June 20, 2019

15% Commercial Building In Kigali Have No Clients – Study Reveals

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Part of Kigali city skyline in the CBD. The last national census in 2012 found Kigali’s population at slightly above 1m. Next year, the city will have more than 1.9m people.

As more commercial buildings rise over the Kigali skyline, new research shows that many of them especially those in the central business district have no clients.

The study published Wednesday June 19 found “a declining trend in occupancy rates” since 2012 for commercial building.

Kigali has 456 commercial buildings spread in the three districts of Gasabo, Nyarugenge and Kicukiro with a combined floor space supply of 40,762,285 Sq/m. Gasabo has highest number of commercial buildings at 255.

The study found an occupancy rate of 85 per cent, leaving the rest of the space empty. Remera suburb has the highest occupancy at 93.1%, as Kicukiro has the least 75.8%.

Researcher Dr Dickson Malunda found that occupancy rates are higher for buildings located in city suburbs compared to CBD, yet many of the huge magnificent skyscrapers are based in the city center.

However, the interesting finding from the study is that the amount of rent has the least influence on the decision by people looking for space to rent.

The city surburbs of Kimironko, Nyamirambo, and Gisozi have the lowest median rents for commercial space per unit per month at Rwf 100,000, Rwf 150,000, Rwf 175,000 and Rwf 250,000 respectively.

High rent centers include Kimihurura, Remera and Nyarugenge with median rent per unit per month of Rwf 946,500Rwf, Rwf 341,667 and Rwf 311,500 respectively.

Only 14.5% of the 1,476 sampled tenants indicated that they had selected a particular building due to its cheap price.

Nearly 50 per cent (46) of the tenants said they had chosen to rent that space because it was closer to them which made it more convenient to access.

18% said they decided to rent from that commercial building because of prestige – largely considering the design and quality of the building.

The findings also show that there was significant increase in occupancy of commercial buildings following a directive by City of Kigali issued on January 5 2017 requiring that all tenants with commercial operations or NGOs relocate from residential houses.

The occupancy rate had been at about 70 per cent in 2016, but then shot up to nearly 90% the following year.

For last year, though, occupancy has again dropped back to 70% – probably indicating that those who went into the commercial buildings have left.

The study “Commercial and Real Estate Survey” was released at the annual 8th Institute of Policy Analysis and Research (IPAR-Rwanda) Annual Research Conference in Kigali.

In general, the study found rent to be high in Kigali caused by high interest rates imposed by commercial banks on developers.

The “Financing landscape involves banks recovering about 3 times the principal on commercial real estate loans. This puts upward pressure on rental prices for developers to recover bank loans,” said Dr Malunda, who conducted the study.

KAYITESI Eugenia, the Executive Director of IPAR-Rwanda, in her intervention said: “Developers are offered loans by banks at relatively high interest rates. After the building is complete, the developer has difficulty getting tenants yet the loan is maturing. We have to find a way to connect bankers, government, real estate sector and the citizens to advocate for reduction in interest rates.”

The last national census in 2012 found Kigali’s population at slightly above 1m. Next year, the city will have more than 1.9m people.

UPDATED January 21, 2020

A public lecture was held this Tuesday January 21, 2020 at which some aspects of the above study were shared again. New details were added in the findings of the study by City of Kigali.

The Kigali study showed that people with small businesses have access to space that fits their pockets as 30% of the tenants were found to be able to pay Rwf 40,000 ($42) monthly rent for work space. 9% were found to be able to pay as much as Rwf 500,000.

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