#1: Despite a slight recovery, general retail performance remained subdued and below 2019 pre-pandemic levels
Despite turnover and footfall levels recording significant improvement in H1 2021 vs H1 2020, the general retail performance remained subdued and is yet to recover to the 2019 pre-pandemic levels.
Subdued trade within the retail sector, stringent operating procedures to limit human to human transmissions, supply chains disruptions, dwindling consumer confidence and spending as well as the general elections and continued closure of bars and nightclubs remained, together with well-founded consumer fear of socializing all combined to suppress demand for retail space.
However, with more people working from home, there was considerable uplift in demand and activity in neighbourhood shopping malls.
Key moves in the sector, include the phased opening of Metroplex Mall with Carrefour opening their new store as well as the opening of the all-new Arena Mall in Nsambya. Major retailers such as LC Waikiki, Cafesserie, Frango and Great Burger are set to debut in the Arena Mall.
#2: Return to relative normalcy in the office market was nipped in the bud by the 42-day June 2021 national lockdown
Downsizing because of Covid-19 hardships, mergers and relocation to owner-occupied premises as well as the 42-day lockdown announced on June 18th, conspired to dampen the Office Market which was beginning to pick up from the effects of the pandemic in the 2020 epidemic. A return to relative normalcy in terms of inquiries that had been observed in Q2- 2021 was affected by the 42-day national lockdown announced on 18th June 2021.
Although Knight Frank registered a 3% drop in the occupancy of Grade A/AB office buildings from 84% in H1 2020 to 81% in H1 2021, the property consultancy firm is optimistic that the closure of key oil and gas agreements in April 2021 will stimulate opportunities for revitalisation in office activity and subsequently demand too.
Knight Frank also reported that despite the decline in office occupancy, office rents remained relatively stable for Grade A and AB Offices. Rent prices for Grade A offices registered a slight reduction of 3% in H1 2021 as compared to H1 2020 because of rent reductions that were enforced in some buildings in the period after the May 2020 lockdown.
Landlords continued to face increasing requests for rent reductions and delay in escalations from both prospective and existing tenants. These however did not materialise for many, considering several landlords had already offered discounts to their tenants during and after the March 2020 lockdown. However, in a bid to prevent a further drop in occupancy, some considerations were made by a few landlords.
Bob Okodi, Amref Health Africa Uganda CFO, On Purpose-Driven Finance and Measuring Impact in Lives, Not MarginsKnight Frank predicts that despite fresh 6,000 sqm of Grade A lettable space coming onto the market in H1 2021 and another 130,000 sqm of lettable space coming on board in the next 24-36 months, the market for prime lettable space will remain stable, depending on the bargaining strengths of each client.
#3: Residential market begins to pick up, with increased requirements for home offices
The end of the January 2021 elections and successful Covid-19 vaccine rollout in many western countries, saw several expatriates return to Uganda, providing a much-needed stimulus to the residential property market. Knight Frank reported an increase in both the demand for private rented accommodation as well as inquiries in sales. However, an increased supply of stock saw some landlords discount rent, to remain competitive.
Demand drivers for high-end residential apartments included amenities such as gyms and swimming pools, proximity to supermarkets, shops, green spaces, and large indoor living spaces as well as home offices.
#5: Increases demand for showroom and industrial spaces within the city centre.
There was an increase in demand for showroom and industrial spaces within the city centre, emanating from companies seeking proximity to their clients, those seeking to diversify their nature of business, new automotive entrants into the market, chemical companies looking to expand, international companies looking to set up local franchises and companies looking for short term storage space.
There was a noticeable relocation of large industrial firms out of industrial areas within Kampala i.e., Luzira, 1st to 8th Street, Ntinda Industrial Area to the Namanve Industrial Business Park, with the majority moving to owner-occupied premises.
#5: The Covid-19 Pandemic continues to impact valuation and advisory services
Rapidly changing market conditions due to the pandemic continue to create significant material valuation uncertainties as well as challenges in carrying out inspections and access to reliable information, necessary for completing valuations.
Knight Frank Uganda says such unprecedented times call for transparency and professionalism, with all limitations on information access declared.
