Private equity funds and investment companies are deepening their stakes in real estate to cushion themselves from the volatile securities market and cash in on the booming sector.

London-based private equity firm, Actis, Renaissance Capital’s private equity firm, Renaissance Partners, Emerging Africa Capital, InReturn Capital and listed investment firm, Centum, have all recently stepped up their real-estate portfolios, eyeing double-digit returns in the sector.

InReturn Capital has also announced a partnership with Horizons Office to finance the expansion of the latter’s office suits from 5,200 square feet of space that serves 20 tenants to an additional 32 suites.

“We are excited to support Horizons Office in growing its office space capacity three-fold and thus provide opportunities for several other small enterprises to start operations quickly,” said Anthony Gichini, a partner at InReturn Capital.

Moses Wekesa, the chief executive of property firm Grade East Africa, said private equities are attracted to real estate as they are long-term investments that have consistent cash flows that match the horizons of private equity firms.

The Riverside business hub in particular has higher returns for office rentals than the alternative hubs of Upper Hill, Westlands and Mombasa Road.

“Rents for corporate offices are on average between Sh80 and Sh120 per square foot, but in Riverside it is about Sh180 per square foot,” said Mr Wekesa.

NSE-listed investment firm, Centum, announced in the third quarter of last year that it was sourcing for Sh6 billion from international banks to help develop the first phase of a real estate project in Runda.

The development will see offices, apartments, shopping malls and recreational facilities put up on a 100-acre piece of land that will include a 255-bed hotel and 544 homes.

“Our target return is 25 per cent year-on-year,” says Centum’s website.

Russian-based Renaissance Partners are financing Tatu City which on completion is expected to host thousands of residents living in a gated community with easy access to amenities such as schools, hospitals and shopping malls.

“Currently there is a backlog of more than 150,000 houses in Kenya and the gap is growing by at least 10,000 every year. Tatu City won’t even scratch the surface to meet this need. This makes it very appealing to us,” said Renaissance Group head of real estate for Africa, Arnold Meyer.

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