Serviced apartments in Nairobi recorded a slight improvement with an average rental yield of 7.6% in 2019, 0.2% points higher than the 7.4% recorded in 2018.
The sector recorded a 2.3% increase in monthly charges per SQM, from Kshs 2,742 in 2018 to Kshs 2,806 in 2019, fueled by the continued demand for serviced apartments by both guests on business and leisure travels according to the latest Nairobi Metropolitan Area Serviced Apartments Report 2019.
“We attribute the increase to the growing popularity of the serviced apartments thus prompting an increase in charge rates.
On occupancy, serviced apartments recorded a marginal decline of 0.5% points to 79.3% in 2019 from 79.9% in 2018 and we attribute this to the growing supply in addition to the current tough financial environment in Kenya,” part of the report findings indicate.
Beatrice Mwangi, a Research Analyst at Cytonn stated that “Westlands and 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 its 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.”
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However, 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.
Beatrice says “Its unpopularity is 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.”
On performance per typology, studio units recorded the highest average rental yield of above 10%, attributed to the relatively high occupancy rates at 83.9%, compared to the market average of 79.4%.
As a result, Cytonn Investments notes that when it comes to serviced apartments, the investment opportunity lies in Westlands and Parklands, and Kilimani, which have continued to be best performing nodes with average rental yields of 10.8% and 9.5%, respectively.
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 and Parklands, Upperhill, Nairobi CBD, Kilimani, Lavington and Kileleshwa, Limuru Road and Thika Road).