The Independent Uganda: You get the Truth we Pay the Price
By Ian Katusiime
Judy Rugasira Kyanda is the Managing Director of Knight Frank Uganda. She spoke to Ian Katusiime about the company’s progress and other issues pertinent to the real estate market.
Having been at Knight Frank for nearly two decades, what would you say has been the key to your longevity?
Keeping trust and integrity at the heart of everything we do. Secondly, going the extra mile to exceed clients’ expectations, and remaining consistent in every step of the way.
Tell us about the new developments that have taken place at Knight Frank in the last five years?
The last five years have been of exponential growth at Knight Frank, and it felt as though Knight Frank in Uganda had certainly come of age.
From 35 employees in 2010, to 155 today and growing is no mean feat. Having said this however, this did not happen by coincidence or accident, but happened through a well-drawn up long-term strategic plan, which we diligently executed and followed through relentlessly, despite the challenges along the way.
Our market comprises discerning and sophisticated players whose knowledge of property and expected service is increasing every day. It is unwise for anyone to think they can bluff their way to success. You either know what you are doing and do it well, or you become unstuck at the seams.
The latest addition to our service line is the retail agency and management service, which has given us a comparative edge in the market, because Knight Frank have distinguished and established themselves as the authority in retail centre leasing and management in the region. It is a service line that requires specialized technical knowledge and understanding in order for clients to benefit from the service.
In June 2015 we opened up an office in Rwanda, which without a doubt will register the same success as Knight Frank Uganda has, possibly in a much shorter time.
According to UBOS, there is a housing deficit of 550,000 units. Isn’t this a worrying figure for Uganda?
I see this as more of an opportunity than a threat. The housing deficit positions investors to bridge the gap between supply and demand of housing, mainly in the affordable segment. The banks are also in a favourable position to seize the opportunity to grow their mortgage portfolios by providing long-term investment options for mortgages in this market. So, in as much as there are a few challenges to achieving this, I choose to see the opportunity in such situations as opposed to worrying about them. The worry would have been if we had a surplus of 550,000 units every year, with no takers in sight.
Why haven’t you partnered, say with NHCC to provide affordable housing to low income earners?
The Knight Frank model of operation does not as a rule get involved in property development as a company. From inception to date, we chose to specialize in offering client services in the property development, agency and management side of the business as opposed to also getting involved in development also. This may change in the future, but for now, this is what it is.
Mortgage rates have gone through the roof recently. What really is the way forward?
It’s true to say we have one of the highest mortgage rates in the region. Kenya, for example, averages out between 15% and 20% whereas the lowest mortgage rate in Uganda is 25% for a Uganda shilling mortgage. The cost of finance or capital is high, and in my simple way of explaining this, if we can adopt a culture of saving more, this might provide a long term solution to this challenge. Banks have to also borrow the finances that they are going to lend the final end user, but if they had more deposits than withdrawals, it might change this somewhat. This is of course a very simplistic way of looking at the issue, but I would rather not delve into the whys and what’s and prefer that this is further answered by a banker or financial expert.
How critical is the struggling shilling to the property market in Uganda?
It’s very critical. The struggling shilling is a direct recourse of a strong and strengthening dollar. Uganda imports more than it exports and, as a result, more money is channelled out than is brought in, which further impacts on the trade deficit creating negative market sentiment which further devalues the currency. When the dollar strengthens, the cost of construction rises due to the increase in cost of imports. This means the cost of construction per square meter is pushed up. This increase is quite significant as the majority of building materials are imported into Uganda and are not locally produced. Higher building costs require higher rentals for developers to see returns that are feasible. Yet the weakening currency impacts on the local economy, which moves into a recessionary slump and space occupiers cannot sustain higher rentals, which in turn means a slowdown in take up of space, in turn a slowdown in construction and development. Obviously this has a negative impact on job creation. This vicious circle has a major impact on the total economy at large.
Office blocks remain largely empty in the Central Business District. Is there any headway to resolving this?
Yes, time. We predict that the office market will even out over the next two to three years as certain fundamentals of the economy take shape. For instance when oil starts flowing, we may see more FDI coming in from where we derive demand for offices space.
The trend right now seems to be the sprouting suburban shopping centers. What explains this?
The retail industry is evolving very fast in East Africa and Uganda’s retail business trade has registered rapid growth in the last two years. The first half of 2015 saw a lot of movement and continuous evolution of the retail sector in Kampala.
Malls under the management of Knight Frank have seen average growth of 14% in motor vehicle traffic and 9% average growth of foot traffic. This has had a negative impact on the trading densities in the Central Business District environment of Kampala, which in turn has meant that the Central Business District retailers are starting to consider taking up space in suburban Kampala and are either expanding or relocating their existing business operations.
This shift in preference is down to the continuing trend of consumers moving to suburban retail nodes. This has cemented the suburban malls as leisure shopping outings and changed the landscape of consumer movement and behaviour in and around Kampala. The consumers have come to the realization that the lifestyle and ease of access that comes along with these suburban shopping centers causes them to appreciate and yearn for more. This has created the demand for malls in the suburban areas.
Property prices advertised by Knight Frank appear more closely aligned to high-end consumers. What is your take on that?
We are often asked this question. From our inception in 1996, we have grown to become the leading independent, global real estate consultancy operating in key hubs across the globe, providing the highest standards of quality and integrity in property advisory services, including prime commercial, retail and residential offerings. The strength of the Knight Frank brand that has been built over the years now attracts similarly strong brands and clients ranging from individual private investors and homeowners to major developers and investors who desire to work with Knight Frank purely because of our reputation for uncompromising professionalism in everything we do. So we offer a service for anybody who appreciates these qualities and is willing to pay for them.
Where do you see Knight Frank in the next five years?
As I mentioned earlier, we work on a short, mid and long term strategic plan at all levels – internationally, regionally and locally, and we implement and execute these plans to the letter, reviewing them on an annual basis mainly to track progress. As we roll out our plans, we shall continually strive to give our clients unrivalled service whilst ensuring we make a healthy contribution to growing the market vibrancy and maturity every year. We are confident that our plans will enable us to secure and maintain our position at the top of the market. The next five years will certainly see us not only maintaining our market share, but increasing it wherever we can. Given what is in the pipeline, we have no doubt our portfolio size will also grow across property classes, and we will begin to think about opening regional offices, God willing.
