What is the State of Real Estate in Kampala- Uganda?

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The latest market report for the second half of 2022, published by Stanbic Properties Limited (SPL), highlights a mixed performance in Kampala’s real estate sector. The report examines various factors affecting the residential, retail, office, rental, and hospitality spaces in different parts of the Kampala Metropolitan areas during the last six months of 2022 compared to the same period in 2021.

The report reveals a 4% increase in demand for office space in Kampala City during the second half of 2022. SPL’s Chief Executive, Spencer Sabiiti, notes that leasing activity for Grade A and B office spaces experienced a solid recovery, reaching approximately 12,000 m² during the same period. This recovery is attributed to a combination of expansionary or consolidation-led leasing and pent-up demand as businesses realigned their strategies after the COVID-19 pandemic.

The report also highlights a new trend of hybrid workplace strategies, combining on-site and remote working, focusing more on employee well-being. Rent for Grade C office spaces declined by 12.5% compared to December 2021, while Grade A and B spaces remained stable at USD 15 and USD 11 per m² per month, respectively. SPL anticipates that office rents, particularly for Grade A spaces, will continue to rise due to tight vacancy, robust demand, and limited new supply.

What is the performance of real estate in Uganda?

In response to the oversaturation of Kampala’s office market, a nascent office market is emerging in Wakiso and Mukono, particularly on the upper floors of mixed-use buildings along arterial routes. However, the available office supply in these areas is mostly suitable for small and medium enterprises, start-ups, and single-person occupiers.

The retail market in Kampala faced challenges due to rising costs of living. Headline inflation increased by 10.6% year-on-year in November 2022 compared to 2.6% in November 2021. Despite this, Kampala’s prime retail malls experienced a sense of normalcy, with retailers adopting a “business as usual” attitude. Landlords and retailers in prime malls implemented diverse tactics to attract consumers back to physical stores, including promotional events, thematic retail stores, and extended display areas. Rent for a luxury retail space remained relatively stable since 2021, ranging from USD 22 to 27 per m² per month for lower floors and USD 12 to 16 per m² per month for larger space occupiers.

At what rate does land appreciate in Uganda?

The report expects cautious expansion by retailers and developers in the first half of 2023, with a recovery anticipated in the second half of the year. The development of strip mall retail spaces measuring up to 5,000 m² is projected to increase due to their manageable nature and lower upfront costs. In Wakiso and Mukono, retail rents decreased by 2.1% year-on-year in December 2022, primarily influenced by the high cost of living that affected disposable incomes, especially in Entebbe and Kira municipalities, with a decline of 10%.

In the residential property market, rents for stand-alone houses in Kampala’s upscale suburbs of Kololo, Naguru, Nakasero, and Bugolobi remained stagnant. However, there was an overall 5% annual rent reduction for two and 3-bedroom apartments in Bugolobi, Nakasero, Kololo, and Naguru. This reduction was attributed to a supply-demand imbalance caused by completing previous apartment projects. In Wakiso and Mukono, there was a 10% and 6% annual rental growth for 2 and 3-bedroom apartments, respectively, driven partly by ongoing government road infrastructure projects in these areas.

What is the status of the real estate market in Uganda?

The industrial market in Kampala Metropolitan observed a partial crossover between retail and warehousing properties, indicating versatility in using new warehouses. On the other hand, the hospitality market is expected to add approximately 550 star-rated keys within the next 12 months. Average daily rates for star-rated hotels increased by 13% from USD 115 per night in December 2021 to USD 130 per night in December 2022, resulting in a revenue per room rate of USD 75. The emergence of the Ebola virus Sudan variant in the second half of 2022 hindered the full recovery of the hospitality sector to pre-pandemic levels, leading to a 19% postponement or cancellation of accommodation bookings by tourists. However, occupancy rates increased by 18% from 40% in December 2021 to 58% in December 2022.

In summary

Kampala’s real estate sector experienced a mixed performance in different segments during the second half of 2022. While there was a recovery in the office market, challenges persisted in the retail sector due to the rising cost of living. Residential property rents varied depending on the location and type of property. The industrial market witnessed a crossover between retail and warehousing properties, and the hospitality sector showed signs of recovery despite the impact of the Ebola virus variant.

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