Stanbic reports rising demand for office space outside Kampala
What you need to know:
- The bulk of office supply in Wakiso and Mukono districts are taken up by small and medium enterprises, start-ups and single-person occupiers, which leaves large companies to compete for the available space
An increase in cost and heightened competition for office space within Kampala has seen “the emergence of a nascent office market in Wakiso and Mukono districts, a real estate market report by Stanbic Properties indicates.
The report, which covers the period between June and December 2022, notes that over-saturation of Kampala’s office space has spurred an office market in the two districts, with clients establishing offices, particularly on the upper floors of mixed-use buildings along major routes.
However, the report notes that the bulk of office supply in the two districts have been taken up by small and medium enterprises, start-ups and single-person occupiers, leaving large companies to compete for the available space.
The report, which presents movements and trends in the real estate property market in the Kampala Metropolitan Area, also noted that demand for office space in Kampala increased by 4 percent, signaling a recovery in the second half of 2022 compared to the same period last year.
The demand was mostly registered among grade A and B properties, which represent high quality buildings and higher income tenants.
Mr Spencer Sabiiti, the Stanbic Properties chief executive officer, said the increase was due to a combination of expansionary or consolidation-led and pent-up demand as tenants sought to realign their business strategies after a lengthy hiatus post-Covid-19.
He also noted that rent for grade A offices is expected to increase due to rising demand resulting from a boom in oil activities.
“Going forward, we anticipate office rent particularly for grade A to remain on an upward trajectory in the next 12 months on the back of tight vacancy, robust demand and limited new supply,” he said.
However, the report notes that rent for grade C buildings is expected to stagnate or continue to decline due to a shift as tenant seek to get office spaces outside Kampala.
During the period, the report noted, rent for grade C offices declined by by 12.5 percent from $8 per square metre per month while that of Grade A and B remained stable at $15 and $11 per square metre per month, respectively.
Rent for office spaces in Wakiso and Mukono, the report indicates, averaged at Shs25,000 per square metre with Mukono Municipality, registering a 12.5 percent annual increase, up from Shs20,000 per square metre per month.
In the retail rental market, the report noted, cost of living remained a key challenge in the second half of 2022 but there was a sense of a return to normalcy with prime locations on the ground and first floors continuing to be keenly sought after.
Impact of shift to online
The shift to online channels due to Covid-19 related spillover effects, the report noted, has come at the expense of physical retail with landlords and retailers in prime malls seeking to find ways through which they can lure consumers back to brick-and-mortar retail stores.
The report also noted that rent in Kampala Residential Market for stand-alone houses in Kololo, Naguru, Nakasero and Bugolobi reduced for both two and three-bedroom apartments due to a demand and supply disequilibrium, which saw supply outstrip demand.