Covid-19: Lower Demand For Serviced Apartments eat up rental yields

By Oduor Jacktone

The serviced apartments sector within the Nairobi Metropolitan Area has recorded a 3.6% drop in average rental yields compared to 2019.

This year the NMA recorded an average rental yield of 4.0% down from 7.6 that the sector recorded in the same period.

According to the Nairobi Metropolitan Serviced Apartments 2020 report, this decline has been attributed to declines in monthly charges per Square Metre and drop in occupancy levels.

The decline in monthly charges per SQM dropped from Kshs 2,806 to Kshs 2,445 while occupancy levels fell from 79.4% to 48.0%.

The decline in performance is attributable to subdued demand for hospitality facilities and services due to the COVID-19 pandemic which saw the government ban all international flights and local flights into Mombasa and Nairobi, implement partial lockdown within the NMA among other restrictive measures that were aimed at curbing the spread of the virus.

Some serviced apartments have also been issuing discounts to attract and maintain clients amid a tough economic environment occasioned by reduced disposable income.

According to the report Westlands -Parklands was the best performing node, recording an average rental yield of 6.1%, 2.1% points higher than the 4.0% market average.

This was attributed to the proximity to business nodes such as Kilimani, Nairobi CBD and UpperHill, availability of amenities such as the Westgate Mall and Sarit Centre, ease of accessibility and proximity to the main airports that is Jomo Kenyatta International Airport (JKIA) and Wilson Airport.

Kilimani was the second best performing node with average rental yields of 4.8% compared to market average of 4.0%. This is however a decline of 4.7% points attributed to 31.6% decline in occupancy rates and 20.5% correction in the monthly charges per SQM.

Thika Road (Muthaiga North, Mirema and Garden Estate) recorded the lowest rental yield at 2.0%, and this was attributed to the relatively low charge rates for apartments within the area, given its unpopularity, due to lack of modern and quality serviced apartments in the area, the significant distance from main commercial zones, in addition to security concerns as the area is not mapped within the UN Blue Zone