May 2016 Dar es Salaam City Report Tanzania
Dar es Salaam City Report May 2016 Market Overview 2016 GDP forecast 7.0% Tanzania Bank Lending Rate 12% (2016) Real Estate Dashboard Office 140,000-180,000m2 gross lettable area US$18-21/m2/month CBD rent US$22-24/m /month 2 Msasani Peninsula rent Retail 153,000m2 gross lettable area US$25-35/m2/month line store rent JLL Property Clock Offices Retail Rental growth slowing Rental growth accelerating The JLL Property Clock SM Rents falling Rents bottoming out Inflation 5.6% (2015) Dar es Salaam is the capital of Tanzania, which has achieved strong growth averages of over 6% for the past five years and whose medium-term prospects are favourable with a 7.1% GDP growth rate forecast for 2016. Agriculture remains the country s largest industry, while more recent expansion has emanated from information and communication, construction, manufacturing and other service sectors. Despite its impressive economic growth, Tanzania s wealth is not sufficiently distributed and poverty levels are high. Education levels remain low and limited progress has been made on the country s liquefied natural gas (LNG) project following the success of its exploration phase. John Magufuli of Tanzania s CCM won the presidential election in October 2015 and has already made strides in clamping down on corruption as well as reallocating superfluous expenditure to infrastructure and social services. The Dar es Salaam real estate market is still in its infancy. The retail market is predominantly informal and grade A office space is going through its first wave of development in the CBD and further north in the Msasani Peninsula. Commercial leases are usually paid in U.S. dollars or Tanzanian shillings pegged to the U.S. dollar. Only two noteworthy transactions have taken place, namely the purchase of Mlimani City Mall by Turnstar (a listed property fund in Botswana) and the sale of the Amani Place office portfolio to Sanlam by Actis in 2013. Current asset pricing in the city remains fairly subjective.
Investor Sentiment Tanzania s macroeconomic environment will foster the growth of more real estate investment in Dar es Salaam. While Nairobi has consolidated its status as the gateway to East Africa for many corporations, opportunity exists in Dar es Salaam to attract international capital and command a greater slice of the property market share in East Africa. At the same time, potential real estate projects will be enabled by the completion of the Kigamboni Bridge in the south of Dar es Salaam, improvement of the Bagamoyo Port in the north of Dar es Salaam, and the real commitment by the new government to capital and infrastructure programmes across the city. However, the introduction of derivative title ownership and the high costs of real estate transactions have created a barrier for foreign real estate developers who want to enter the market, and the majority of new projects are therefore being developed by local real estate players. The sustained growth of the city bodes well for future infrastructure and property development. However, real estate players need to be wary of the nature of the real estate opportunities that they pursue. Market Drivers US$11 billion and US$ 4 billion GDP forecast of 7.0% on the construction of Bagamoyo Port and Uganda to Tanga Oil Pipeline respectively Reformist government US$19 billion on major infrastructure projects
$ Offices Gross lettable area 140,000-180,000m2 CBD rent US$18-21/m2/ month Msasani Peninsula rent US$22-24/m2/ month Overview There are two primary office nodes in Dar es Salaam. The CBD is currently the hub of commercial activity in the city with local pension funds investing heavily in new office towers; however, take-up of space has been slow as traffic congestion and generally poor-grade accommodation characterise the area. Golden Jubilee Towers and PSPF Twin Towers are examples of recently-completed skyscrapers in the CBD which have added a great deal of office stock to the city. The office market has begun to move away from the CBD to a broadly decentralised node located towards Oyster Bay, the Msasani Peninsula and further north leading to the Mwenge intersection. The pace of development in this node is quickly accelerating as its areas are appreciably more appealing to live and work in than the CBD. Base rentals for quality offices in the CBD range from US$18-21/m2/month, while asking rentals are much higher in the Msasani Peninsula at US$22-24/m2/month. Service charges are approximately US$2-3/m²/month while lease lengths typically range from two to five years. Rental growth in the office sector has been negligible over the past few years with achieved escalation rates being not greater than 2% per annum. The office market has begun to move away from CBD.
Retail City population 5.1 million GDP per capita US$601 Overview The retail sector in Dar es Salaam is primarily informal, and the largest formal retailer footprint in the city is that of Kenyan supermarket chain Nakumatt. Formal retail formats are rare and the city s current retail stock has stemmed from local supermarket owners who have chosen to develop their surrounding landholdings. Many of these schemes have been built without professional retail expertise which has resulted in poor trading conditions due to unsuitable locations, insufficient parking, inefficient design, and poor or non-existent property management services. Only two modern shopping centres currently exist in Dar es Salaam - Mkuki House Mall, a 25,000m² scheme which has just been completed and is located off Julius K. Nyerere Road, and Mlimani City Mall (19,000m²) which is the largest and only wellplanned shopping centre in the city. Mlimani City Mall has attracted international retailers such as South Africa s Game and Mr Price, KFC and the Landmark Group out of Dubai. Further presence of these retailers is evident in standalone and department store layouts across the city such as Food Lover s Market in Oyster Bay and Landmark Group s portfolio of brands. With a city population of 5.1 million, demand for more formal retail exists but retailers need to be pragmatic about their approach to this market. Tanzania is still a low-income economy and retailers have to offer value for money to the broader consumer. In the medium term, single-level malls consisting of a grocery anchor and a few apparel and service operators in a basic retail format will perform well. Dar es Salaam s future retail pipeline includes Peninsula Plaza (29,000m²), Dar Village (25,000m²) and the extension of Mlimani City Mall which will add 10,000m² of retail space to the mall, a conference facility of circa 4,000m² and two office blocks of 5,000m² each. With a city population of 5.1 million, demand for more formal retail exists but retailers need to be pragmatic about their approach to this market. Gross lettable area 153,000m2 Line store rent US$25-35/m2/ month
Commercial nodes Seacliff Village Peninsula Plaza Slipway Shopping Centre Oyster Bay Bagamoyo Road Dar Village Oyster Bay Shopping Centre Ali Hassan Mwinyi Road Victoria Kinondoni A7 KEY Morogoro Road Kawawa Road Upanga Office nodes: CBD Kinondoni Oyster Bay Upanga Victoria Nelson Mandela Road Kigogo Road Dar City Mall CBD Retail: Dar City Mall Dar Village Quality Centre Milimani City Mall Oyster Bay Shopping Centre Peninsula Plaza Seacliff Village Slipway Shopping Centre Quality Centre Julius K. Nyerere Road Julius K. Nyerere Road Milimani City Mall B2 Real Estate Outlook Dar es Salaam is one of the world s most rapidly-expanding city economies and, as such, it has earned a place in JLL s Global300: The New Commercial Geography of Cities report (published in 2014) the 300 cities that JLL predicts will represent the bulk of economic and commercial real estate activity over the next decade. The sustained growth of the city bodes well for future infrastructure and property development. However, real estate players need to be wary of the nature of the real estate opportunities that they pursue; consumer support for future projects will depend on better wealth distribution and higher education and income levels among the majority of the population. Speculative development in the office sector may lead to oversupply in the short term, while opportunities exist in the retail sector for smaller, well-designed malls which can be extended in the future to match increasing demand. Improved roads and other infrastructure work will serve as a catalyst for developments along main arterial routes such as Old Bagamoyo Road.
Contact Us JLL Kenya: Lucy Githinji Associate Director Corporate Solutions East Africa tel +254 730 112 024 lucy.githinji@eu.jll.com Mark Dunford Vice President Hotels & Hospitality Group tel: +254 730 112 024 mark.dunford@eu.jll.com JLL : Craig Hean Managing Director Sub Saharan Africa craig.hean@eu.jll.com Xander Nijnens Senior Vice President Hotels & Hospitality Group xander.nijnens@eu.jll.com Ewout Holst Director Corporate Solutions ewout.holst@eu.jll.com Fadheelat Noor Mohamed Associate Research tel +27 11 507 2200 fadheelat.mohamed@eu.jll.com Anthony Lewis Director Capital Markets anthony.lewis@eu.jll.com Information Credit: Pangani Group www.africa.jll.com COPYRIGHT JONES LANG LASALLE IP, INC. 2016. This report has been prepared solely for information purposes and does not necessarily purport to be a complete analysis of the topics discussed, which are inherently unpredictable. It has been based on sources we believe to be reliable, but we have not independently verified those sources and we do not guarantee that the information in the report is accurate or complete. Any views expressed in the report reflect our judgment at this date and are subject to change without notice. Statements that are forward-looking involve known and unknown risks and uncertainties that may cause future realities to be materially different from those implied by such forward-looking statements. Advice we give to clients in particular situations may differ from the views expressed in this report. No investment or other business decisions should be made based solely on the views expressed in this report.