Driving around Nairobi, one is likely to see construction of high-rise buildings under way almost everywhere, according to a report in HowWeMadeItInAfrica.

While individual private investors are heavily focused on residential developments in Nairobi, institutional investors are concentrating on commercial offices, retail and industrial property, the report says.

Some corporations have relocated from Nairobi’s central business district to suburbs such as Upper Hill, Kilimani and Westlands to escape the city’s infamous traffic jams.

“However, there are still people who will thrive in having their business in the CBD like banks and lawyers,” said Gikonyo Gitonga, CEO of Kenya’s Axis Real Estate, in an interview with HowWeMadeItInAfrica.

Nairobi’s improving infrastructure, international airport, robust financial sector, educated workforce, quality of life and expanding middle class make it an attractive destination for multinationals expanding to East Africa.

“Although there are a few security issues it is relatively secure,” Gitonga said. “With the discovery of oil we are going to see a lot of commercial real estate growth as oil companies and firms that provide auxiliary services to the oil and gas industry locate here. There is definitely going to be more demand for office space in Nairobi.”

The emerging business district of Upper Hill is home to World Bank, Equity Bank Group’s head office, Coca-Cola East and Central Africa office headquarters, the World Health Organisation, British High Commission and Embassy of Japan.

The government and universities are also filling office space in the central business district because it’s convenient, Gitonga said.

“If you look around Nairobi, some of the buildings have been bought by universities and converted into teaching facilities because a lot of Kenyans are doing post-graduate degrees. Which is the most convenient place to have a class at 5:30 in the evening? It is the central business district. Any building that is put up for sale in the CBD will probably be bought by a university,” he said.

London-based private equity firm Actis expanded its Nairobi Business Park development in 2012 and has begun work on Garden City, a mixed use development that will play host to the region’s largest retail center and residential and office complex.

“The Kenyan property market is very vibrant,” Gitonga said. “Capital appreciation is high in Kenya and there are good returns in terms of yields. That is why you are seeing a lot of international players coming in.”

Kenya has just 20,000 mortgages but that hasn’t stopped locals from buying and investing
in real estate. Most buyers and local investors use alternative financing sources like savings and credit cooperatives and investment groups.

“Kenyans love real estate,” Gitonga said. “There seems to be a lot of money in the market.  The investment opportunity for a lot of people is very limited. You either invest in the stock market, your business or real estate. However, limited access to professionals is a major challenge in the market.”

Axis recently opened an office in Tanzania and is planning to expand to Rwanda, Uganda
Burundi, South Sudan and possibly Ethiopia, developing partnerships with existing companies in these markets and work with them as affiliates and associates.

“You have to understand how to do business in these countries,” Gitonga said. “Doing business in Kenya and doing business in Uganda or Tanzania is a completely different ballgame. There is no one single formula.”

His advice to foreign and local investors? Now is the time to expand across East Africa before the market matures.