When pitted against residential properties, commercial properties have better cash flow and higher return on investment primarily because commercial properties are divisible into smaller units which can be rented either as a whole or in sections ensuring the return on capital investment as opposed to residential units which traditionally have to be rented out as whole units.
This makes commercial properties a much more attractive alternative for investors who seek a cash flow steady real estate investment option.
Despite the fact that commercial real estate is not the top option for beginner property investors in real estate, there are a lot of opportunities in this industry. Almost every human goes out to buy something from a shop or a mall. Most of the corner shops available in Kenya are still made of ‘mabati’ with very few exceptions emerging from gates, or knocked down walls of sections of homes. Regardless, the structure of convenience shops particularly within residential areas or learning institutions are still very much a work in progress.
As the Real Estate landscape grows in Kenya and as the number of expats and foreign investment increases, there is a major investment in office towers, shopping malls as well as other alternative commercial spaces. It remains cheaper to invest in commercial property off plan as opposed to when the units are complete and market ready.
Commercial real estate with multi units has a higher income potential. Student housing is beginning to be a more attractive alternative as a more structured way of playing the commercial real estate market. Most of the student units are much smaller and are typically located in cities or towns. Access to education is increasing and what this means is that when tertiary institutions are not able to handle accommodation capacity of students, private investors will have to fill in the gap. This is already visible with players such as Kwetu.
As we launch into the second half of 2022, LIKO takes a keen interest in the commercial space and we will bring exclusive conversations around this topic.
Incase you would like private consultation on commercial real estate, kindly reach out to us via +254773027474