Cytonn Real Estate, the development affiliate of Cytonn Investments, released the Nairobi Metropolitan Area (NMA) Serviced Apartments Report 2019 highlighting the performance of serviced apartments within the Nairobi Metropolitan Area in 2019. The report focused on the performance of the theme based on rental yields and occupancy rates with research conducted on seven nodes within the Nairobi Metropolitan Area (Westlands& Parklands, Upperhill, Nairobi CBD, Kilimani, Lavington & Kileleshwa, Limuru Road/Gigiri and Thika Road).
According to the report, serviced apartments recorded improved performance in 2019, with a 0.2% points increase in rental yields to 7.6%, from 7.4% recorded in 2018. This is attributed to a 2.3% increase in monthly charges per SQM, from Kshs 2,742 in 2018 to Kshs 2,806 in 2019, fuelled by the growing popularity of the serviced apartments’ concept. Overall, the sector continues to record good performance supported by the stable political environment and improved security, thus making Nairobi an ideal destination for both business and holiday travellers.
Westlands & Parklands area was the best performing node, recording average rental yields of 10.8%, 3.2% point higher than the 7.6% market average, attributed to their proximity to business nodes such as Kilimani and Upperhill, availability of amenities such as the Westgate Mall and Sarit Centre, ease of accessibility and proximity to the main airports that is Jomo Kenyatta International Airport (JKIA) and Wilson Airport. On the other hand, Thika Road node (Muthaiga North, Mirema and Garden Estate) recorded the lowest rental yield at 4.0%, attributed to the relatively low charge rates for serviced apartments within the area, given its unpopularity due to lack of modern and quality serviced apartments, the significant distance from main commercial zones, in addition to not being mapped within the UN Blue Zone thus not attractive to expatriates due to security concerns.
The summary of performance of the nodes within NMA was as shown below;
|
Summary of Performance of Serviced Apartments per Node in 2019 |
|
|
Node |
Rental Yield 2019 |
|
Westlands& Parklands |
10.8% |
|
Kilimani |
9.5% |
|
Limuru Road/Gigiri |
9.4% |
|
Kileleshwa& Lavington |
8.2% |
|
Upperhill |
6.0% |
|
Nairobi CBD |
5.1% |
|
Thika Road |
4.0% |
|
Average |
7.6% |
|
High |
10.8% |
|
Low |
4.0% |
Source: Cytonn Research 2019
The serviced apartments concept has gained popularity in the recent years as more leisure travellers find that these apartments are easily available and offer a credible and cost-effective alternative. They are especially economical for longer stays and for group and family travel. The main advantages of serviced apartments include; (i) they have utilities that enable freedom and comfort thus offering a homely feel, (ii) offer more space than a traditional hotel room, (iii) substantially cheaper than a hotel room when staying for a longer period of time, (iv) offers the ease of integration as they are located within or in close proximity to other residential developments, (v) they resemble the culture of the specific area, and (vi) the easy conversion, as serviced apartments can easily be converted into furnished or normal apartments in the case where the former is not performing well.
The investment opportunity lies in Westlands/Parklands and Kilimani, which were the best performing nodes with average rental yields of 10.8% and 9.5%, respectively in 2019.
The outlook for serviced apartments theme is positive mainly due to attractive returns recording relatively high rental yield at 7.6%, 0.2% points higher than 7.4% recorded in 2018, and 2.8% points higher than 4.8% for the residential sector (apartments) according to Cytonn Research. Given the growing popularity of the concept, improved security and political stability, serviced apartments are expected to continue recording improved performance going forward.
Appendix
The Summary of performance was as shown below:
|
All values in Kshs unless stated otherwise |
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|
2019 Summary of Performance per Node |
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|
Unit Sizes (SQM) |
Monthly Charges per Unit (Kshs) |
||||||||||||
|
Node |
Studio |
1 bed |
2 bed |
3 bed |
Studio |
1 Bed |
2 Bed |
3 Bed |
Occupancy 2019 |
Monthly Charge per SQM 2019 |
Devt Cost per SQM(Kshs) |
Rental Yield 2019 |
|
|
Westlands& Parklands |
33 |
85 |
115 |
177 |
249,700 |
279,018 |
319,529 |
337,408 |
80.8% |
3,884 |
209,902 |
10.8% |
|
|
Kilimani |
39 |
69 |
110 |
149 |
160,000 |
221,167 |
362,813 |
418,000 |
80.0% |
3,353 |
202,662 |
9.5% |
|
|
Limuru Road/Gigiri |
51 |
137 |
187,400 |
197,184 |
260,500 |
300,000 |
88.2% |
3,430 |
231,715 |
9.4% |
|||
|
Kileleshwa& Lavington |
38 |
70 |
134 |
140,000 |
193,333 |
268,990 |
474,000 |
82.4% |
2,845 |
206,132 |
8.2% |
||
|
Upperhill |
75 |
110 |
156 |
195,000 |
304,600 |
368,333 |
67.8% |
2,577 |
209,902 |
6.0% |
|||
|
Nairobi CBD |
51 |
90 |
115 |
137 |
130,250 |
170,500 |
241,786 |
331,250 |
72.0% |
2,230 |
224,571 |
5.1% |
|
|
Thika Road |
70 |
100 |
144 |
110,000 |
131,667 |
155,000 |
84.4% |
1,321 |
200,757 |
4.0% |
|||
|
Average |
40 |
73 |
117 |
153 |
173,470 |
195,172 |
269,983 |
340,570 |
79.4% |
2,806 |
212,234 |
7.6% |
|
|
High |
51 |
90 |
137 |
177 |
249,700 |
279,018 |
362,813 |
474,000 |
88.2% |
3,884 |
231,715 |
10.8% |
|
|
Low |
33 |
51 |
100 |
137 |
130,250 |
110,000 |
131,667 |
155,000 |
67.8% |
1,321 |
200,757 |
4.0% |
|
Source: Cytonn Research 2019
