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Why Kisumu’s future lies in mixed use developments

With devolution, the city expects to see an increase in economic activity and hence an improvement in the quality of office space on offer

Wahinya Henry and Noven Owiti

Potential real estate investors in Kisumu city are being advised to put their money in mixed-use development where income yields are more attractive.

Research findings carried out by Cytonn Real Estate developer focusing on the best investment opportunity for investors in the town puts income yields at 9.6 per cent for mixed yields development — much higher than the residential average of 4.8 per cent. They also have a high average occupancy of 91 per cent.

Cytonn has been carrying out periodical research on the real estate market in Kenya.

The research was in line with a strategy by the firm that seeks to establish viability and real estate investment opportunity present in the real estate sectors of residential, retail, mixed-use and hospitality sector. The ideal development in Kisumu thus encompasses a mix of retail and office blocks, recommends Cytonn executive director, Edwin Dande. “The building ought to be in a prime location in the city and offer relatively good facilities such as lifts and sufficient parking,” he said. 

Renovations

This is because most buildings in the city are old, and do not have upgraded facilities and this is the gap that exists in this market.  The market also lacks fractional office space for sale, and this is a new area of opportunity for real estate investors.

However, the retail sector (supermarkets, shops, restaurants and bars)  despite having attractive yields of nine per cent, is not ideal as the city has a large supply of retail space at 650,000 square feet (sqf), against a population of 434,661 people.  An additional 270,000 sqft are in the pipeline.

A resident, Okello Alfred, concurs with the research findings. He says the city has had not good commercial buildings with only a few having lifts, while others have been in poor maintenance state for months.  Given devolution, an opportunity in this mixed-use development has arisen as the renovated buildings have high demand and are attracting high rental rates of Sh120 per square foot, verses a market average of Sh102 per square foot.

Buildings yet to be renovated are charging only Sh55 per square foot. Poor quality office space in the city is as a result of absence of strong economic activities— particularly an industrial base — to spur growth and create demand for quality office space.

Valuer consultant Pamela Achieng says given devolution, the city expects to see an increase in economic activity and hence an improvement in the quality of office space on offer. She credits devolution for recent upgrades in some Kisumu estates in areas such as Okore, Migosi, Celtel, Mosque, Makasembo and Arina estates in the city. 

The third largest city in Kenya has continued to attract more people in the middle class who stay on approximately 780,000sqm.

Almost all major projects in the mixed-use development are located along Oginga Odinga Street and include Alpha House, Reinsurance Plaza, Jubilee Building, Auctioneer, Eco Bank and Awori Investment and Swan Centre.

However, Dande is optimistic the entire sector is expected to prosper. He says there are more government initiatives towards making housing affordable, with regions outside Nairobi gaining in real estate investments on the back of the increased infrastructural development.“We expect to see more activity in the real estate sector, especially in end-user purchases, thus a rebound in the price appreciation rates,” he says.

Zoning

Meanwhile, plans are underway to start a zoning project for Kisumu City Manager Doris Ombara says.

The municipal administrator  says Work on the project dubbed Local Detailed Urban Physical Plan is scheduled to start as soon as the tendering process is finalised and is expected to cost Sh230 million under the Kisumu Urban Project (KUP) supported by the French government.

Ombara said evaluation of the project’s tendering process was underway after advertisement before it can be awarded to a prequalified company. “About seven firms both local and international have bid for the project’s tender,” she says.

The city will be zoned into five special planning zones including the Central Business District (CBD); the Lake Front (about 60 metres from the CBD);  middle-level estates (housing estates around the CBD); the slum belt and extended areas (areas falling between the slums and the city).

The town has witnessed a rapid growth with steady housing development coming up recently, especially on the outskirts such as Riat, Mamboleo and Kanyakwar. The value of land in these areas has risen sharply as they are considered prime zones because of their attractions to many developments.

Upon completion, the zoning will assist the city authorities in controlling developments besides ensuring proper planning for efficient service delivery to the residents. The city zoning project will also prescribe the kind of land use for developers to avert overrating of property costs. “For instance, some developers in areas such as Milimani estates have developed a habit of rating land beyond the normal prices,” she said.

Demolitions 

Speaking to Boma in her office, Ombara regretted that Kisumu was initially poorly planned because of ‘rogue’ workmanship, a situation that has seen irregular developments lately coming up in undesignated areas. “Zoning will help us know exactly the type of developments needed in each area,” said Ombara. “The bottom line is to have a more efficient service delivery for the citizenry in areas of security, safety and development,” she added, while assuring that all stakeholders’ inputs will be involved in the process.

She cautioned developers against encroachment on public facilities such as road reserves, schools and wetlands, saying developments put up on such areas would be demolished. She said plans are underway to upgrade slums with a view to doing away with old and dilapidated houses. Kisumu’s slum areas comprise Nyalenda, Obunga, Manyatta and Bandani.

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