Happy Times for Nairobi Serviced Apartment Investors

Well-funded developers are increasingly pouring big doses of investment into the construction of serviced apartments in Nairobi as they seek to meet the rising demand for such facilities.

Serviced apartments are proving especially popular with multinationals operating in Kenya, whose workforces – largely millennials – are largely capitalising on serviced residences in Nairobi – piling more pressure on the few high-quality apartments available in the city.

This trend is sparking new investments, ranging from five-star hotel-based residences to high-end serviced apartments, in prime locations across the city as investors race to meet the rising demand for non-hotel accommodation among travellers.

Prit Shah, sales manager of Vaal Real Estate, said in an interview that Nairobi serviced apartments have registered a three-year average occupancy of 72 per cent compared to a 52 per cent average for short-stay hotels, mainly due to the flexibility and freedom afforded by these dwellings.

“In terms of a home away from home, a serviced apartment will give you that but a hotel can’t. You get a kitchen; you can cook your meals. With a hotel, it is not possible. So we have seen a very big rise with the occupancy for serviced apartments compared to traditional hotels,” Mr Shah said.

According to Vaal Real Estate, Nairobi boasted 4,582 serviced apartments last year – nearly double the figure in 2013 – with Westlands supplying 37 per cent of these residences due to its vast offering of business, entertainment, and social amenities.

Kilimani followed at 28 per cent, with the city centre and Upper Hill supplying nine and six per cent of Nairobi serviced apartments respectively.

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Some of the big names in the business include Skynest with 250 serviced apartments, Britam (163), Montave (147), Radisson Blu (123) and 9 Oak’s 120 units. Many other ventures are sprouting up.

A recent report by real estate investment firm Cytonn said demand from foreign investors and expatriates – who stay for more than 15 days a visit – raised last year’s uptake of serviced apartments to a record 80 per cent occupancy rate.

“Compared to 2017 serviced apartments performed better in 2018, with the rental yields coming in at 7.4 percent compared to 5.3 percent. Cytonn said. “Occupancy has increased by 8.0 percent to 80 percent solely attributed to a better political climate in 2018.”

According to the company, serviced apartments in Kilimani enjoyed 86 per cent occupancy in 2018 – giving investors the best returns at a 10.9 per cent rental yield, with those at the Westlands/Parklands node offering a 10.6 per cent rental yield and Limuru Road offering a 9.7 per cent rental yield.

Serviced apartments are a more affordable choice compared to short-term hotel stays and a more convenient alternative to long-term rentals.

They allow a lessee to move into a fully furnished house, where they can host guests as they wish while enjoying private occupancy during the agreed-upon period.

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