High-end office space in high demand in Uganda

Saturday September 24 2016

The modern UAP Nakawa Business Park in Kampala. PHOTO | MORGAN MBABAZI

The modern UAP Nakawa Business Park in Kampala. PHOTO | MORGAN MBABAZI 

By BERNARD BUSUULWA

The demand for high-end office space in Uganda, particularly Grade A premises, has risen sharply in recent times, with the country’s real estate sector registering a modest recovery in the second quarter of the year.

Grade A office premises are located in a prime area and occupy more than 5,000 square metres; they have ample parking space, are easily accessible, and offer amenities such as security, lighting, toilets and air conditioning.

However, there are fears of a glut in the market as construction projects pick up in the Kampala central business district. Investors had suspended critical commercial decisions prior to Uganda’s general election in February.

“The peaceful post-election period and a more stable shilling have boosted investor appetite in this sector since April,” said Moses Dennis Lutalo, head of commercial and residential property management at Knight Frank Uganda, a leading real estate management and consultancy firm.

“However, big office construction projects being undertaken by large clients like the Uganda Revenue Authority could impact negatively on projected demand for office space in uptown Kampala in about three years’ time.”

The Uganda shilling has gained by 2.4 per cent against the US dollar, averaging Ush3,370 at the beginning of June, compared with Ush3,451.2 posted in January this year. More than 60 per cent of inputs used in the real estate sector are imported from overseas markets, exposing developers to currency fluctuation risks.

Office projects being executed in Kampala City include Rumee Towers on Lumumba Avenue and Lotis Towers on Mackinnon road. URA on the other hand is building a 22-floor office block near its Nakawa headquarters. The project is scheduled for completion in 2018.

MTN Uganda also plans to build new head offices on Jinja Road.

On average, occupancy rates registered by Grade A buildings rose to about 80 per cent in the first six months of this year, especially between April and June, a new report by Knight Frank Uganda notes.

The demand was highest among government agencies and new investors setting up shop in Kampala.

They include the Uganda National Roads Authority and the standard gauge railway project that recently relocated to UAP Business Park, a four-block office complex completed in 2014 in the Nakawa suburb, which is less than five minutes’ drive from the city centre. The inflow of new tenants pushed the building’s occupancy rate to around 90 per cent by end of June, according to property managers.

The Financial Intelligence Authority also recently transferred its offices from Communications House to Rwenzori Towers, while the Electoral Commission currently on Jinja Road, is shopping for some 10,000 square metres of new office space.

But while there has been a surge in the demand for commercial properties, the residential property market presents a mixed picture with properties located on Entebbe road recording higher occupancy rates compared with similar projects in Ntinda and Naalya which are closer to Kampala City.

“There has been an uptick in construction activity in rental units in areas like Sonde and Namugongo that are less congested compared with central Ntinda,” said Shakib Nsubuga, country manager at Jumia House Uganda, an online real estate vendor.

According to Richard Byarugaba, the managing director Uganda’s National Social Security Fund, a major real estate property owner, the growing demand for residential space on the Kampala-Entebbe highway is driven by “the anticipated completion of the Kampala-Entebbe ExpressWay and widespread dislike for heavy traffic jams experienced in mainstream settlements in Kampala City.”

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