Demand for residential, commercial rent space declines in first half of 2024

The demand for residential homes and commercial space in Kampala and surrounding urban areas has been low in the first half of 2024, marked by a low volume of sales and lettings, a new study by Knight Frank shows.

In the Kampala Property Market Review for the first six months of 2024, Knight Frank says when compared to H1 2023, the market was strained, with supply outstripping demand.

“The sluggish start witnessed at the start of the year persisted throughout the half year. In the period under review, the commercial office sector performance was sluggish, marked by a low volume of sales and lettings compared to H1 2023; Prime office space demand persisted, with prime net rents recorded at $16.5 and $15.0 per square metre per month for Grade A and Grade AB, respectively,” the report reads in part.

“There has been a slight decline in occupancy levels for Grade A and AB properties, with vacancy rates increasing by 1% compared to H1 2023. Demand for smaller office space (50 -150 sqm) has persisted from the IT/ Telecom, retail, legal services, business and professional services, energy, industrial, and financial service sectors,” it adds.

However, the retail sector registered notable performance in the first half of 2024, benefitting from a resilient economy, increased occupancy levels resulting from new entrants into the market, the expansion of existing retailers within the sector, and strong product and tenant-mix offerings within the various malls.

“This was further supported by key Retail Calendar events, such as back to school, Valentine’s Day, Easter, and Eid which propped up the performance of the sector. The performance improvement in footfall, turnover, and occupancy levels indicates an optimistic retail sector outlook. On an annual basis, general retail turnovers surged by 30%, while footfall figures showed 5.0% growth, with occupancy levels increasing by 3.0%,” the report states.

The Industrial Sector growth in the FY 2023/24 was mainly driven by manufacturing, construction, and mining. Foreign Direct Investment (FDI) inflows to the oil and gas sector, agriculture, infrastructure, mining, and green projects have increased. There is increasing investment in renewable energy and other green industrial projects in Uganda, like Nexus Green, 1MTN, and Sprouts of Water, attracting over US $ 400 million in FDI in the FY 2023/24.

Knight Frank says the retail outlook for H2 2024 remains optimistic, supported by the anticipated improvement in economic activity, the launch of new stores, with a further 1,606 m² expected to open within the various malls in Q4 of 2024, the reasonably stable currency, and upbeat investor sentiments.