Kilimani is located approximately 4 kilometers from Nairobi’s Central business district. It is embedded between Ngong road and Dennis Pritt Road. The neighborhood was a low-density residential area but since 2000 it has become increasingly high density, mixed residential and commercial: both retail and offices. Presently, Kilimani has a rich mix of cultures with a population consisting of individuals from diverse social backgrounds. It is known to host expatriates, high net worth individuals, renowned business persons, politicians, and foreigners alike. The area has a blend of mansionettes, modern apartments, mixed-use developments, and office suites. As Kilimani continues to grow and expand, investment opportunities for real estate developments in the area are on the rise with the key pull social amenities being good infrastructure, hospitals, education institutions, shopping malls and centers, security, entertainment joints, and hotels, cinemas, and bars.
Reasons to invest in Kenya
Land in Kilimani
The land prices in Kilimani per acre have changed from 114M in 2011 to 385M in 2021. The significant change has been brought about by the development of infrastructure and social amenities in the area. Also, an influx of upper-middle-income earners in Kilimani has increased the demand for both residential and commercial developments leading to the high demand for land. Land pricing in Kilimani has experienced unprecedented fluctuations and declines due to the ongoing global pandemic. Investors have been displaying caution and delaying purchasing decisions in the absence of market stability. Some landowners are experiencing liquidity problems and as a result, they have put their land on the market. On the other hand, this has created an opportunity and better bargaining power for investors whose cash flow has not been affected.
“In 2019, the Kilimani area had an oversupply of 6 million square feet of office space, against an 8% demand. Due to the completion of new projects in 2020, the supply rose by 12% resulting in an oversupply of 7.2 million square feet of office space in the area.” Says Mr. Prit Shah, the Sales Manager of VAAL Real Estate. The demand for office space has significantly reduced due to the ongoing global pandemic. Companies and businesses have resulted in working from home. As the covid19 measures ease, people are compelled to work from home to cut down on office overheads. According to the VAAL Real Estate field study, the Kilimani area supplies 15% of the total office area in Nairobi. Some of the factors driving the office space supply in the Kilimani area are the re-invention of office space and the establishment of multinational companies.
Residential housing in Kilimani is dominated by high-rise apartments ranging from 7 to 20 floors. Developers are going for high-rise developments because they are the most efficient way of land utilization. They offer better ventilation, sunlight, and views.
With an average price of 7.1 M and an average monthly rent of 80,000 for the unfurnished rental units, apartments in Kilimani generate an average total return of 13% for the 1 bedroom but 20% if the unit is furnished. The 2 bedrooms have an average price of ksh.10.2M, ksh.102,000 for the unfurnished rental units, and ksh.160,000 for the furnished rental units with an average rental yield of 12% for the unfurnished and 18% for the furnished units.
The 3 bedrooms have an average price of ksh.17M while the 4 bedrooms ksh.22M. The average rent for the unfurnished units for the 3 bedrooms is ksh.140,000 while the 4 bedrooms go for ksh.180,000. Apartments in easily accessible areas and modern amenities such as the Wilma towers by VAAL in Kilimani have higher rental yields compared to the old units
Kilimani has witnessed an increased supply of serviced apartments, accounting for approximately 26% of the total Nairobi market share (VAAL, field study). Serviced apartments are becoming more attractive in the hospitality industry in Kenya to apartment owners because they are cost-effective and also easily convertible to either furnished or unfurnished. According to the field study by VAAL, serviced apartments like the Yaya center apartments, which are easily accessible to the roads and near social amenities like malls reported the highest rental yields. Their occupancy rate was also higher by 10% compared to the older units away from malls and the main roads.
The residential market landscape is expected to remain dynamic with offerings of better quality, flexible payment plans, and modern amenities. Kilimani offers attractive returns with an average rental yield of 10% for unfurnished apartments and 18% for furnished apartments. A future outlook shows that developers will continue to build in Kilimani to cater to the deficit of the studios and the 1 bedroom. The demand for office space is expected to stabilize in the next year or so which will translate to higher occupancy rates. The rental market is expected to do better than the sales market with negligible changes in the pricing.
Given Kilimani’s high land prices, developers will still prefer the high-rise apartments by utilizing the vertical spaces. The land prices in Kilimani are bound to go higher due to the demand for residential apartments for rent and sale. According to the Ministry of Land and Housing, Kenya continues to face a shortage in housing and as more people join the upper-middle class, Kilimani will remain a housing area option for them. Serviced apartments outperform other themes due to their differentiated offerings of the hotel living concept.