Prime residential properties to remain empty, says report

By Christine Kasemiire

Kampala- Owners of prime residential areas in Kampala suburbs such as Nakasero, Kololo, Naguru and Bugolobi might take longer to realise profits as supply tops demand.

According to a Knight Frank report of the first half of 2018, supply of apartments in prime residential areas could overwhelm demand in the next two years.

“We anticipate the supply of residential apartments in the prime residential suburbs of Nakasero, Kololo, Naguru and Bugolobi to exceed demand over the next 24 months,” the report reads in part, pointing to the possibility that there might be a “redundancy of properties”

“Redundancies [unoccupied properties] will only be relieved if existing and newly completed developments are absorbed by the market over the next six months,” the report says.

The report indicates an increased supply of 10 per cent mainly due to completion of pipeline projects in prime residential suburbs in the second half of 2017. The projects have led to an increase of 5 per cent in occupancy levels on an annual basis.

Demand in the secondary residential suburbs such Kira, Najjera, Kyanja, Namugongo and Naalya increased by 9 per cent attributed to proliferation of newly constructed properties.

Many of the properties cost between Shs100m and Shs200m and between Shs400,000 and Shs800,000 for selling and rental value per month, respectively.

An estimate of 80 per cent of the new apartments in secondary residential suburbs on the market were sold in the first half of 2018.

Meanwhile, occupancy rates of grade prime office space have increased to 92 per cent in the last 12 months. Grade B office space has registered a decline of about 7 per cent from 85 per cent last year to 78 per cent.
The drop was attributed to the relocation of organisations to office spaces that have better amenities and construction of their own buildings.

Government organisations have been the biggest culprits of the reform. Last year, Public Procurement and Disposal Authority (PPDA), Uganda Road Fund and Capital Markets Authority broke ground to construction their own office.

Others such as Insurance Regulatory Authority, Uganda Investment Authority, among others expect to launch their offices next year.

Approximately 65,000 square metres of prime office space is expected to be added on the market in the next 12 months with at least 50 per cent of this being built for owner occupation by organisations such as law firms and government parastatals.

Rent asking rates, according to the report, have also reduced by 20 per cent to attract tenants.

Mr Frank Karuhanga, the Uganda National Association of Building and Civil Engineering Contractors chairman, told Daily Monitor yesterday that construction sector was increasingly becoming unproductive because of government’s delay procure bids on time.

Increased activity

Meanwhile the report registered a 10 per cent decline in demand for industrial space on account of a slowdown in economic activity.
Some corporate organisations and private businesses, the report says, have been downsizing, and opting to take up smaller and or cheaper warehouses.
Additionally, the energy sector related investments such as storage facilities and logistics built on speculation of the boom of the oil and gas sector are yet to materialise.

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