Fusion Capital pegs counties as the next growth area for retail outlets, residential and commercial centers

Fusion Capital Executive Director in charge of Real Estate, Daniel Kamau.

Real estate developer and private equity firm, Fusion Capital has touted the Counties as the next growth area for retail outlets, residential, commercial and distribution centers. The financial services firm has stated that one of the biggest opportunities seized by Fusion was devolution, which saw the movement of people to Counties. Company research has revealed that Counties, however, will only have an appetite for medium-sized developments since – though demand is proven – “the demographics can only support so much.”

“We made a decision to go to the Counties so as to capitalize on the first-mover advantage by being the first developers to venture into those counties on specific sectors mainly high grade retail outlets, residential, commercial and logistics and distribution centers,” said Fusion Capital Executive Director in charge of Real Estate, Daniel Kamau.

“The governors/county governments are very supportive of serious investors, they tend to offer support and create enabling environment for investments. There, are of course, some counties that have corruption issues that they need to seriously deal with to attract and or retain investor. Going forward, I believe investors like ourselves will mark counties that have markets and good governance structures and will commit to back them in the long term but will also black list others that are mulled with corruption and or insecurities,” he added.

One of Fusion Capital’s ventures is the Meru Greenwood Park development.

“Meru is ranked as one of the fastest growing counties in Kenya. The town has a 15% population growth and an urbanization rate of 11 per cent, which is more than the average National urbanization rate of 4.34 per cent. This shows how much potential there is in Meru. There is no other proper shopping mall in the town and our intention is to provide a one stop center for Meru and its environs. Whereas the mall is only 135,000 square feet of lettable space, it will serve as a destination mall for Meru and its environs,” Kamau explains.

Being the first development in the market also allows Fusion to tap into lifestyle brands looking to expand into the Counties.

“We are already in Nairobi, Kiambu, Mombasa, Nakuru, Machakos, Muranga as well as Meru. We have identified another three Counties that we hope we can invest in in the coming year. Our intention is to remain committed into Retail, office, residential and logistics sub sectors of real estate,” Kamau said.

“The medium sized projects are within what we have previously delivered, the capital price is within what we can raise and pre-fund before ground breaking besides the fact that you don’t end up struggling with demand by running an oversupply, the size also enables exit within the investment horizons that our investors prefer. Very large projects have had their share of problems in East Africa due to the number of parties involved,” he added.

The company has invested in offices, retail and residential developments. Some of the notable projects under Fusion include the centrally located Kigali Heights in Rwanda that sits opposite the Kigali Convention Centre, Flamingo Towers in Upper Hill Nairobi, Monty Apartments in Nakuru, Valencia Luxury Apartments in Bukoto Kampala, as well as other projects.

Kamau adds that going forward, experienced financiers and developers such as Fusion will seek to minimize market offtake risks on real estate investments by ensuring pre-sales and pre-lets before committing to projects. Traditionally, financier developers were happy to commit to developments on signing the anchor tenants who typically occupy between 8 per cent and a maximum of 30 per cent of retail space.

“Going forward, developers such as ourselves will required pre lets upwards of 60 per cent before investing in new developments. Fusion will be seeking to go the pre-let and presales on new projects as well as build to suit models,” Kamau said.

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