Kampala has recorded an 11% increase in office occupancy for the first half of 2022, according to a Knight Frank market performance review for the half.
According to Knight Frank Uganda, the prime office market marked an uptick in leasing activity in the first half of 2022.
“Enquiries increased, driven in part by the full reopening of the economy, increased start-up funding, improved activity in the services sector, and the signing of the FID in early February. Demand was from a wide range of sectors including; Financial Services, Technology/Telecoms, Oil & Gas, Health, NGOs, Business & Professional Services, start-ups, Industrial/Logistics, Legal as well as Government agencies,” reads an excerpt from the H1 report recently released by Knight Frank.
These were either new entrants or existing firms that were expanding or relocating.
“Take-up was also registered from occupiers who had previously downsized at the onset of the pandemic and are currently seeking to reoccupy the spaces they had relinquished. As a result, enquiries increased by 20% in H1 2022 as compared to the same period in 2021,” notes the research document.
Similarly, Grade A office occupancies were up by 11% while grade AB occupancies improved slightly by 2% in the same period, largely attributed to existing occupiers increasing their space take-up.
“Despite the positive trends in uptake, several landlords were cautious, opting to maintain prevailing rents. However, a few landlords who had discounted rents at the onset of the pandemic revised their rents upward, during contract renewals,” says the report that was compiled by Judy Rugasira’s research team at Knight Frank.
This however had a marginal effect on average rents, which remained relatively stable. Prime yields were in the range of 9 – 10%.
The second quarter (Q2) of 2022 saw a steady increase in occupancy levels which are being clawed back, some to pre-covid numbers.
“This comes as no surprise given the increased uptake of space and shrinking supply of good quality, functional space in strategically located properties in the prime office locations,” notes the research team.
Knight Frank Research provides strategic advice, consultancy services and forecasting to a wide range of clients worldwide including developers, investors, funding organizations, corporate institutions and the public sector.
“All our clients recognize the need for expert independent advice customized to their specific needs,” states the H1 2022 report.
DStv losing UGX 2.7 billion annually due to content piracy in Uganda According to Knight Frank, Grade A refers to prime office rental space valued at $12 to $16 while Grade AB is prime office rental space worth $12 to $14.
“The recently completed PPDA-URF Towers and the New ERA House added approximately 20,000 square meters of office space on the market.”
“The Landlord and Tenant Bill was assented into law in April, 2022. The Act is intended to; regulate the relationship of landlords and tenants, reform and consolidate the law relating to the letting of premises; provide for the responsibilities of landlords and tenants in relation to the letting of premises; and govern the relationship between landlords and tenants,” reads the report excerpt.
Additionally, the Act is Uganda’s first comprehensive piece of legislation that addresses the relationship between landlords and tenants.
The Landlord and tenant bill states that all tenancy agreements involving rent above Uganda shillings five hundred thousand only (UGX 500,000) are to be in writing.
“Increased engagement by real estate professionals who provide real estate professionals who provide tenant representation and property management services is anticipated which will eliminate the need for landlords and tenants to negotiate directly when disclosed agents exist,” notes the report.
The retail market performance as measured by footfall and turnover improved by 6% and 8% respectively in H1 2022 as compared to a similar period in 2021, attributed to the full reopening of the economy in January 2022.
“While a noticeable uptick in retail activity was observed on a year-on-year comparison, turnover growth for general grocery retail and average footfall in malls remained subdued, showing a negative growth of 20% & 23% compared to pre-covid numbers respectively as of May 2022,”says the research team.
Positive growth in average turnovers was recorded on a monthly basis in the quarter to April 2022, but dipped by 5.8% in May 2022. This was on the back of rising commodity and fuel prices that affected affordability among consumers. A similar trend was observed with the monthly footfall figures which declined by -9% and -2% in April and May 2022 respectively.
The continuous rise in inflation in Q2 2022 affected consumers’ disposable income and spending habits, necessitating prudent expenditure planning. This affected footfalls and had a correlated effect on the average turnovers in the same period. Our outlook is that this trend will likely persist in the short term as countries world over grapple with rising costs of commodities and fuel.