Kshs millions, unless stated otherwise

Summary of Capital Appreciation - Commercial Areas

Location

2011 Price*

2016 Price*

5-YR CAGR

Kilimani

114

360

25.8%

Riverside

116

362

25.6%

Westlands

150

453

24.7%

CBD

200

600

24.6%

Upper Hill

200

512

20.7%

Average

24.3%

·  The land prices in commercial zones recorded a 5-year CAGR of 24.3%, attributable to the high plot ratios allowing for densification of developments,  hence high demand due to attractive returns on investment after development

·  Kilimani experienced the highest capital appreciation, growing at a 5-year CAGR of 25.8% between 2011 and 2016,  attributable to demand by the middle class and convenience associated with its ample supply of facilities and  amenities

*Asking prices of land are per acre. Source: Cytonn Research

Table 3: Capital Appreciation for High Rise Residential Areas

All values in Kshs millions, unless stated otherwise

Summary of Capital Appreciation - High Rise Residential Areas

Location

2011 Price*

 2016 Price*

5-YR CAGR

Dagoretti

28

95

28.0%

Ridgeways

24

62

21.0%

Kilimani Residential

114

280

19.6%

Githurai

21

45

16.8%

Embakasi

33

69

16.2%

Kileleshwa

149

286

13.9%

Kasarani

32

60

13.3%

Kahawa

33

60

12.7%

Average

17.7%

·  The land prices in high rise residential areas recorded a 5-year CAGR of 17.7%, attributable to the premium associated with high plot ratios allowing for land use maximisation

·  Dagoretti and Ridgeways recorded the highest 5-year CAGR at 28.0% and 21.0%, respectively. This is attributable to higher plot ratios resulting in higher return on investment

*Asking prices of land are per acre. Source: Cytonn Research

Table 4: Capital Appreciation for Low Rise Residential Areas

All values in Kshs millions, unless stated otherwise

Summary of Capital Appreciation - Low Rise Residential Areas

Location

2011 Price*

 2016 Price*

5-YR CAGR

Spring Valley

64

147

18.0%

Kitisuru

32

70

16.9%

Runda

33

67

15.0%

Nyari

54

109

14.9%

Karen

25

46

13.0%

Old  Muthaiga

125

197

9.6%

Average

14.6%

·  The land prices in areas allowed for low rise residential houses recorded a 5-year CAGR of 14.6% between 2011 and 2016

·  This is lower than other areas i.e. zoned for high rise residential and commercial zones, which can be associated to  limiting plot ratios on land, reducing the return on investment on land

*Asking prices of land are per acre. Source: Cytonn Research

Table 5: Capital Appreciation for Satellite Towns

All values in Kshs millions, unless stated otherwise

Summary of Capital Appreciation - Satellite Towns

Location

2011 Price*

 2016 Price*

5-YR CAGR

Ongata Rongai

2

10

33.2%

Limuru

4

13

25.0%

Juja

3

9

22.4%

Ngong

7

14

16.0%

Ruaka

40

83

15.7%

Athi River

2

4

13.9%

Utawala

6

11

13.7%

Average

20.0%

·  The land prices in Nairobi satellite towns recorded a 5-year CAGR of 20.0% due to improved infrastructure opening up the areas for development

·  Ongata Rongai, Limuru and Juja all recorded 5-year CAGR of above 20%, indicating relatively higher infrastructure provision than in the other Satellite towns, for which they demanded a premium

*Asking Prices of land are per acre. Source: Cytonn Research

Table 6: Capital Appreciation for Site and Service Schemes

All values in Kshs millions, unless stated otherwise

Summary of Capital Appreciation - Site and Service Schemes

Location

*Price in 2011

*Price in 2016

5-YR CAGR

Athi River

3

13

34.0%

Syokimau-Mlolongo

3

12

30.0%

Ruiru

7

19

23.9%

Ongata Rongai

7

19

21.8%

Ngong

11

19

12.7%

Thika

5

8

10.5%

Ruai

8

13

10.2%

Average

20.4%

·  Site and service schemes recorded a 5-year CAGR of 20.4%, attributable to the value add attributable to the amenities provided

*Asking Prices of land are per acre. Source: Cytonn Research

Table 7: Investment Grade Land Opportunities

Areas Expected to Benefit from Upcoming Infrastructural Development

Infrastructural Developments

Areas to Benefit

Western Bypass

Kikuyu, Kabete, Tigoni, Wangige  and Dagorreti

Outer Ring Road Upgrade

Kasarani, Donholm, Embakasi and Buruburu

Relaxed Zoning Regulations

Spring Valley, Kilimani, Parklands & Ngara

Trunk Sewer Lines

Ruiru

·  From the analysis, the land price change in the Nairobi Metropolitan area is affected mainly by planning regulations and trunk infrastructure such as sewer lines and road network in the respective areas

·  Therefore, areas likely to experience a CAGR above 25% in the next 5-years are Ruiru, Kikuyu, Kabete and Dagoretti, among others, due to planned infrastructure developments as shown above

Source: Cytonn Research

For more information, please contact us at:
Cytonn Investments Management Limited, 3rd Floor, Liaison House, State House Avenue
P.O. Box 20695 ? 00200, Nairobi, Kenya.

info@cytonn.com || rdo@cytonn.com | +254 (0) 20 4400420 | +254709 101 00

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