Serviced apartments recorded improved performance in 2018 with the average rental yield coming in at 7.4 per cent, compared to 5.3 per cent in 2017, a new Cytonn Real Estate Nairobi Metropolitan Area, indicates.
The study attributes the marked increase to demand, which triggered an increase in charge rates, as well as increased occupancy rates with an average of 80 per cent in 2018, compared to 72 per cent last year.
Beatrice Mwangi, assistant research analyst at Cytonn said the improved performance in Nairobi was also attributable to the stable political environment and improved security. This, she added, made Nairobi an ideal destination for both business and holiday travellers.
According to the study, Kilimani was the best-performing region, recording high occupancy rates of 86 per cent and rental yields of 10.9 per cent due to its easy access from Jomo Kenyatta International Airport (JKIA) and proximity to business areas such as Westlands and Upperhill, and a good transport network.
Mwangi said the long distance from the main commercial zones, lack of modern and quality serviced apartments in addition to not being within the UN Blue Zone made developments in the Thika Road area (Muthaiga North, Mirema and Garden Estate) record the lowest rental yield of 4.4 per cent.
She revealed that serviced apartments are becoming popular for use by holiday guests who travel as families and for business travellers looking for mid to long-term accommodation.
The report adds that the demand has been supported by benefits that come with serviced apartments such as bigger spaces compared to hotel rooms and are considered more affordable given their relatively lower charges compared to hotels.
She said, unlike a hotel, a serviced apartment can easily accommodate a family, in addition to allowing one to cook and hence creating the home away from home experience that is sought after by many long-term travellers.
Mwangi said there has been a growing supply of serviced apartments with about 1,189 additional units expected into the market by 2020, mainly in Westlands and Kilimani.
“In the Nairobi Metropolitan Area, the investment opportunity lies in Kilimani and Westlands, which are the best performing areas with average rental yields of above 10 per cent,” she said.