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Property developers seeking higher
yields create lifestyles for Kenyans

NAIROBI (Xinhua) -- A shopping mall, a pre-unit school, office block and a recreational centre are the facilities Joseph Ombogo can access in a few minutes if he walks from his apartment located on the south of Nairobi, Kenya’s capital.

The software developer moved into the estate recently after buying the three-bedroom apartment on mortgage and he totally loves the development.

“If I stretch my left hand, I am in the mall and the right at the school. And if I lift my left leg, I will be in the office and the right in the pub. That is how easy life has become,” he quipped on Sunday.

Ombogo, who works with a software company in Nairobi, plans to enrol his youngest child at the school in January and open his firm at the office block as he readies to go into private employment.

“Since I moved here seven months ago, the idea of working near home has nagged me more often. I don’t think I am ready to struggle with traffic jams anymore while driving to Westlands, every day, not when I am living in such an environment where everything is at one place,” he said.

Ombogo is among a growing number of Nairobi residents living in estates where houses, shopping malls, office blocks and recreation facilities, among others, are all under one roof.

An increasing number of property developers in the east African nation have embraced the projects, therefore, integrating residential, commercial, hospitality and retail aspects of life at the same place as they maximize land use.

The projects, dubbed mixed-use developments (MUD), have helped to create a life, work, play and invest environment for residents as it boosts uptake of constructed units.

The MUDs are taking over the east African nation’s real estate sector amid shrinking demand for office space and rising prices of houses.

Anthony Kuyo, a real estate consultant with Avent Properties in Nairobi, noted that even small developers are going for MUDs.

“In the suburbs, you will not find residential areas alongside big malls but you will get a five storey building with ground and first floors occupied by shops and the upper floors being houses. This helps the developers to get commercial and residential tenants,” said Kuyo.

Cytonn, a Nairobi-based investment firm, observed that there is the emergence in Kenya’s real estate sector of large-scale integrated mixed-use developments, composed of extensive retail malls, grades A office spaces, residential areas with apartments and villas, restaurants, hotel rooms and serviced apartments.

In the capital Nairobi, recent MUDs include Garden City along the Thika Super Highway, Two Rivers along Limuru Road, Le Mac in Westlands, NextGen along Mombasa Road, Greenspan on the east of Nairobi and Crystal Rivers in Athi River.

“The growing popularity of mixed-use developments is mainly driven by higher returns since MUDs perform better, recording an average rental yield of 8.5 percent compared to a market average of 7.5 percent for single-themed developments,” said Cytonn.

The MUDs also enhance operational synergies whereby one sector’s performance, for instance, residential complements the others.

“Building houses creates a ready market for retail services while firms occupying office space are potential clients for hotel, restaurant and conferencing space. As a result, improvement of performance of one theme leads to better performance in other,” said Cytonn.

While more investors are going for the buildings, Kuyo noted that disadvantages include congestion and lack of market in case more than one developer builds the structures in the same area.

“On the east of Nairobi, three malls are in the vicinity of each other having been constructed with residential areas. The shops in some of the malls remain unoccupied, including a supermarket hall, because the customers’ catchment area is the same. The developers simply cannibalized each other,” he said.



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