H2 2020 Kampala Market Performance Review and H1 2021 Outlook - January 2021
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1 2 3
Economic Update Sector by sector H1 2021 Outlook
Analysis
H2 2020 Kampala Market
knightfrank.com/research
Performance Review and
H1 2021 Outlook.
January 2021
The Arena Mall, Nsambya.
KAMPALA MARKET UPDATE H2 2020
Key Insights
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The Central Bank Rate reduced to 7% in June 2020
Supply of residential apartment units increased by 6%
2ƃFHVSDFHYDFDQF\LQFUHDVHGE\
Prime residential occupancy declined by 8%
Grade A passing rents declined by 7%
Cover Image: The Arena Mall, Nsambya. Space available to let. Turkish Fashion brand, LC Waikiki, opens at Acacia Mall.
ECONOMIC OVERVIEW
The Economy However, in Q3 2020, different real sector
indicators recorded improvements according to
Uganda’s economy remained subdued against the Bank of Uganda. This was largely attributed to
backdrop of strict lockdown measures imposed easing of the lockdown restrictions which started
in March 2020. According to the Uganda Bureau in June. The month-on-month Composite Index
of Statistics (UBOS), GDP growth was recorded at of Economic Activity (CIEA) increased by 5.3% in According to the Uganda
2.9% for FY2019/20, largely due to the mitigation June and 3.5 % in July, against the backdrop of a Bureau of Statistics (UBOS),
strategies that were undertaken to curb the 3.0% and 3.6% decline in the months of May and GDP growth was recorded at
April respectively, indicating an improvement
spread of the virus. Growth is further anticipated 2.9% for FY2019/20
to remain under pressure until FY2022/23 due in economic activity relative to the contraction
to disruptions on the economy caused by the registered in Q2 2020.
pandemic. The economic slowdown in 2020
resulted in revenue deficits and an increase in The Business tendency indicator greatly
expenditure to deal with health interventions improved in the months of September, October,
in response to the pandemic and in an attempt and November 2020, signifying an increase in
to contain the transmission of the virus. As a business confidence and optimism for the future
result, public debt stock is projected to increase as the economy slowly continues to recover
to 49.9% of GDP in FY 2020/2021 from 41.2% in towards pre-COVID-19 times.
FY 2019/2020.
2
KAMPALA MARKET UPDATE H2 2020
Ministry of Health (MOH) reported a surge in
the number of COVID-19 cases and deaths in
Figure 1.0: Business Tendency Indicator +ZLWKRYHU RIWKHWRWDOFRQƁUPHG
2020 cases reported in the last four months of
the year, largely due to the election campaigns
70.0
and preparations for the festive season. The
60.0 recent approval of several vaccines provides
hope for a quicker return to normalcy, although
50.0
there remains a long and uncertain lag before
40.0
vaccine acquisition and deployment may be
Points
achieved.
30.0
20.0
As of 31st December 2020, the country had
10.0
recorded 35,511 cases and 265 deaths, with
the highest daily case tally (1,199) recorded on
0.0
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 8th December 2020. Kampala is currently the
Years
District with the highest number of COVID-19
Business Tendency Indicator cases.
Source: Bank of Uganda The government instituted various
interventions with the aim of mitigating the
VRFLDODQGHFRQRPLFHƀHFWVRIWKHSDQGHPLFRQ
the economy, key of which included increasing
access to credit through the provision of
Figure 2.0: Uganda Covid-19 Cases and Deaths from Jan to Dec 2020
DƀRUGDEOHORDQVZLWKUHGXFHGLQWHUHVWUDWHV
for small, medium, and large-scale enterprises
16000 100
through Uganda Development Bank. Others
90
14000
included provision of seed capital to organized
80
12000 special interest groups, rolling out of the Social
70
10000 Assistance Grant for the Elderly to cater for
60
relief food, expediting the payment of arrears
Deaths
Cases
8000 50
RZHGE\*RYHUQPHQWWRSULYDWHVHFWRUƁUP
40
6000
30
DQGGLƀHUHQWIRUPVRIORDQUHVWUXFWXULQJWR
4000
20
encourage spending and re-ignite business
2000
10 activity
0 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Months
Cases (35,511) Deaths (265)
As of 31st December 2020, the
country had recorded 35,511
Source: WHO/MOH
cases and 265 deaths
Figure 3.0: The Money Market Dec-19 to Dec-20 Money Market
25.0
Month-on-month commercial bank lending
20.0 rates on shilling denominated loans that had
reduced at the start of the year, from 19.88%
15.0
% Rates
in January 2020 to 17.73% in April 2020
10.0 increased in July 2020 to 20.93%. However,
since August, the lending rates were relatively
5.0
stable, averaging at 19.5 % between August and
0.0 November 2020. The Central Bank Rate was
Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20
maintained at 7% from June 2020 to sustain
Months
OLTXLGLW\VXSSRUWWRVXSHUYLVHGƁQDQFLDO
Lending Rates 91-Day Treasury Bill Yield 364-Day Treasury Bill Yield Central Bank Rate
institutions amid the slow economic conditions
Source: Bank of Uganda
FDXVHGE\WKHHƀHFWVRI&29,'
3
KAMPALA MARKET UPDATE H2 2020
Above all, 91 days government securities, which
had declined for the larger part of H2 2020
Figure 4.0: Headline Index and Annual Inflation Developments:
increased to 8.3% for the year ended December
Dec-19 to Dec-20
2020 from 7.6% recorded for the year ended
November 2020, while yields on long term (364 10.0
days) treasury bills remained relatively stable in 8.0
the quarter to October but increased to 13.5% in 6.0
December 2020 from 12.8% in November 2020. 4.0
The decline in yields for short-term securities was 2.0
% Change
attributed to subdued loan demand by the private 0.0
Index
sector and increased appetite for less risky and -2.0
liquid assets due to negative sentiments caused by -4.0
COVID-19. -6.0
-8.0
-10.0
Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20
7KHDQQXDOKHDGOLQHLQƂDWLRQ Months
rate was recorded at 3.6% for Headline Index Headline Core Foodcrops and Related items Energy, Fuel and Utilities
the year ended December Source: Source: Bank of Uganda
2020 compared to the 3.7%
registered for the year ended
November 2020
Figure 5.0: Exchange Rates: Dec-2019 to Dec-20
3,850 2
Inflation
1.5
3,800
Annual appr./dep. Rate(%)
T
1
Period Average (US$)
he annual headline inflation rate was
3,750
recorded at 3.6% for the year ended 0.5
December 2020 compared to the 3.7% registered
0
3,700
for the year ended November 2020. This was
-0.5
attributed to a decline in the annual Energy
3,650
Fuel and Utilities (EFU) inflation that decreased -1
to -4.6 % in December 2020 relative to -1.4% 3,600 -1.5
Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20
registered for the year ended November 2020.
Months
Annual Core Inflation which had dropped by
Period Average Annual Appreciation/Depreciation Rate
0.5% in November to 5.8% increased to 5.9% for
the year ended December 2020. Food crops and Source: Bank Of Uganda
related items inflation was recorded at -7.0% for
the year ended December 2020.
Exchange Rate
The Uganda shilling recorded relative stability
against the USD in the second half of 2020,
appreciating by 1.2% month-on-month in
December 2020 to an average rate of 3,666.5 to
USD. This was attributed to subdued aggregate
demand, and a weaker USD against other
international currencies. According to Bank of
Uganda, the exchange rate is likely to remain
stable on account of matched corporate activity;
and a projected USD depreciation against other
reserve currencies.
Shoprite, Acacia Mall.
4
KAMPALA MARKET UPDATE H2 2020
The Real
2020 as compared to the same period last year, sales turnover post lockdown compared to
mainly attributable to landlord interventions pre-COVID-19 levels largely due to redirected
Estate Sector
on agreements and the opening of LC Waikiki demand as a result of the international travel
Uganda. ban that lasted over 6 months until October
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Average year-on-year footfall reduced by 30% in favoring international brands.
Retail H2 2020 as compared to H2-2019. This is directly
The period under review saw spas and salons FRUUHODWHGWRWKHHƀHFWVRIWKHRQJRLQJFXUIHZDQG The lockdown resulted in the increased use of
being allowed to trade from July onwards. FRQWLQXHGUHVWULFWLRQVRQVSHFLƁFUHWDLOVHJPHQWV online retail shopping platforms by consumers,
Cinemas and gyms were opened up from such as bars and nightclubs still under lockdown. and e-commerce retailers saw trade spike
mid-November albeit with restrictive standard However, monthly averages showed major VLJQLƁFDQWO\GXULQJWKHORFNGRZQSHULRG7KLV
operating procedures emanating from the improvements, recording an 8% month-on-month consumer transition to online retail however, was
COVID-19 pandemic, and curfew from 9pm to 5am average growth in H2-2020, with July registering WHPSRUDU\DQGVLJQLƁFDQWO\GHFOLQHGDIWHUHDVLQJ
still being enforced. The impact of these measures the highest record in the half year at 22% as up of lockdown measures. Instead, consumers
on retail as a whole, is that trade in Uganda is still consumers got to grips with the new normal. gravitated back to bricks and mortar shopping.
under severe pressure, and is further impacted This trend was noticed across several markets
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by lack of consumer spending on the back of a internationally and has put an end to the debate
to the lockdown measures imposed to curb the
slowdown in the economy. That said, retail activity on online trading taking over from bricks and
spread of the COVID-19 virus. Several formal retail
saw a sharper fall than workplace activity in the mortar. The theory now is that online trade will
stores were closed for the months of April and May
ƁUVWKDOIRIWKH\HDURQWKHEDFNRIVXSSO\FKDLQ eventually end up being a support to traditional
and some up until the end of the year. Shoppers
disruptions and extremely restrictive government retail, accounting for approximately 20% of all
were forced to change shopping patterns due to
measures adopted to curb the spread of COVID-19. retail trade.
curfew and restrictions on travel, so they opted
for neighborhood shopping centers as compared
However, average turnover, footfall and occupancy
to the formal shopping centers. Year-on-year
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WXUQRYHUƁJXUHVLQ+UHGXFHGRQDYHUDJH
the second half of the year, demonstrating,
by 20%.
the sector’s resilience and increased demand
for formal retail in Uganda. The pandemic has
However, month-on-month improvements were
prompted new innovative thinking around the
recorded as restrictions on lockdown were eased
Average year-on-year footfall
retail sector moving forward in regards to space
during the year, with December 2020 registering reduced by 30% in H2 2020 as
utilization, rent models and interactions with
the highest monthly growth in turnover due to compared to H2-2019
customers. Hand sanitizing, social distancing,
increased shopping in preparation for the festive
wearing of masks and temperature checks are
season and the Knight Frank Black Friday Sales
now accepted as part of the “new normal’’. Several
which was run in all our managed Malls in the last
landlords considered incentives for their tenants
week of November. The sale this year was held
and review of lease agreements in order to attract
over 5 days and not the traditional one day so as
new tenants, and retain existing ones. Some of the
to take into account social distancing guidelines.
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A few branded fashion retailers improved their
timeframes especially for the months during
and after the lockdown, deferred payments and
rent-free months to tenants on a case-by-case Figure 6.0: Annual and Monthly Growth in Footfall in Knight Frank
basis, among others such as purely turnover based Managed Malls
rentals.
80%
60%
The sector registered expansions and new entrants
into the market in 2020, with Carrefour growing its 40%
presence in Uganda (Metroplex Mall store being 20%
% Change in footfall
ƁWWHGLQWKLVSHULRGDQGGXHWRRSHQLQ)HEUXDU\
0%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2021), Shoprite set to expand its store number
-20%
to 6 with the anticipated opening of the Arena
-40%
Mall in 2021, and LC Waikiki, a Turkish based
international fashion chain opening its 2000m² -60%
$IULFDƂDJVKLSVWRUHDW$FDFLD0DOOLQ'HFHPEHU -80%
2020. -100%
Months
Annual Change 2020 Vs 2019 2020 Monthly Change
Year-on-year retail occupancy remained
relatively stable with a slight increase in H2- Source: Knight Frank Research
5
KAMPALA MARKET UPDATE H2 2020
corporate organizations.
The Growth Year-on-Year
Table 1: Year-on-Year and Month-on-Month
and Month-on-Month Turnover Several re-occupancy strategies were adopted
of Turnover
Growth in Knight
in Knight Frank
Frank Managed
Managed Supermarkets
Supermarkets including 2-meter distancing between desks
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FRQƁJXUDWLRQVDQGVWDƀFDSDFLW\OHYHOVLQVHYHUDO
Month Annual Change Monthly Change
RƃFHVUHJXODWHGDFFHVV RQHZD\WUDƃFƂRZV
(2020 VS 2019) (2020)
WRVSHFLƁHGDUHDVZLWKLQWKHRƃFHWHPSHUDWXUH
July -21% -19% testing, hand sanitizing, increased cleaning
frequency, disinfecting and safety signage display
August -24% 2%
DWWKHZRUNSODFH6KLIWZRUNLQRƃFHVZDVDGRSWHG
by several organizations due to the inability to
September -32% 21%
DFFRPPRGDWHDOOVWDƀPHPEHUVLQFXUUHQWRƃFH
October -22% -12% premises, while adhering to set SOPs. The binary
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November -15% -0.4% become the preferred solution for many and will
most likely carry on for the foreseeable future.
December -8% 111%
Similarly, several corporate organisations were
Source: Knight Frank Research
forced to rethink their business strategies to
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their space requirements, relocations, lease
Table 2: Prime Retail Rental Rates in Kampala reviews and renegotiations, and postponing
(COVID-19 Impacted) occupancy plans, among others, which had a great
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review.
Size Rates
KAMPALA MARKET UPDATE H2 2020
rent concessions. In other instances, these
conversations wound up in vacancies across
Figure 7.0: Monthly Average Net Rent (US$) per square meter in
various buildings. As a result, our outlook is Kampala's Prime Office Market.
that prime rentals (which had already seen a
correction in 2019) will likely remain stable or 18 88
fall depending on the bargaining strength of 16 86
HDFKWHQDQWDVODQGORUGVVWULYHWRƁOOFXUUHQW 14
Monthly Net Rent per sqm(US$)
84
vacancies resulting from relocations and 12
Occupancy Rate(%)
82
downsizing. 10
80
8
0RVWRIWKHQHZRƃFHVWRFNDUHGHYHORSPHQWV 78
6
which had started in 2018-2019, with limited if 76
4
any new construction that commenced in 2020
2 74
due to a halt in construction activity during the
0 72
lock down, causing delays and postponement in 2017 2018 2019 2020
Years
delivery. Most of the new developments coming
up are for owner occupation with the majority
Grade A Grade AB Occupancy
23% Vacancy rate in prime commercial offices
ranging between 1,500-4,000sq.m while the 7% Decline in rents for Grade A offices
bigger pipeline developments are for both owner Source: Knight Frank Research
occupation and investment purposes.
4
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7
KAMPALA MARKET UPDATE H2 2020
6HFWLRQDO2ƃFH6SDFH rules as laid out by the Body Corporate. Unlike accommodation which as many have described it
A Growing Trend Freehold ownership, sectional title unit owners resulted in “cabin fever”. The need for living and
in Kampala’s Prime pay a monthly fee including maintenance of the green space which was not as important pre-Covid
&RPPHUFLDO2ƃFH6HFWRU common property, property manager’ s fees and, ZDVFHUWDLQO\DPSOLƁHGGXULQJWKHORFNGRZQ
utility bills required for the common property. These shifting trends will shape the Kampala
With the current uncertainty caused by COVID-19,
housing market outlook over the next 18 months.
developers have been inquiring if now is the right
time to invest. The cyclical nature of the real estate
development process has proved that there is no
Residential H2 2020 left landlords and tenants in uncharted
waters, as both parties were forced to renegotiate
such thing as ‘the right time’, but rather how bold
7KHGHƁQLWLRQRIKRPHWRRNRQDZKROH their terms, from rent discounts to deferrals in
DQGƂH[LEOHRQHLVWRFHDVHLQYHVWPHQWRSSRUWXQLWLHV
new meaning in 2020 when lockdown was a rapid sequence of events over a short period
in the market.
announced. Overnight, homes became schools, RIWLPH,QWKHƁUVWTXDUWHURIWKH\HDUIRUHLJQ
RƃFHVFKXUFKHVVWRUHVDQGPDQ\RWKHUXVHV nationals, who form a large part of the tenant
One of the new opportunities currently in Kampala’s
VLQFHSHRSOHZHUHIRUFHGLQWRFRQƁQHPHQW market repatriated to their home countries at
SULPHFRPPHUFLDORƃFHVHFWRULVWKHRZQHUVKLSRI
and self-isolation. This led to a rethink by the announcement of the lockdown, resulting
VHFWLRQDORƃFHVSDFH,QYHVWRUVVHHNLQJORQJWHUP
many occupiers on the type of home they LQDGYHUVHHƀHFWVRQRFFXSDQF\DQGUHQW
returns, but unable to or uncertain of whether or
want and provoked questions and decisions levels. Average occupancy in prime residential
not to develop themselves, are opting to buy on a
between owning or renting, apartments or apartments dropped by 8% year-on-year in H2
sectional title basis for owner occupation or as an
detached houses, and the importance of green 2020 as compared to H2 2019.
investment.
space for families who found themselves in
6DOHRIRƃFHVRQDVHFWLRQDOEDVLVLVDUHODWLYHO\QHZ
concept in Uganda but steadily gaining popularity.
The current practice is that a portion of the space Figure 8.0: Monthly Net Rents($) for Furnished Apartments in Kampala's
is sold per square meter while the residual portion Prime Residential Areas
is leased out. Currently, a typical example of such
3500
a development is Lugogo One, a nearly completed
development on Lugogo By-Pass. 3000
2500
2000
1500
1000
500
0
2017 2018 2019 2020
2-Bed, 3-Bed,
Source: Knight Frank Research
Knight Frank recorded a 6% year on year already oversupplied prime residential market,
increase in supply of apartment units coming WKDWKDGEHHQDƀHFWHGE\WKHHƀHFWVRI&29,'
Lugogo One, Lugogo bypass. Space available to let. onto the market particularly in the prime As a result, overall average prime rental rates for
residential areas of Kololo, Nakasero, Bukoto, furnished apartments declined by 4% in H2 2020.
Commonly known as a condominium title for
Bugolobi, and Naguru. The increase in stock Rental yields in prime residential suburbs averaged
residential properties, a sectional title describes
forced some landlords to discount their between 8% - 10%.
separate ownership of units or sections within a
rents in order to remain competitive in an
commercial complex or development. When one
buys into a sectional title building, they purchase
a section or sections and an undivided share of the Table 3: Average Rents and Selling Prices of Residential
common property, collectively known as ‘units’. Units in Kampala
Sectional title developments are governed by a Body Description Rent (Furnished) Sale
Corporate who are responsible for managing the
2-Bedroom Apartments $1,650 $215,000
property, setting and enforcing rules, and managing
3-Bedroom Apartments $2,700 $325,000
ƁQDQFHVDQGEXGJHWV,QYHVWRUVLQDVHFWLRQDOWLWOH
scheme own part of a development, meaning that
the owner is part of a small community and will Source: Knight Frank Research
need to comply with the management and conduct
8
KAMPALA MARKET UPDATE H2 2020
It is expected that approximately 110-150 housing stay in areas with good infrastructure, security
Free Zones
units (mainly apartments and townhouses) will DQGSUR[LPLW\WRGLƀHUHQWVHUYLFHV7KHUHLV
come onto the market over the next 12 months in higher demand for modern housing, thus forcing
The Uganda Free Zones Authority, a body
Kampala’s prime residential suburbs. Demand owners of older properties to reduce their asking
corporate under the supervision of the Ministry of
for prime residential rental accommodation is rents or renovate their property so as to compete
Finance, Planning and Economic Development,
mainly driven by members of the diplomatic favorably with the newer stock.
responsible for the establishment, development,
community and multinationals who prefer to
management, marketing, maintenance,
supervision and control of free zones within the
country aims at creating 8 private and 2 public free
Table 4: Market sentiment Survey H2 2020 zones with the aim of encouraging investment,
increasing export earnings and creating jobs. The
Market Inquiries Completed Postponement of Achievable Market Conditions (Tenant, Landlord
Transactions Deals Rents Favourable or Balanced) ƁUVWSXEOLFIUHH]RQHORFDWHGLQ(QWHEEHZKRVH
construction was commissioned by the Minister
Residential Tenant
of Finance will be the pioneer public free zone
Commercial Tenant in the country. Upon completion, the zone will
accommodate 7 production units and a trade
Source: Knight Frank Research KRXVHWKDWZLOOKRVWGLƀHUHQWJRYHUQPHQWRƃFHV
to oversee business in the area.
Developing and/or operating in a free zone comes
Industrial within the country, championed by Uganda
with various tax incentives among which include;
Investment Authority under its mandate to
tax holidays, exemption from payment of stamp
establish 27 industrial and business parks, aimed
duty for land owned by the Authority, unrestricted
Travel restrictions and closing of the border at creating jobs, easing accessibility to land for
UHPLWWDQFHRISURƁWDIWHUWD[UHQWIUHHODQGIRUD
during the lockdown period resulted in noticeable investment, introducing new research, technology
VSHFLƁHGSHULRGHWF
increase in the need to repurpose production lines and skill development as well as boosting exports
for manufacture of certain products most of which therefore, increasing Uganda’s revenue base.
With supportive business policies coupled with
were essential and urgently required in response The Industrial Business Park locations include
WKHGLƀHUHQWWD[LQFHQWLYHVGHYHORSPHQWRI
to the pandemic. The increase in e-commerce Kampala, Mbarara, Jinja, Kasese, Soroti, Moroto,
industrial parks and free zones are anticipated
trade during lockdown increased the need for Nakasongola, Bulisa, Gulu, Lira, Arua, Tororo,
to boost Uganda’s industrial sector by attracting
stock piling in a bid to meet the growing demand Iganga, Luwero, Bushenyi, Kabale, Kabarole,
productive investment, ensuring economic growth
by online retailers for essential goods and services. Rakai, Mubende, Hoima, Nakaseke, Kyankwanzi,
and job creation.
This resulted in the short-term increase in demand Rubirizi, Pakwach, Kamuli, Mbale and Masaka.
for storage space in the traditional industrial
areas (1st – 8th Street), Nalukolongo, and Ntinda The anticipated completion of the industrial parks
/ Nakawa Industrial areas. As a result, leasing
Valuation & Advisory
will add value to locally available raw materials
activity in the industrial sector remained relatively thus boosting agriculture, business growth and the
Valuation & Advisory was affected by COVID-19
9DOXDWLRQVXUYH\LQJZDVDƀHFWHGE\&29,'
stable for the period under review. industrialization agenda.
and the mode in which properties were inspected
changed. To minimize transmission or contracting
The biggest determinants of demand were; According to the Uganda Investment Authority,
the virus, there was regulated access to areas
accessibility/proximity, size, eaves heights, investors can apply for land in these industrial
within premises to be inspected, either because
DPSOHSDUNLQJ ODUJH\DUGV DGGLWLRQDORƃFH parks for as long as they have a registered
the clients were being cautious or Valuers
space on the warehousing facility as well as high company, an investment license, a comprehensive
were limiting exposure, resulting in increased
TXDOLW\VSHFLƁFDWLRQVLQIRUPRIƂRRUORDGLQJ EXVLQHVVSODQVROLGSURRIRIƁQDQFLQJDQGD
time spent inspecting. In addition to the usual
requirements. Average rents for warehouses sketch map of land utilization. Satisfying these
inspection equipment, Valuers incorporated hand
remained relatively stable, ranging between US$4- requirements accords an investor an initial lease
sanitizers, face masks, and gloves as protective
US$6 per sqm for warehouses in the Kampala of 5 years, which will be extended to 49 years upon
gear.
Industrial Business Park (KIBP), while the older completion of development.
stock especially those found outside the KIBP had
Real estate, as compared to other investments
rental rates of approximately US$2.5 to US$4.5 per
sqm. Table 5: Average Net Rent is known to be illiquid, and as such recording
(US$) for Warehouse changes in value is not as immediate as other
forms of investments. With leases running for
The Kampala Industrial Business Park (KIBP)
Description Rent Per Square Meter (US$) three and more years and transactions that require
continues to remain the preferred area for large
long timelines, real estate values usually move at a
industrial companies looking to construct their Within KIBP 4.0 - 6.0
slower pace. As such, impacts of the pandemic on
own premises and as such has seen tremendous
Outside KIBP 2.5 - 4.5 property values may take a while to fully manifest
growth of purpose-built warehouses for owner-
DQGEHTXDQWLƁDEOH
occupation as opposed to renting.
Source: Knight Frank Research
There has been growth of several industrial areas
9KAMPALA MARKET UPDATE H2 2020
Due to the uncertainty surrounding valuations, the cautious approach to investment before and a global shutdown of trade which led total
the Royal Institution of Chartered Surveyors LPPHGLDWHO\DIWHUJHQHUDOHOHFWLRQVZLOODƀHFW stagnation of supply chain and distribution routes
(RICS) issued a Valuation Practice Guideline, new developments and leasing activity across into the country. This led to a short-term increase
advising RICS regulated members to add a all property sectors in 2021. We were already in demand for storage space from the health
Material Valuation Uncertainty Clause, allowing seeing potential investors adopting a “wait and sector, e-commerce, and pharmaceuticals.
values provided to be supported by a caveat, which see approach” to the anticipated increase in
serves as a precaution but does not invalidate country economic and political risk. The recent Much as retail was quicker to rebound from the
the valuation. The current market conditions development and anticipated rollout of vaccines, lockdown than any other property sector, the
and valuation uncertainty have prompted gives hope to a quicker recovery of the economy HƀHFWVDQGLPSDFWZLOOEHIHOWIRUDORQJWLPHWR
valuers to advise banks to keep valuations under and real estate market in general. come.
constant review given the unknown future impact There is an underlying level of uncertainty in
COVID-19 might have on the real estate market. There is going to be continued emphasis on WKHVHFWRUGXHWRWKHSRVVLEOHQHJDWLYHHƀHFWRI
KHDOWKDQGVDIHW\HVSHFLDOO\LQWKHRƃFHDQG increased import duties on a range of products
There was a marked reduction in valuation retail markets, with contactless technology and particularly processed foods, which could
instructions received from the banks in Q3 2020 continued social distancing measures as a major dampen the potential growth of retail sales as the
mainly attributed to the lockdown instituted area of focus in the wake of the pandemic for new associated costs will be passed on to the consumer.
in March, which resulted in closure of business and existing prime developments. Technology will Additionally, pent up spending after lockdown
operations in the country, and in particular continue to play a major role in real estate, as a was short lived as consumers are still being
WKH/DQGV2ƃFHIRUWZRPRQWKV7KHPDUNHW PHDQVWRIDFLOLWDWHZRUNƂRZVDQGUHGXFHSK\VLFDO cautious in their spending habits, whilst others
uncertainty caused by the pandemic forced a contact. are still avoiding “crowded” places which include
number of banks to lend cautiously as a way of VKRSSLQJPDOOV7KLVLVHYLGHQWLQWKHIRRWWUDƃF
mitigating the likelihood of increasing non- 2ƃFHRFFXSLHUVDUHVWLOOWDNLQJDFDXWLRXV numbers registered at shopping malls in H2 2020
performing loans (NPL) which were initially DSSURDFKWRRƃFHH[SDQVLRQHYHQLQUHVSRQVH compared to same time last year. The ongoing
anticipated to increase from 4.6% to 10%. Despite to social distancing requirements. Working from curfew and restrictions on bars will continue to
the pandemic, Knight Frank recorded an increase home and in shifts will continue through 2021 as impact on the sector until they are fully lifted. The
in commercial valuation instructions in Q4 2020 HPSOR\HUVDQGRUJDQLVDWLRQVHVWDEOLVKDQGUHƁQH reduction in numbers of outbound travelers from
as compared to residential instructions, majorly workplace strategies that favor their employee’s Uganda, may indirectly support and increase retail
due to the loan restructuring opportunities that ZHOIDUHKHDOWKDQGVDIHW\7KHWUDGLWLRQDORƃFH sales of children’s clothing and footwear. Similarly,
banks availed to their borrowers, that seemed to however still remains the core of work and its cosmetics and healthcare products will likely be
appeal to commercial property owners than any environment, and is yet to be superseded by the big winners until such a time as it is felt safe to
other property type. working from home, although some elements of travel abroad. The supply chain disruptions which
ƂH[LEOHZRUNLQJZLOOEHFRPHPRUHQRUPDOL]HG plagued retailers last year seem to have eased
up somewhat, though restocking of shops is still
It is evident that landlords across sectors are EHLQJLPSDFWHGE\FDVKƂRZVDQGVORZWXUQRYHU
intent and more focused on recovering from the
The current market rent concessions and stimulus interventions they The jury is still out as to whether 2021 will be a
conditions and valuation put in place for their tenants in 2020, and are less year of recovery from the total disruption and
uncertainty have prompted inclined or accommodating of any more requests destabilization of the real estate sector in 2020.
valuers to advise banks for further rebates. This sentiment is reinforced Whilst it is reasonable to forecast a gradual and
to keep valuations under E\WKHEDQNVDQGƁQDQFLDOLQVWLWXWLRQVZKRDUH modest improvement in the performance of the
constant review also not open to further concessions to borrowers sector in general, it is important to bear in mind
now that the initial period allowed for loan that momentum of this improvement will be
restructuring is over. determined by how quickly and positively the
economy rebounds to reasonable growth levels.
H1 2021 Market Outlook Prime residential leasing activity remains under Similarly, it is hoped that the speed with which
pressure as expatriate numbers have dwindled in the vaccine is acquired and administered, will
light of second lockdowns and restricted travel in also play a big impact in curtailing the spread of
According to the Bank of Uganda State of the
Europe and United Kingdom. Since this remains the virus, and enabling a faster return to some
Economy Report for December 2020, economic
the biggest driver of demand for this sector, we semblance of normalcy all things remaining the
growth is projected to remain below expected
anticipate prime residential rents in turn coming same, and no new variants to further complicate
levels until FY2022/23, with estimates of 5.5%- 6.5
under pressure and reducing further as vacancy the situation. We can only wait in hope, as we do
% projected for FY2021/22. Growth will be hinged
rates also increase. our best to stay safe.
RQPRQHWDU\DQGƁVFDOSROLF\VWLPXOLDVZHOODV
rebound in both foreign and domestic demand
7KHLQGXVWULDOVHFWRUVHHPVWRKDYHEHQHƁWWHG
following the development of the Covid-19
from the lockdown and restricted travel which
vaccines.
forced manufacturers and traders to be innovative
DQGƁQGZD\VDQGPHDQVRIUHVSRQGLQJWRORFDO
The current property market uncertainty
demand for essential goods and services amidst
associated with the pandemic, heightened by
10The Arena Mall, Nsambya. Space available to let.
JUDY RUGASIRA KYANDA
VALUATION & ADVISORY RESIDENTIAL AGENCY
MANAGING DIRECTOR
Arafat Katugga Lucy Kaitesi Wamimbi
+256 414 344 365
Head - Valuation & Advisory Head - Residential Agency
judy.rugasira@ug.knightfrank.com
+256 414 341 391 +256 414 341 391
Arafat.katugga@ug.knightfrank.com lucy.wamimbi@ug.knightfrank.com
RETAIL AGENCY & MANAGEMENT RESEARCH & CONSULTANCY
OCCUPIER SERVICES & COMMERCIAL AGENCY
Marc Du Toit Patience Taaka
Head – Retail Agency & Management Sharon Kamayangi Head - Research & Consultancy
+ 256 414 344 365 Head - Occupier Services & Commercial Agency +256 414 341 391
marc.dutoit@ug.knightfrank.com +256 414 341 391 patience.taaka@ug.knightfrank.com
sharon.kamayangi@ug.knightfrank.com
Recent Publications
Kampala Market Update H1 2020
Africa Residential Dashboard
Africa Retail Report 2020
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