The value of non-residential building plans approved every year has dropped by a massive 74 per cent in the 10 years as real estate investors diverted billions of shillings into higher-return residential units.
Analysis by the Parliamentary Budget Office which advises lawmakers on the economy and budget, shows that the value of non-residential commercial building plans approved annually fell from Sh115 billion in 2021 to Sh29.8 billion in 2022.
Commercial buildings include warehouses, industrial premises, office spaces, business premises, and garages among others. The actual value of residential building plans approved per year, however, increased by 34 per cent from Sh75.2 billion in 2012 to Sh100.7 billion in 2022.
“The real estate sector has continued to expand to meet the demand of middle-class households. This growth was also supported by the government policy on affordable housing through various schemes and projects under the Big Four Agenda,” said PBO.
While commercial buildings market has registered oversupply in recent years, demand for residential units continues to grow amid an expanding population.
250,000 units
Kenya has a housing deficit of about 250,000 units per year according to government estimates making the market segment lucrative to investors seeking to meet this demand.
The mad rush by investors to set up multi-billion shilling commercial buildings in prime areas such as Upperhill and Westlands, Nairobi in recent years has led to a glut of commercial office spaces in the capital city.
This has seen office rental prices drop even as many office buildings remain empty, which has driven away investors from the market segment.
The retail market has also struggled as the tough economy has forced some major shops and supermarkets to close branches with others entirely exiting the market leaving empty retail spaces. “Consequently, the office market continues to be a tenants’ market because of the oversupply of commercial space in major commercial nodes that is expected to continue in 2022,” said property firm Knight Frank in its update on the Kenya property market for the first half of 2022.
President William Ruto’s government has promised to provide land and bulk infrastructure as well as implement measures to boost investment in the housing sector.
“The government will implement policies and administrative reforms to lower the cost of construction and improve access to affordable housing finance while creating jobs and entrepreneurial opportunities for all Kenyans,” said the Treasury in the draft 2023 Budget Policy Statement.
