Mixed-use Developments in Kenya: All You Need To Know
Are you torn between starting residential, commercial, or industrial real estate? It’s overwhelming to decide what to create, mainly due to the different returns on investment with each type of real estate. As a result, most investors have decided to come up with a mixed-use property that serves at least two purposes.
Mixed-use properties have been rising recently in Kenya, especially in Nairobi metropolitan area. Chances are, residential estates should be near commercial real estate because the residents will need to visit retail stores frequently. That’s why investors have thought of combining residential and commercial real estate.
This guide will explain everything about mixed-use developments in Kenya and how you can succeed with the investment.
What is a Mixed-use Development?
A mixed-use development consists of single property with multiple purposes. For instance, you can combine residential with retail stores. It’s rare to get vacant mixed-use properties since it has many clients.
These developments can consist of a wide area or just a few houses. The bottom line is that residential dwellings will be in the same area as commercial properties.
The commonly used mixed-use development is commercial at the front and residential houses at the back; this setup is known as horizontal development.
Other investors prefer ground floors for commercial use, and the rest of the building accommodates residents; this setup is called vertical development.
Benefits of Mixed-use Properties
- Proper management
Once you have all your property in one place, it will be simple to manage. You won’t have to travel to different locations to collect data because it’s all in one place.
In addition, when doing repairs, it will be cheaper because you’ll pay for bulk services.
Furthermore, you’ll also be closer to your tenants, and you can answer questions with ease. For instance, if there is a water shortage, you can organize more water for your tenants without going to separate properties.
- Broad client base
With mixed-use property, you will not stay long without tenants. If you don’t get a residential tenant, you’ll get a commercial one.
In addition, since it’s an area serving a more significant population, more people would like to settle in places close to social amenities and retail shops. In addition, the business people would also like to set up a business in the area since there are ready customers.
- Closer social amenities
Nowadays, everyone likes to stay in places with schools, security, hospitals, proper transport, and communication channels.
When an area has lots of mixed-use developments, it will attract the establishment of better social amenities.
Furthermore, due to the high cost of living in the country, most people would prefer walking to and from work, school, hospitals, etc. At least, they’ll save some coins by doing so. And that’s a big reason they would prefer staying in an area serving all their needs.
Areas with mixed-use properties like Athi River, Kitengela, Huruma, Kiambu, and Ruiru, among others, tend to develop faster than areas set for residential or commercial property alone.
Mixed-use property triggers the growth of small and medium businesses. As a result, your property returns grow from time to time.
- Less risk to investors
You can survive with the booming side when one investment type goes down.
For instance, in 2020, most businesses closed down due to the pandemic. As a result, commercial real estate went down in terms of ROI. However, the residential sector was not affected that much. So, whoever had mixed-use property managed to pay their mortgage and bills using residential income.
Therefore, mixed-use property poses a lesser risk to the investor if one side subsides in returns.
- Higher returns
Indeed, commercial property has higher returns because the charges are usually high. A single retail storeroom in Nairobi could cost above Ksh. 20,000, while a single residential house costs at least Ksh.3000. Such a huge difference.
Mixed-use property owners gain from commercial and residential houses. And the overall ROI is usually higher than that of single-use properties.
Shortcomings of Mixed-use Property
- They are very costly to set up
Since you need two types of properties, you may have to dig deeper into your pockets. Whether you buy undeveloped land or a complete property, you’ll need a lot of money. In addition, the down payment is also huge.
- Conflict of interest among the tenants
Residential and commercial tenants may have different interests like cleanliness and usage of shared things like water and electricity.
As an investor, you’ll have a hard time reconciling tenant disputes, still due to congestion. The only sure way is to ensure everyone has their metered water and electricity. That will reduce conflicts during the usage of those amenities.
- In case of a fire breakup, you may lose.
Fire breakups are common in congested areas. When little fire is not prevented from spreading, it can affect multiple properties, causing losses to owners.
However, insuring your property against such risks can help you. But once a regular income source is dormant, you can reconstruct it.
Is Mixed-use Property Investment a Good Idea?
Well, the benefits outdo the demerits, so yes, mixed-use is an excellent idea that can help you have huge returns.
You’ll also have a humble time managing all your property in one area.
Frequently Asked Questions
- What’s the main benefit of mixed-use development?
Diversification proves to be the main benefit of mixed-use investments. With mixed-use property, you will thrive, even when one side of the property is doing poorly.
- Why do people love mixed-use rentals?
People like places where they can access everything they’ll need to survive. That calls for more tenants in mixed-use areas. In addition, the residential part tends to be cheap compared to residence-only property.
- What comes under a mixed-use development?
Modern mixed-use properties have residential and commercial spaces such as retail stores, offices, industrial, hospitals, hotels, and other recreational areas.