It has been revealed that rental rates in Kampala experienced a noteworthy surge of up to 12% across various property segments in a recent report by Knight Frank, a prominent property management firm. This surge, observed in H2 2023, is attributed to heightened demand propelled by improved economic activities.
The report highlights a substantial increase in rental rates for Grade A and Grade AB office spaces, reaching USD 16.5 and USD 15 per square meter, respectively, indicating a surge of 10% and 12% compared to the previous year.
Residential Sector Dynamics
Prime residential properties also witnessed an uptick, with a 4% rise in average monthly rents for 2-bedroom apartments, and a 1% increase for 3-bedroom apartments on a year-on-year basis. This growth is linked to the introduction of prime apartment units with larger living spaces and enhanced amenities, commanding higher rates in the market.
However, the industrial sector’s rental rates remained stable, ranging between USD 3 to USD 7 per square meter for warehouse space, contingent on factors such as size, location, and others. The demand for industrial space has been buoyed by business growth, particularly in sectors such as automotive, manufacturing, interior design, pest control, pharmaceuticals, and beverages.
Market Trends and Shifts
The report notes a shift in preference among industrial players, with more opting to purchase their premises rather than rent, driven by the need for operational control, long-term growth plans, and the availability of capital. There has been a general improvement in occupancy for Grade A and AB properties, with vacancy rates reducing by 1% during the period under review.
Occupancy and Sector Dynamics
Tenants seeking smaller units under 200sqm accounted for 47% of inquiries, reflecting reduced demand for larger spaces. Core sectors like consultancy services, NGOs, finance, health sciences, and IT remain strong, but newer entrants in the renewable energy sector and lottery companies are emerging.
Property Sales and Tenant Preferences
Client portfolio adjustments are driving increased property sales, with 75% of inquiries prioritizing renting over buying, indicating a preference for flexibility in this dynamic market.
Letting Periods and Location Dynamics
The average selling and letting periods continue to vary, with Grade A offices in prime locations experiencing high demand and shorter letting periods of 3-6 months. Conversely, less prime areas record longer letting periods of over 6 months.
Residential Landscape
In the prime residential sector, standalone houses or houses in a gated community remain the preferred accommodation for senior expatriate staff. However, limited supply of detached houses in prime suburbs has led to increased popularity of secondary residential areas such as Mbuya, Munyonyo, Muyenga, and Bugolobi.
Future Outlook
Looking ahead, commuter towns on the outskirts of Kampala are becoming attractive options for those seeking a quieter suburban lifestyle. The industrial sector’s growth is expected to continue, driven by agro-processing, renewable energy, construction, cold storage, and technology sectors.
