Decision-making Criteria for Investing in Commercial Real Estate in Kenya

Abstract

Commercial real estate inresullems in the Ke".I"lI'scapital city-Nairobi reveal the jo/lolring: A shrinking occupation demand; Disparities between expected and actual incomes; D!lJiculties in meeting debt serricing obligations and d!lJiculties in completing const.ruaion projects within the specified cost and timejrames.ln spite <1these problems, neu; IeIlBeand re,:." expensire buildings continue CO mushroom in the ci~l".Therefore, there appears CO be unexplained reasons that compel investors co continue inresting in commercial real eswte. It is against this background that research \Vasundertaken CO esuiblisb the basis <1decision-making wliile inresting in these properties. The research lI'as based on W'O main object ires, name~I'; to idem!fj' and rank theJvctors that irifluence the decision to inrest in commercial real escote and propose steps to bejolloll'ed ~I' inrestors in the decision to inl'est in these properties in order co, amongst other goals, minimise disparities between the expected and actual rer urns, A random sample <1commercial buildings in the ci~I' lI'as st.udied and it 11'05 esuibltsbed that, expected income II'(lS the most important jactor irifluencing the decision to inrest in commercial real estaie Iollowed ~I' expected returnsJrom the illl·estment. While it lI'a5 observed that the commercial real estate rnrestor in Ker~1"lIisjair~1' rational and economicallv led, a lack <1s}'Stemat ic and formal decision making rules and procedures l\'a5 noted. The study's main proposal is that the decision to illl'est in commercial real estate ought to be undertaken in a srstemacic manner. EjJectire decision making tarelv occurs ~I' chance but involves a logical, sequential and ordered approach. The researcher is also the opinion that a standard school <1appraisal should be developed and introduced in Kenya. Continuous pr<ifessional development: programmes should also be instituted.