Uganda's Government agencies, corporates compete for office space

Wednesday July 26 2017

DFCU Towers, one of the new buildings in downtown Kampala. PHOTO FILE | NATION


Government institutions and big corporates drove demand in Uganda’s real estate sector during the first six months of 2017, analysts say.

The rising appetite for Grade A commercial office space — premises that offer a parking bay for every 40 square metres of space rented, a centralised air conditioning system, digital building management system and a prime location close to the city centre or major urban centre — has been attributed to some government agencies that have moved offices to new, upscale premises since mid-2016.

The Financial Intelligence Authority, a government agency, moved into Rwenzori Towers in Kampala during the second half of 2016 while the Uganda Tourism Board shifted its offices to Lugogo House last month.

Earlier, Uganda National Roads Authority and the standard gauge railway project had set up camp at the UAP Office Park in Nakawa.

Meanwhile, the Ministry of Justice has extended its lease at Bauman House, just below parliament.

While some government agencies have been planning to build their own office premises following a policy reversal of the 1990s that discouraged government investment in real estate, the pace has been slow.


This seems to have partly informed the decision by some private companies like DFCU Bank, Centenary Bank and Housing Finance Company of Uganda to build their headquarters with more space than they can fully utilise alone.

Financial services and mining firms also contributed to the rising demand for Grade A office space during the first half of the year.

The average rental prices for Grade A office premises ranged between $17 and $18 per square metre between January and June 2017, according to industry findings.

READ: Malls in cut-throat competition for local and international brands

In contrast, demand for Grade B office premises declined during the same period, with disgruntled tenants leaving to look for more parking space and less traffic-congested areas.

Grade B office premises offer one parking bay for every 60 square metres of space and a prime location but lack digital building management and centralised airconditioning systems, according to real estate experts.

Rental prices averaged $14-$16 per square metre during the period under review.

The advent of agent banking and tough business conditions have reportedly forced banks to review their branch portfolios to cut operating costs and boost profit margins.

Leading banks closed some poorly performing branches and relocated others to more promising areas.

“Stanbic Bank closed seven branches last year. This has led to delayed space acquisition among those players, with final decisions taking as long as six months to materialise,” said Moses Dennis Lutalo of Broll Property Group.

Commercial banks have dominated the high-end client list in the real estate for several years due to their spending power, stable occupation behaviour and a customer pull effect that usually benefits other businesses located in the same premises.

“We have focused on the small but efficient branch network model. We are keen on installing more automated teller machines across the city than opening new branches.

"The pending rollout of agent banking platforms has also forced our rivals to reconsider the idea of maintaining large branch networks in a difficult business environment,” said Charles Katongole, head of corporate, investment banking and treasury operations at Standard Chartered Bank Uganda.