Knight Frank Uganda has released a new market update which covers the performance of the Residential, Office, Retail, Industrial and Valuation sectors during the second half of 2019.
Latest statistics from Uganda Bureau of Statistics (UBOS) reveal that there has been a noticeable improvement in Uganda’s economy over the past 12 months evidenced by a 5.4% growth in GDP registered in Q4 of financial year 2018/19 compared to 5% registered for the same period in 2017/18.
Additionally, the annual headline inflation increased to 3.0% for the year ended November 2019, up from 2.5% registered for the year ended October 2019.
The increment was primarily credited to a 2.9% increase in core Inflation for the year ended November 2019, up from 2.6% in the previous month.
The last 12 months have seen an 8.5% year on year increase in the supply of apartment units coming onto the market particularly in the prime residential areas of Kololo, Nakasero and Naguru.
However, Knight Frank registered a 9% year on year average decline in occupancy for the same suburbs from 81% recorded in H2 2018 down to 72% registered in H2 2019. The company has also registered a 3% year on year decline in occupancy rates (from 86% recorded in H2 2018 down to 83% as at December 2019) for prime office space (Grade A and B+).
This is mainly on account of a 6% decline in demand by large space occupiers (>500 sqm) particularly multinationals and large corporates as well as the addition of approx. 18,000 sqm of prime office space during the first half of 2019, with the market absorbing only 20% of this space during H2 2019.
As a result, Knight Frank has observed a 4% increase in leasing activity for smaller office occupiers (<200 sqm) particularly start-ups, who prefer flexible office terms and solutions (including shared and serviced offices) which best suit their requirements.
The Company also recorded a 31% year on year increase in commercial valuation instructions in H2 2019 compared to the same period last year. This is majorly due to the fact that commercial properties are perceived to generate stable income streams for repayment of the loan as opposed to residential properties.
“H2 2019 has seen varied activity in Uganda’s retail sector. The biggest impact was statutory, with Uganda Revenue Authority (URA) issuing a list of goods that could no longer be eligible for customs warehousing at the point of entry.
“The net effect of this means that traders would have to import goods, clear taxes immediately and then transport to the final destination. The change in operations will no longer allow traders to keep certain items in bonded warehouses in Uganda, and draw on the stock as needed.
“As such, an initial outlay of capital to clear the entire consignment upfront will be required and traders are concerned that this will negatively impact on their operating capital and cashflows, with a negative effect on their business viabilities due to the additional capital required upfront.”
According to the December 2019 monetary policy committee statement issued by Bank of Uganda, Uganda’s GDP is projected to grow in the range of 5-6% in H1 2020.
The growth is expected to be anchored by an accommodative monetary and fiscal stimulus leading to an increase in private sector investment.
Nevertheless, sentiment remains cautious due to the fact that growth remains subject to downward risks stemming from the global economy particularly geopolitical tensions as well as trade policies.