A team of experts has been assigned to probe the reasons behind the low occupancy of new commercial buildings in Kigali city, officials have disclosed.
While meeting private sector operators on Friday last week at a dialogue between the City of Kigali and the Private Sector Federation (PSF), Pudence Rubingisa, the city Mayor, said that; “The findings, measures and proposed solutions to the matter should be available within two weeks.”
“We have been in discussions with private sector operators in commercial real estate in Kigali over the issue of unoccupied commercial buildings,” the Mayor added.
The central bank and Rwanda Housing Authority have been tasked to discuss with investors in commercial buildings to seek a solution, Rubingisa said, adding that tentative solutions need to be put on the table for discussions within two weeks.
“We have to discuss and come up with possible solutions,” he said.
Rubingisa explained that the low occupancy of the commercial buildings has been caused by different factors.
Among them, he cited the Covid-19 pandemic, which led to the closure of some businesses which used to rent these commercial buildings.
Other reasons, he added, include the choice by some businesses to operate from residential houses.
In 2016, the city of Kigali authorities launched a crackdown on businesses and non-government organisations operating from residential houses.
However, six years since the order, a number of organisations and businesses continue to operate from residential houses.
Rubingisa said that those operating from buildings designated for residential purposes should relocate to commercial complexes.
He added that there is a need for helping and encourage businesses to streamline their operations and occupy commercial buildings.
“As we recover from Covid-19 effects we hope the occupancy could also increase,” he said.
What does the private sector say?
Some private operators have said that the speed at which commercial buildings are coming up is not commensurate with market demand.
Robert Bafakulera, the Chairperson of the PSF, said that every three months private operators meet with the City of Kigali to discuss matters and partnerships.
He said that there is need for a study and measures that guide commercial buildings construction and occupancy demand.
“There is an issue of low occupancy of commercial buildings and it is worrying. However, as we have been discussing with the city, there should be no push to raise so many commercial buildings without first assessing occupancy demand,” he said.
Other players in commercial real estate said that the high cost of rent in Kigali is among the reasons for the low occupancy rate of commercial buildings.
Bafakulera said that while some businesses only need sensitisation; there is also a need for building the capacity of others to raise their ability to afford commercial buildings space.
“We also have to build capacity and create more businesses that can occupy the commercial building spaces. For instance, we are working on a strategy together with the local government where each village will have a mega business/project that can create jobs. We need to build traders’ capacity from the grass root level and the more Rwandans embrace trade, the more commercial buildings will be occupied,” he said.
A glance at the occupancy rate of commercial buildings
According to a commercial real estate market survey in the city of Kigali whose findings were revealed in May 2020, the occupancy rate for commercial buildings in Kigali stood at 85 per cent.
Among the key driving factors include buildings’ proximity to clients, amount of rent and quality of the building among others.
The study surveyed 1,476 tenants and 456 commercial buildings owners within nine commercial centres.
Proximity to clients is by far the most important reason for renting at a specific location, according to 46.3% of the tenants.
This is followed by location prestige at 18.2 per cent and cheap rent at 14.5 per cent.