Rentals hit by delayed oil decisions

Kampala. Occupancy levels of prime residential properties have declined by 5 per cent due to delayed Final Investment Decision (FID) in the oil and gas sector, a real estate report indicates.
According to the Kampala Market update report covering the second half of 2018, released by Knight Frank Uganda in Kampala yesterday, occupancy of prime residential spaces in places such as Kololo, Nakasero and Naguru has dipped because of the continued downsizing of oil companies such as Total and Tullow.

“As soon as the market became aware that the FID was not going to be announced last year, we started seeing leases being called back, early terminations being called in, a lot of properties falling back onto the market,” Ms Judy Rugasira, the Knight Frank managing director, said.
The dropped residential properties in addition to 800 units, which were in the pipeline in 2017, that have not been taken up have caused a relatively saturated market, putting pressure on existing rental rates.

Further dipped
In addition, an increase in new stock of prime residential accommodation of about 150 housing units, 85 per cent of which are apartment blocks, targeting dollar renting tenants such as insurance companies, has further dipped the rental rates.
For instance, Rugasira said, there is downward pressure of approximately 10-15 per cent on rentals across the board in response for example, two bedroom furnished apartments dropping from $2,250 to $1850.
The unfurnished apartments equally dropped from $1,500 to $1,000. There is need for increased demand yet about 150 housing units are expected to come onto the market in the next 12 months.

Knight Frank Uganda has registered a 5per cent year-on year-decline in occupancy rates from 86 per cent to 81 per cent in its prime residential suburbs of Kololo, Nakasero and Naguru.
The decline was attributed to relocation of tenants to other suburbs where rent prices are slightly lower with newer houses along improved infrastructure.

However, occupancy rates in greater Kampala suburbs such as Naalya, Kira, Najjera and Namugongo, the report says rose by 2 per cent from 80 to 82per cent despite an increase in supply of 12 per cent.
The high occupancy rates are on the back-bone of a stable demand for affordable housing amid limited supply for the past five years, the report indicates.
Occupancy rates of commercial Grade A and AB office space increased in Kampala to 86 per cent during the period from 84 per cent in the second half of 2017.

Even then, landlords in a bid to retain tenants increased flexibility of their lease terms on the heels of increasing office space in addition to the awaited impact of government parastatals moving out into their own buildings.
While launching the new Uganda Revenue Authority building in Nakawa, Kampala recently, President Museveni said government would consider building office space for all its agencies with the view of cutting back on rent expenses.

Other segments
Retail occupancy: The onboarding of popular anchors in Acacia and Victoria malls have contributed to the growth of retail properties. Anchors are businesses set up in a building to attract other tenants for example supermarkets.
According to Knight Frank, Victoria mall in Entebbe has the highest footfall per square metre in Uganda with 41 people recorded per square metre per month.

The high number of footfall is attributed to anchors such as Shoprite as well as developed infrastructure which creates convenience for customers.
Industrial occupancy: Industrial property such as warehouses continue to be developed on speculation.
Knight Frank registered a decline in rental rates for warehouses in traditional industrial areas of Ntinda and Luzira among others because of overlapping supply against demand while companies relocated to smaller premises.
The property managers envisage an increase in demand for warehousing space in the next 12 months as government expects growth in the manufacturing sector.

[email protected]