Worrying slump in Nakuru

As the construction boom in Nakuru Town continues, some landlords are beginning to realise that investing in the town might  have been a hasty decision.  Many landlords in the central business district (CBD) are staring at empty premises as property agents count their losses.

Some of the new high-rise commercial buildings that have come up in the CBD in the last three years are struggling to get half their targeted occupancy, with many of the empty floors now serving as meeting points for  lunch-time church services.

A spot check by DN2 found that in most buildings, occupancy was  concentrated on the ground and first floors, while the rest are largely empty.

The situation is the same in residential areas such as Racetrack, Shabab, Naka, Section 58, Kiamunyi, Barnabas and Freehold.

In a bid to attract tenants, some of the those putting up buildings in the CBD are no longer using agents; they  have also stopped demanding goodwill and a year’s rent in advance.

Indeed, many have hoisted huge banners on their upcoming buildings proclaiming these developments.

Following the post-election violence in 2007/2008, the cosmopolitan town witnessed a huge influx of settlers from North Rift, who invested millions of shillings in real estate.

The construction boom attracted investors from Nairobi, Eldoret and Kisumu, who set up base in the town.

The rapid growth of real estate  saw Nakuru voted the fastest growing town in the region by UN Habitat.

However, the current shortage of tenants for most of commercial and residential units seems to indicate that the anticipated economic growth was overstated.

INFLATED PRICES

A hardware shop that set up base in the town in the 1970s has been forced to scale down its operations and sub-let its front offices as its customer base dwindles by the day due to stiff competition.

According to Skylight Commercial Agency Managing Director Mr John Kiritu, the inflated landlords are to blame for the situation.

“Some of the rents charged in the CBD are not affordable. For instance, two years ago, an office measuring 10ft by 10ft on Kenyatta Avenue was going for between Sh4,000 and Sh5,000 per month. It has now shot up to between Sh15,000 and Sh20,000,” Mr Kiritu offered.

He added that most businesses in  these premises were not making enough to pay rent and also meet  overhead costs such as electricity, water and the oppressive licences demanded by the county government.

Those who own dilapidated buildings have been forced to pull  them down since the county government has refused to renew their leases. agreements.

“With so many building coming up, it is up to the landlords to review their rents if they hope to get new tenants,” Mr Kiritu said, adding that  some investors who had shown interest in investing in the town had relocated due to the high rents.

The sale of empty plots in the CBD and houses in the emerging suburbs such as Barnabas, Kiamunyi, Bahati and Lanet has also shot up beyond the reach of many would-be investors .

“A quarter-acre plot on Kenyatta Avenue is going for Sh200million while a three-bedroom house in Barnabas is selling at Sh6million, yet very few people can afford that,” said Mr Kiritu.

Meanwhile, a marketing consultant in the town, Mr Daniel Kigathi of Dapri Enterprises, said the euphoria that the declaration that Nakuru was the fastest growing town in the region is to blame for the slump in the property market.

“The declaration that this is the fastest growing town is what has brought about this mess because our economic growth has not reached the level as hyped by  UN Habitat,” said Mr Kigathi.

But he  noted that private developers had also ignored the rule of supply and demand, resulting in low occupancy.

“Most of the buildings that have come up in Nakuru town hardly have an occupancy of 30 per cent and this is a clear indication that the boom that was anticipated is not there,” he said.

UNAFFORDABLE RENTS

Meanwhile, Mr Thomas Sibwoga, a director of East Africa Homes Commercial Agencies noted: “Most buildings that were put up were meant to accommodate people fleeing violence from Kisumu, Eldoret, Kericho and Naivasha but the dust has now settled and many have moved back to their original homes while others have relocate because Nakuru is a transit town,” Mr Sibwoga offered.

He added many refugees from  South Sudan had also returned home, leaving houses in estates like Racetrack vacant.

Noting that some landlords in the CBD were charging Sh150 per square foot for ground floor and first floor offices, in addition to  six months’ deposit and rent for a similar period, he added: “It becomes tricky for a beginner and that is why many buildings are empty since the rents are unaffordable.”

As a result, small traders are pooling resources to rent  a single space and displaying their wares on tables.

Dr Daniel Auka, the Dean of the Faculty of Commerce at Egerton University, attributed the low occupancy to a mismatch between supply and demand, adding, “Another reason is that most residents are building their own homes since it is cheaper.”

He added that the death of Eveready, the Pyrethrum Board of Kenya, and Nakuru Blankets had affected the rate at which investors are moving into the town to set up new offices: “The only vibrant economic activity in the region is a little farming and the service industry, which cannot be relied on to sustain the fluid real estate market,” said Dr Auka.

The number of lawyers and doctors who are the major target by the landlords are few and many are sharing offices to reduce costs.