It seemed like a foreign disease or problem when the very first covid19 patients were announced in Wuhan late last year. Little did we know that it would affect every aspect of our lives and change the course of history; characterized by headlines like ‘the Wasted Year’.
The first half of 2020 has been spectacled by adverse and unimaginable punches to all sectors of the economy.
According to The Kenya National Bureau of Statistics Economic survey, Before the COVID-19 pandemic, Kenya’s real estate sector was poised for growth in 2020 as it had begun to show signs of recovery in 2019, with a growth of 5.3%, from the sluggish growth experienced in 2017 and 2018 (which had a growth of 4.1%).
In terms of office space, there has been a 68% decline in office space absorption majorly done by both local and international corporates as per research done by Knight Frank. This trend is expected to decline further with most corporates adopting the work from home initiative or having minimal rotational staff on a work shift basis.
There has also been an increasing trend of landlords and tenants negotiating flexible payment plans where possible, as cash flow is currently greatly affected. This has been observed both in the CBD and its environs with some tenants preferring to vacate their offices due to low revenue to meet their obligations.
The Retail sector is perhaps the most significantly affected in the property market. The resultant decline in footfall to major malls due to various government directives such as curfews and social distancing has resulted in the slowdown of various businesses within retail centers. Tenants dealing in fast-moving consumer goods have however maintained steady traffic from consumers and have also quickly adopted online sales and deliveries to enhance their productivity.
In the hospitality space, travel restrictions have reduced hotel occupancy which has forced some hotels to close down temporarily. The same scenario has been reflected in recreational areas such as bars, clubs, and swimming pools due to the directive restricting public and social gatherings.
In the residential space, there have been a decline in house sales and rental prices, with most tenants feeling the pinch from their employers as a result of reduced revenue mitigation measures such as unpaid leave and pay cuts.
There have been conflicts between landlords and tenants negotiating rent discounts with both trying to reach a balance to meet their existing obligations. Some extreme cases have been witnessed where landlords have disconnected water and power supply to push the tenants to pay-up. Experts like Kai Enders, however, remain positive explaining that “The demand for residential space will not decrease even in the face of the coronavirus crisis – because people will always be in need to have a roof over their heads.”
Opportunistic tenants and speculative property buyers are taking advantage of the situation to try and get a good deal from distressed landlords and property sellers.
The construction space, there has been a delay in the completion of projects due to health and safety concerns as there are always more than 15 people on a construction site and the restriction of movement affecting the delivery of building materials which at times is across counties. A slowdown in building approvals has also been witnessed as public offices such as City Hall remain closed or with minimal staff.
All in all, with the lifting of the cessation of movement directive and return of both domestic and international flights as announced by the President on Monday 6th, the economic curve is expected to change positively.
Author: Eric Njaramba
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