nairobi struggles with · nairobi, kenya february 2018 how a brazil-brewed $29m construction...

WWW.CONSTRUCTIONKENYA.COM NAIROBI, KENYA FEBRUARY 2018

How a Brazil-brewed $29m construction scandal is wreaking havoc in Lima, PeruMISFORTUNE: A bribery scandal orchestrated by Brazilian construction giant Odebrecht is wreaking havoc in Peru, in what appears to be a case study in the ability of corruption to damage a nation. 6.

BY JANET MUTEGI

The Nairobi office market is turn-ing into a tale of two cities.

On the one hand the Kenyan capital is contending with the ris-ing amount of vacant office spac-es, while on the other the city is reeling under a chronic shortage

of high quality Grade A offices.Driving around the city, eye-

sore ‘To Let’ signs draped over skyscrapers become a constant pointer to a metropolitan that is staring at a property slump.

According to a Broll Property Group study covering the first quarter of 2017, Upper Hill – viewed as Nairobi’s financial dis-trict – has the lowest occupancy levels behind Westlands, Mom-

basa Road, Kilimani and Karen at 74, 80, 85, and 88 per cent re-spectively.

The oversupply of offices against low demand has forced some landlords to lower rents and is-sue shorter lease lengths to lure elusive tenants – leading to sig-nificant losses and erosion of the overall value... Turn to Page 4.

Nairobi struggles with too much office space

Private investors eye profits from student housing • FULL REPORT, PAGE 3

How the State plans to deliver new homes for as little as Sh0.5m • FULL REPORT, PAGE 19

Five elements of a work ethic that accelerates success • FULL REPORT, PAGE 22

MARKET GLUT: Property developers are now taking unorthodox measures to lure tenants, buyers

2 FEBRUARY 2018 CONSTRUCTION KENYA

BY JANET MUTEGI

Kenya’s shortage of skilled masons, electricians, plumbers, painters, and other construction workers is holding back projects at a critical time when the country needs to put up more houses and infrastructure.

Two thirds of local property de-velopers who responded to a recent online questionnaire by Construc-tion Kenya said a lack of skilful workers is a major factor limiting construction activity, coming close to limited access to finance which was reported as a difficulty by 70 per cent of respondents.

The chronic shortage of skilled workers has significantly pushed up labour costs in the past few years - forcing some developers to turn to uncertified artisans thereby com-promising standards.

A recent study by Construction Kenya found that daily dues for certified artisans had more than tripled to between Sh2,500 and Sh3,000 from Sh500 to Sh1,000 in 2012. Artisans operating in major towns charge more.

This has been corroborated by of-ficial statistics from the Kenya Na-tional Bureau of Statistics (KNBS) which show that compensation for workers in the construction indus-try rose to Sh16.87 billion in 2016 from Sh8.84 billion in 2012 – rep-resenting a 90.8 per cent upsurge.

Interestingly, the number of workers engaged in the sector grew at a much slower pace over the peri-od – signalling a protracted labour crunch amidst a boom of real estate

and mega infrastructure projects. According to the KNBS data, a

total of 148, 022 contractors were involved in the building and con-struction sector, up from 106,114 in 2012 – a 34.49 per cent growth.

“We’re currently witnessing dou-ble-digit percentage wage inflation,” says Gerald Maina, who is building a block of flats in Rwaka, Nairobi.

Mr Maina added that some de-

velopers, faced with the difficulty of finding skilled workers, are resort-ing to poaching workers from other developers’ sites by offering small increases in wages.

“There are plenty of developers that are ready to pay higher wages as long as the workers are skilled enough to provide the right quality.”

He lamented that the lack of a national skills database from which certified workers can be sourced has made it extremely difficult for property developers to hire qual-ified artisans as they have to rely on referrals, which are not always reliable.

The labour crisis has been blamed on recent trends where students shun technical education in favour of courses leading to office jobs.

The deficiency began to bite mid 2012 as the sector slowly came to life after the 2008-2011 cool off that coincided with the global economic recession.

During the slowdown, many de-velopers postponed their projects due to lack of finances – which rendered thousands of artisans jobless. As a result, the craftsmen were forced to look for work else-where and most of them have never looked back.

Meanwhile, the supply of fresh construction workers has weak-ened since 2012 when President Mwai Kibaki elevated a big number of technical colleges to universities, leaving only a handful of institu-tions to impart technical and voca-tional skills to students.

To salvage the situation, several organisations including the Afri-can Development Bank (AfDB) and German fund GIZ have recently launched initiatives aimed at shift-ing emphasis towards technical vo-cational training in a bid to develop requisite skills for the local and re-gional construction market.

PAGE TWO

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Developers faced with the difficulty of finding skilled workers are resorting to poaching artisans from other sites. FILE

Skills shortage threatens to slow construction industry

What’s Inside...Building boom opens cash taps for construction tools, lendersRenting of tools and equipment is becoming a viable option for builders seeking to cut operating costs and run a more financially stable business. Page 4

Kenya banks on land bank to deliver low cost housingThe State plans to establish a land bank in a move aimed to address the challenges faced by investors seeking to acquire land for real estate projects. Page 5

Office glut brings losses, anguish for Nairobi landlords as rents plummetOversupply of offices against low demand has forced some Nairobi landlords to lower rents and issue short-er lease lengths to lure elusive tenants. Page 7

How augmented reality helps builders to see through the wallsAugmented reality allows builders to take their BIM model to the construction site to experience it as an immersive, full-scale 3D environment. Page 12

World’s biggest construction scandal wreaks havoc in PeruA bribery scandal orchestrated by Odebrecht is wreak-ing havoc in Peru, in what appears to be a case study in the ability of corruption to damage a nation. Page 16

IKEA’s frugal billionaire founder Ingvar Kamprad slips away at 91Ingvar Kamprad, whose boyhood business of selling matches from his bicycle in Sweden eventually grew into the Ikea furniture chain, has died at 91. Page 18

Labour crunchShortage of certified artisans has significantly pushed up daily wages

FEBRUARY 2018 3CONSTRUCTION KENYA

NEWS ANALYSIS

BY JOY MAKENA

Once upon a time, univer-sity students in Kenya were offered high quali-

ty accommodation within their campuses as the State had then established infrastructure to support the number of students admitted to the country’s insti-tutions of higher learning.

But as the local population expanded, the demand for high-er education grew and universi-ties expanded their campuses albeit at a slower rate compared to the market needs, a situation that left many campuses with severely stretched accommoda-tion facilities.

Today, student housing in the country is big business. Univer-sities, both private and public, are totally incapable of accom-modating a majority of their students.

Official statistics show that the 31 public universities in the country can only accommodate

25 per cent of their students – forcing thousands of learners to seek alternative accommoda-tion. This has provided a huge opportunity to private develop-ers who have been building hos-tels near universities to house learners who cannot find shel-ter within their campuses.

Although this has provided some relief to both the students and their schools, the private hostels are in most cases quite expensive and insecure.

Public Private PartnershipCases of students being mugged or raped as they walk to their hostels at night have been on the rise – prompting the univer-sities to find ways to accommo-date their students within the university campuses.

Several colleges are explor-ing the Public Private Partner-ship (PPP) model as a means to solve the housing crisis. Under this model, a developer builds a hostel, operates it for about 20

years to recoup his investment before handing over the facility to the university.

The PPP model, which is in-creasingly gaining popularity worldwide, is viewed as a fa-vourable avenue for investors to put money into the public education sector to supplement State funding.

“The model is preferred mainly due to its ability to tie in the operation and maintenance aspect of an infrastructure as-set, meaning facilities can re-main in great condition for the entire life of the contract,” says Stanley Kamau, director for Public Private Partnership.

At the prodding of several public universities, the Kenyan government is currently seek-ing investors to bankroll a Sh20 billion student housing scheme that is expected to ease the se-

vere shortage of bed spaces for public university students.

Officials from the National Treasury’s Public Private Part-nership (PPP) Unit last month held an investor conference in Nairobi to sell the idea to po-tential investors who the gov-ernment hopes to partner with to set up 30,000-bed spaces in three public varsities that are struggling with a severe short-age of student accommodation.

According to the Treasury Cabinet secretary Henry Rot-ich, the institutions that will benefit from the project include Moi University, South Eastern Kenya University (Seku), and Embu University College.

Mr Rotich had earlier said that Moi would get an addi-tional 14,000 beds, while Seku and Embu would get 5,400 and 4,000 new beds respectively;

bringing the total number of new bed spaces to 23,400 – a figure that has now been raised to 30,000.

The project will be undertak-en on a build-operate-transfer system in which universities will provide land for construc-tion while the developers will build the hostels, operate them for about 20 years to recoup their investments before hand-ing them over to the universi-ties.

Other public institutions that have sought the State’s approv-al to use PPPs to set up student hostels include Jomo Kenyat-ta University of Agricultural Technology (JKUAT), Egerton, Maseno and the Kenya School of Government – all of which are seeking to add a combined 60,000 bed spaces.

Kenyatta University (KU) has already partnered with New York-based private equity firm Africa Integras to build a 10,000-capacity hostel on a 20-acre piece of land in its Kahawa main campus on Thika Road in Nairobi.

Africa Integras, which in-vests in developing education infrastructure projects, won the tender to lead the PPP in-vestment in 2014 and signed a contract with KU in June 2015.

Under the agreement, a con-sortium led by the US firm with local partners Triad Architects, EPCO contractors and Broll Kenya Facility Managers will build and operate the hostel for 20 years to recoup their invest-ment.

The facility which is ear-marked for completion in two years is the first major PPP in-frastructure project since the construction model was en-trenched into law in 2013.

Affordable accommodationIn addition to investors eying lucrative partnership deals with universities, a host of local and international developers are seeing the shortfall as a great opportunity to set up affordable accommodation facilities for students who may never want to live on campus.

UK-based private equity fund Helios last year signed a Sh7.4 billion deal with property firm Acorn Group for the construc-tion of 3,800 hostels in Nairobi.

The first bunch of hostels will be built near Strathmore, USIU and Daystar where the in-vestors have acquired parcels of land for the project.

The World Bank’s private lending arm - International Fi-nance Corporation (IFC) - which has committed to finance the project to a tune of Sh4 billion has hailed the development as a great initiative that will help reduce the deficit in affordable student housing.

Developers eye big profits from student housing

A student hostel in Jaramogi Oginga Odinga University in Kisumu. Most public universities are contending with a severe shortage of student housing. FILE

Treasury Cabinet Secretary Henry Rotich. FILE


NEWS ANALYSIS

BY JUDY MWENDE

Kenya has enjoyed a con-struction boom for the past decade as developers

rush to keep up with a fast ris-ing population and an increas-ing demand for urban housing.

The boom has not only al-tered the country’s landscape but it has also created a lucra-tive business opportunity for individuals who venture into the trade of hiring construction tools and equipment.

In Nairobi, for example, hir-ing of construction apparatus is gaining in popularity for vari-ous reasons including the rising cost of equipment and limited access to finance, which have forced property developers to find ways to save money wher-ever possible.

Renting of equipment – from small tools such as chisels, ham-mers, and spades to large appa-ratus such as concrete mixers and earth-movers – is becom-ing a viable option for builders seeking to cut operating costs and run a more financially sta-ble business.

“Demand is rising by the day as more construction projects get underway across the city,” says Peter Ngotho, who oper-ates a hardware shop on Kamiti Road in Nairobi.

Mr Ngotho, who mainly hires out wheelbarrows and concrete mixers, says that most of his

clients are property develop-ers and masons who operate in Zimmerman, Roysambu and Kasarani where construction is booming as developers seek to meet the rising demand for housing in the estates.

According to Mr Ngotho, it costs about Sh40 per day to lease a chisel, while a hammer goes for Sh70 a day. A wheel-barrow is rented out for Sh200 per day. The businessman told Construction Kenya that he makes about Sh6,000 daily, sig-nalling the enormousness of the business.

Large enterprises lease out big machinery such as exca-vators, compressors, water pumps, drills, demolition ham-mers, among others. A concrete mixer is, for example, hired out at a cost of between Sh4,500 and Sh7,000 per day depending on location and a client’s nego-tiation skills.

The business is, however, not without its own challenges.

“There are so many conmen masquerading as customers,” says Tom Kamau, who has been in the business for three years.

“You must vet the client and ask for credible referees before you release your tools,” he says adding that many shop owners have at one point or another lost their valuables to conmen.

Mr Kamau says that he re-tains borrowers’ identification documents until they return

the tools after a day of work. “It does not make economic

sense to buy all these tools only to keep them in a store after a development is over,” he added.

Besides, renting of equip-ment avoids the upfront costs associated with purchasing and it allows builders to better allo-cate their financial resources.

Although maintenance and repair is still important for rental equipment, costs are sig-nificantly lowered compared to purchased equipment.

With rentals, the time and labour costs associated with maintenance and repairs are lower and more manageable. Rather than worrying about maintaining a piece of equip-ment for its entire life-cycle, leasing removes this stress from your already busy schedule.

Equipment rentals allow you to focus on the near future rath-er than taking the time to plan out a lengthy maintenance plan.

With owning equipment, companies must have storage solutions in place to keep appa-ratus when they are not in use. Equipment that is not stored properly or exposed to harsh weather condition may depreci-ate at faster rates.

Additionally, warehouse or storage space is an additional cost for construction compa-nies. If you negotiate with ven-dors or suppliers regarding how

long you need a rental, your company may not need to wor-ry about long-term storage.

This saves you the time need-ed to plan out logistics, as well as the cost of storage.

Furthermore, warehouse costs can be extremely high, especial-ly if you have a fleet of machin-ery. In contrast, leasing has the ability to take this inconven-ience away.

Purchasing equipment, and maintaining it as long as pos-sible, requires quite a large in-vestment on top of your upfront purchase price.

As value continues to depre-ciate, it becomes more difficult to recover the cost of your ini-tial investment.

Although all companies op-erate differently, you may want to lease heavy construction ma-chinery to avoid loses associat-ed with depreciation.

Building boom opens cash taps for tools lendersINGENIOUS TRADE Renting of construction tools is becoming popular among many builders

Renting of equipment – from small tools such as chisels, hammers, and spades to large apparatus such as concrete mixers and earth-movers – is becoming a viable option for many builders seeking to cut operating costs. FILE

BY JOHN NDUIRE

The Japanese firm undertak-ing the dualling of Ngong Road has been praised by Nairobians who are particu-larly wowed by the quality of work and meticulous execu-tion of the project.

World Kaihatsu Kogyo (WKK), who are currently finalising work on phase one of the Ngong Road dualling project, have been praised for the manner in which they have put together the

dual carriageway that seeks to decongest the Kenyan capital Nairobi.

“Kudos, Japanese! De-spite taking long, you have built a high quality highway that meets international standards,” Claire Kariuki wrote on the Construction Kenya’s Facebook page early this month.

The Sh1.4 billion project runs from the Kenya Nation-al Library Service to Prestige Plaza and has been under-way since August 2016, with

its completion now sched-uled for next month.

“Japanese companies are the least corrupt (never heard of them in corruption issues). They are great when it comes to technology trans-fer,” Maslah Adan, a Nairobi businessman, told Construc-tion Kenya via email.

And in what appears to be a reward for great workman-ship, the company was on January 25 awarded a Sh2.3 billion tender to undertake phase two of the project –

running from Prestige Plaza to Dagoretti Corner.

The project is expected to commence by April, with a construction timeline of two years.

The scope of work will involve construction of four vehicle lanes and a service lane on each side of the road comprising cycling paths and pedestrian walkways.

Both phase one and two of the project have been fi-nanced through a grant from the Japanese government.

Kenyans praise Japan firm for ‘job well done’

A section of the newly-built Ngong Road. FILE

6,000The amount (in KSh) that a hardware shop owner makes in a day renting out tools.


ECONOMY & POLICY

A residential building in Nyeri. The national housing deficit currently stands at about 1.85 million units FILE

BY JUDY MWENDE

The government is in the process of establishing Kenya’s first ever land bank to serve local and in-

ternational investors in a move aimed to address the challenges faced by in-vestors seeking to acquire land for real estate projects.

The Ministry of Land is currently preparing to conduct a detailed audit of several government-owned entities to establish those that hold more land than they need, with a view to having them release the excess parcels to the land bank.

Some of the big institutions under the ministry’s radar include the Kenya Broadcasting Corporation, Internation-al Livestock Research Institute, East Af-rican Portland Cement Company, Kenya Prisons, the Ministry of Agriculture and Livestock, Numerical Machining Com-plex, and several public universities.

According to the ministry, whatever amount of land will be found to be in excess will be released and gathered to-gether in a land bank that will contrib-ute towards the State’s goal of provision of affordable housing to Kenyans.

“It is noted that quite a number of public institutions hold more land than they require. It is therefore proposed that they release the land for govern-ment projects. Institutional land will be audited and limited to certain acreages based on land use guidelines,” the Min-istry said in a statement last month.

“Some of the institutions’ land hap-pens to be very strategic and prime yet government projects lack space while members of the public consider the lands idle hence subject to invasions and squatter settlements.”

Basically, a land bank is a public or community-owned entity created to acquire, manage, maintain, and repur-pose vacant, abandoned, and foreclosed properties.

The purpose of land banks is to reha-bilitate or demolish inadequate proper-ties or get them into hands of new own-ers who will improve them in accord-ance with the long-term interests of the community.

The creation of a land bank is seen as a great way to defeat speculators who

normally sit on land without building anything, then sell it for a profit – a ma-licious cycle that has abnormally raised prices of land across the country; mak-ing it impossible to build truly afforda-ble houses.

“Land is traded many times over before it gets a developer, after which houses are marketed and sold off-plan – sometimes sold several times before they are even built,” John Mbogo, a Nai-robi-based real estate agent, told Con-struction Kenya.

“You end up with a much distorted market. But it makes sense if you are an absentee landlord; why would you sell your vacant land for little money when you can sell it for an arm and a leg as a ‘proposed gated community’ with a golf course?”

According to Mr Mbogo, the govern-ment will not succeed in its low-cost housing plan if at all it will not address the issue of land prices.

“High land prices have made it all but impossible to build much of any-thing except luxury units,” he said add-ing that the current prices are beyond the reach of most Kenyans.

Sh1 millionAware of the market reality, the govern-ment has shortlisted 35 local and inter-national companies to undertake a pi-lot low-cost housing project in Mavoko, Machakos County, which will serve as a prototype for a planned national roll-out of a scheme that seeks to meet the housing needs of the low-income urban population.

Under the pilot project, a total of 8,000 low-cost two-and three-bedroom houses will be built on a 55-acre parcel of land that has been provided by the government – each of which will be sold to the public for between Sh1 million and Sh1.5 million.

A total of Sh2.6 trillion will be spent to build a million homes across Kenya in the next five years as the country seeks to bridge its national housing gap that currently stands at an estimated 1.85 million units.

According to the government, 800,000 houses will be built under the private public partnership (PPP) mod-el while the remaining 200,000 homes

Kenya banks on land bank to deliver low cost housingSTRATEGY: The State will offer 7,000 acres of land to private investors to build affordable houses for low income earners

will be built under a social housing scheme – where a unit will be sold for between Sh500,000 and Sh700,000.

Social housing refers to dwellings pro-vided for rent or sale at a fairly low price by housing associations and local govern-ments. It is typically offered to citizens on extremely low incomes.

Incentive packageThe government has pledged to offer pri-vate developers about 7,000 acres of land as part of an incentive package.

“We are putting together a land bank because one of the ways we are going to realise affordable housing is when the government provides land for the private sector to work on because 30 per cent of the cost of housing is actually land,” Aidah Munano, principal secretary in the ministry of housing and urban develop-ment said early this month.

“If the government can provide land, then we may be 50 per cent there (meet-ing the affordable housing target),” Ms Munano said.


ECONOMY & POLICY

BY CK REPORTER

Development of the much delayed Konza Technol-ogy City in Machakos

County is still on course as the government rolls out support-ive infrastructure to facilitate growth of digital economy, the Konza Technopolis Development Authority (KoTDA) has said.

John Tanui, KoTDA chief executive said the government has been facilitating dialogue with investors to set up physical infrastructure and social amen-ities at the proposed site of the technology city.

“The proposed Konza tech-nology city whose implementa-tion will be done in three phas-es is part of the government’s digital transformation agenda.

The project is at the take-off stage,” Mr Tanui said.

He spoke in Nairobi during a recent national workshop to discuss flagship projects that are embedded in Kenya’s Vision 2030 blue print on socioeco-nomic transformation.

Kenya’s ministry of Informa-tion and Communications Tech-nology (ICT) has been spear-heading the establishment of a technology city on 5,000 acres of land located 50 kilometres southeast of Nairobi.

The US Silicon Valley in-spired technology hub is ex-pected to attract foreign direct investments and create jobs for skilled youth.

Mr Tanui said that core ac-tivities at the Konza technol-ogy hub will focus on ICT, life

sciences and engineering disci-plines to fuel Kenya’s transition to knowledge-based economy.

“We are optimistic the Konza technology city will offer incu-bation and acceleration space for local start-ups. It will also be a hub for research and devel-opment,” he said.

Kenya requires $14.5 billion to develop the proposed tech-nology city, which is modelled on America’s Silicon Valley.

Mr Tanui said the govern-ment will source for funds from institutional investors to ensure Konza technopolis is completed on schedule.

“The project has attracted investors from across the globe and currently we are develop-ing physical infrastructure like access roads and sewer lines to pave way for creation of the pi-oneer technology city in the re-gion,” Tanui told reporters.

The Konza City, whose mas-ter plan borrows on best prac-tice from Brazil, China and Brit-ain, will be carried out in sev-eral phases spanning 20 years with the initial phase expected to be completed in five years.

The development is based on a model where the government offers land, legal backing and architectural plans to investors to build business process out-sourcing (BPO) ventures and other facilities.

The project is being spear-headed by KoTDA, the Inter-national Finance Corporation as the lead project financial adviser and dozens of consult-ants, including New York-based HR&A Advisors who were in 2012 hired to carry out the ini-tial development of the city.

MIRIAM NKIROTE

The much-awaited con-struction of a new termi-nal at the Jomo Kenyatta

International Airport (JKIA) in Nairobi hangs in the balance despite the approval of a Sh16.5 billion loan by the African De-velopment Bank (AfDB) to fi-nance the multibillion shilling project.

Reports emerging from avia-tion circles in Nairobi indicate that AfDB is just about to back out of the deal following the State’s failure to give a detailed strategy of how it plans to raise the rest of the money needed for the project whose total cost is Sh37 billion.

“The AfDB wants to know how the Kenyan government proposes to come up with the rest of the money needed to build the runway,” reads a new report published by the Indian Ocean Newsletter.

The Kenya Airports Author-

ity (KAA) had planned to use part of the AfDB funding to hire a consultant to prepare an im-pact study for the project.

“Since the AfDB has refused to disburse the first instalments of the loan, the KAA has been unable to conduct this audit, which has delayed the whole project,” the report adds.

Following the approval of the loan in November, the KAA had indicated that construction of

the runway would commence in the second half of this year to enable JKIA to handle bigger aircraft that ply intercontinen-tal routes.

The proposed JKIA second runway, whose design was fi-nanced by the AfDB, is 4.8 kilo-metres long and 75 metres wide – a significant improvement from the current runway that has a length of 4.2 kilometres and a width of 60 metres.

KAA managing director Johny Andersen last year said that the proposed runway would nearly double the movement of air-craft from 25 to 45 per hour thus minimising delays caused by mishaps on path.

“The new runway will be an upgrade of the existing one (which was built in the 1970s). This will be a category two run-way that conforms to interna-tional standards,” he said.

The technology of the facili-ty, according to KAA, will meet the International Civil Aviation Organisation’s (ICAO) Category II specifications, which will en-able operations in bad weather thus avoiding aircraft diversion.

“This is an ICAO Code F run-way which can handle the new generation extra wide bodied aircraft like Airbus A380 and Boeing B747-800,” KAA said in a statement.

Some of the attributes that will come with the new runway include fog lights on the land-ing path. Presently, the runway is only lit on the sides.

In bad weather, aircraft have to be diverted to Moi Inter-national Airport in Eldoret or Entebbe International Airport in Uganda as they cannot be al-lowed to land at the airport for safety reasons.

Officials have in the past stat-ed that the second runway will allow for continuous airport op-erations should an aircraft inci-dent render the existing runway unusable.

JKIA, which is the largest and busiest airport in East Afri-ca, is expected to handle slight-ly over 17 million passengers annually by 2020, with growth expected to hit 35 million pas-sengers a year by 2030.

Government says development of tech city on course

KoTDA chief executive John Tanui. FILE

JKIA’s second runway project hits financial potholeCONCERN: AfDB wants to know how Kenya proposes to come up with Sh21bn needed to build the runway

A Kenya Airways plane at the Jomo Kenyatta International Airport (JKIA) in Nairobi. FILE

BACKGROUND

The long walk to Kenya’s Silicon Valley

•Ground-breaking for the Konza Technology City was held in March 2012, but the project has not taken off, save for the ongoing construction of a building that will serve as KoTDA headquarters.


TOP STORY

BY JANET MUTEGI

The Nairobi office mar-ket is turning into a tale of two cities. On the one

hand the Kenyan capital is con-tending with the rising amount of vacant office spaces, while on the other the city is reeling un-der a chronic shortage of high quality Grade A offices.

Driving around the city, eye-sore ‘To Let’ signs draped over shiny skyscrapers become a constant pointer to a metropol-itan that is staring at a costly property slump.

According to a Broll Prop-erty Group study covering the first quarter of 2017, Upper Hill – viewed as Nairobi’s financial district – has the lowest occu-pancy levels behind Westlands, Mombasa Road, Kilimani and Karen at 74, 80, 85, and 88 per cent respectively.

The oversupply of offices against low demand has forced several landlords to lower rents and issue shorter lease lengths to lure elusive tenants – leading to significant losses and erosion of the overall value of their as-sets.

“What you will see is prices flattening and rents reducing over time as some developers might panic,” Sakina Hassanali, head of development consult-ing and research at Hass Con-sult said while releasing the

Sonko’s repaint order draws mixed feelings

Office glut brings losses, anguish for Nairobi landlords as rents plummetOVERSUPPLY: Some 2.5m sq ft of office space came on-stream last year, with 2.4m sq ft expected this year.

The oversupply of offices against low demand has forced several landlords to lower rents and issue shorter lease lengths to lure elusive tenants. COURTESY

BY NJOROGE MACHARIA

An order issued by the Nai-robi County government for all buildings to be repainted has exposed an archaic city by-law that has not been up-dated to match the latest ad-vances in the building and construction sector.

During a tour of the cen-tral business district last month, Governor Mike Son-ko directed building owners in the city to repaint their structures as part of an on-

going beautification project in the city.

“Nairobi is a commercial hub. We should make sure that it is beautiful and clean. All buildings should be re-painted,” Mr Sonko said.

“Owners have a choice to either maintain their origi-nal colours or change them as they please,” he added.

Although Mr Sonko did not issue a deadline by which the buildings should be repainted, he asked land-lords to abide by the direc-

tive – which is actually in line with the city’s by-laws that stipulate that every building in the city must be repainted every two years.

While repainting of build-ings adds to their value, Johnstone Ngare, a Kasara-ni-based contractor, says the by-law “has been overtaken by events considering that the minimum warranty pe-riod for most external paints is five years.”

“It is not practical and cost effective to repaint every

two years given the develop-ments in the paint sector,” he adds.

Jane Otieno, a tenant, is on the other hand very hap-py about the directive.

She argues that fine-look-ing buildings will attract better tenants and more shoppers – which will even-tually lead to more profita-ble ventures.

“Landlords should keep their buildings neat since the accruing benefits are self-evident,” she said.

Nairobi governor Mike Sonko directed building owners in the city to repaint their structures . FILE

Hass Property Index for the fourth quarter of 2017 last month.

“We have also seen peo-ple convert their buildings mid-construction where a property that started off as a commercial building is transformed into a hotel as developers avoid adding on to the glut.”

This is a gamble since the landlords may have a hard time trying to fill their leaseholds, while delays in construction could lead to asset value depreciation.

A Nairobi property agent who spoke to Construction Kenya on condition of ano-nymity said he was aware of landlords who recently low-ered their asking prices by as much as 30 per cent in some office buildings.

“Some buildings in Upper Hill and Westlands opened with an asking price of Sh140 per square feet, but are now asking as low as Sh100,” John Wafula* (not his real name) said.

He said the absence of centralised data on the Ken-

yan real estate sector has greatly contributed to the office glut in Nairobi since many developers do not have an idea that they are pumping their money into an already heavily saturated office market.

But despite the glut, there is a chronic shortage of Grade A office space – high quality offices built to international standards – amid rising demand from local and international cli-ents.

“Key challenges within the office market continue to be a limited supply of pure grade A office devel-opments in Nairobi as per international standards,” Broll said in its report.

“These challenges con-tinue to limit higher rental growth in the market and continued delays in com-pleting projects on time negatively impacts the of-fice supply cycle.”

But even as the market stagnation continues to weigh heavily on the minds of investors, property ex-perts are quick to allay fears of a looming bubble burst in the office market.

“We are seeing quite a lot of space coming on to the market in 2018 and lesser into next year so we expect some of the oversupply to be reabsorbed as the econ-omy recovers,” says Knight Frank chief executive Bob Woodhams.

According to Woodhams, the supply of office spaces is expected to slow in the coming years thereby eas-ing supply glut.

“In 2016, we had two mil-lion square feet coming on stream and last year this went up to 2.5 million,” he said.

“This year, we expect 2.4 million square feet and this will go down to 1.5 million in 2019 so as the supply slows down, we expect demand to pick up and consequently a recovery in prices.”

Upper Hill is, however, expected to continue strug-gling with supply glut due to its perennial congestion.

30%Percentage by which some landlords have lowered their asking prices

QUICK FACTS

How landlords are fighting glutUAP TowersThe tallest building in Nairobi has at least eight vacant floors - two years after it opened its doors. The owner has contracted four real estate agents to find tenants.

Vienna CourtA pure Grade A office that opened in January 2017 is now 70pc occupied and the developer is aggressively pushing to attain 100pc occupancy by end of June.


BY PETER LUGARIA

Investment firm Cytonn has called for urgent review of the interest rates capping

law as a means to address the widening demand-supply gap for affordable housing in the country.

In a new report titled ‘The Total Cost of Credit Post Rate Cap’, the company says that lack of access to cheaper credit has seriously undermined housing development in the country, leading to a huge number of in-complete and delayed projects.

“The constraints have made developers seek alternative funding methods. They want cheaper, easier-to-access, and more reliable means to fund their development activities,” Cytonn said in the report dated January 2018.

The firm argues that re-viewing the law will encourage many financial institutions to venture into construction and mortgage financing, unlike the current situation where most lenders are limiting credit to individuals in favour of buying government papers.

“Most of the banks [55 per

cent] interviewed in the survey indicated that interest rate cap-ping negatively affected their lending as it compelled them to tighten their credit standards,” the report reads.

Cytonn said that non-per-forming loans have increased in seven sectors: building and construction, trade, real estate, tourism, transport and commu-nication, manufacturing and household sectors.

This development is believed to cause anxiety to would-be new recruits in mortgage, with the end result being “low finan-cial participation with fewer than 25,000 mortgages in the country.”

Cytonn’s report comes as the World Bank suggests the crea-tion of a Kenya Mortgage Refi-nance Company that borrows from successful models such as Morocco and Malaysia that guarantee up to 70 per cent of mortgage loans.

According to the World Bank, this will help raise the number of mortgages in the country to an average of 60,000 mortgag-es from 25,000.

This, together with the gov-ernment’s plan to build a mil-

lion low-cost homes in the next five years, will help ease the national housing shortage that currently stands at about 1.85 million homes.

The State is seeking to part-ner with the private sector to deliver low-cost homes that will target individuals earning Sh25,000 and below per month – who form the bulk of the country’s working population.

The project is estimated to cost Sh2.6 trillion, according to the ministry of housing.

CORPORATE UPDATES

Nearly two thirds of UK millionaires want to buy homes in KenyaBY JOHN NDUIRE

Nearly two thirds of United Kingdom’s millionaires are in-terested in buying homes in Kenya, a new report shows, fur-ther reinforcing the country’s status as a regional hotbed for property investments.

According to the recently re-leased Knight Frank Inside View Kenya 2018 report, four cent of the world’s high net worth pop-ulation – individuals with assets of more than $1 million exclud-ing their primary homes – are considering purchasing homes in Kenya; led by UK million-aires, 63 per cent of whom have expressed their desire to own property in the country.

British buyers are interest-ed in Kenyan holiday homes – mainly in Lamu and Watamu, as well as countryside areas such as Nanyuki, near Mount Kenya, and within game conservancies.

“Among the global high net worth population, four per cent look to own homes in Kenya – led by the UK’s high net worth population, 63 per cent of whom express interest in Kenyan prop-erty, followed by 16 per cent of South African high net worth individuals and 11 per cent of Spanish, Mauritian and US high net worth individuals,” said the report.

“About five per cent of the super-rich in Uganda, Tanzania, Nigeria, Ghana, Switzerland, France, Canada and Lebanon are also likely to invest in Kenya.”

The Kenyan capital, Nairobi, is on the other hand popular among international corpora-tions looking to set up their headquarters in Africa.

“The city’s hotel industry is growing fast, as is the technolo-gy industry, which attracts many young Americans straight out of college who want to embrace ex-posure to this rapidly expanding

market,” the report says. “While many expatriates will

live in high-end residential areas such as Karen, Runda or Muthai-ga, these young tech workers tend to rent apartments clos-er to work and enjoy Nairobi’s burgeoning youth culture in the form of trendy bars and clubs.”

Kenya’s high net worth indi-viduals, who have doubled to around 9,400 over the past dec-ade, are in recent times invest-ing heavily in the local luxury property segments – a scenario that has pushed property values to record heights.

“Whereas traditionally wealthy Kenyans might have sought a safe haven for their cash in lux-ury property in South Africa, Dubai, New York or London, they are increasingly seeking high-end products within Kenya itself,” says the report.

This comes even as the city’s prime residential market looks forward to a recovery in the first half of 2018 as the wave of pro-longed political uncertainty dis-sipates, ending a period of price correction experienced in 2016 and 2017.

“An oversupply of prime prop-erties for rent is behind the weaker prime rental growth, which has given tenants more leverage to negotiate with land-lords. In a market dominated by expatriate tenants, corporate budget cuts by multi-national firms have further influenced the performance of the high-end residential segment,” the Knight Frank report states.

According to Knight Frank Kenya managing director Ben Woodhams, Kenya has “a long-standing reputation as a destination for holiday home ownership” and that property investments are expected to in-crease in line with a strong eco-nomic growth in 2018.

Cytonn urges repeal of rate cap, says it stifles growth HARD TIMES: Bad debts have increased in construction, trade, real estate, tourism, transport and communication, manufacturing and household sectors.

Cytonn says reviewing the law will encourage many lenders to venture into construction financing. FILE

QUICK FACTS

Kenya real estate market in figures1,000,000The number of low cost houses that Kenya plans to build in the next five years.

200,000The number of low cost homes that must be build every year to hit the above target.

Sh2.6 trillionThe estimated amount to be spent to build a million low cost homes countrywide by 2023.

Runda Paradise located off Kiambu Road in Nairobi. COURTESY


OPINION & COMMENTS

The other day, while driv-ing through Nairobi’s Parklands area, I couldn’t

help but notice how much the neighbourhood I grew up in had changed.

Gone were the art deco hous-es with round verandahs and tiled roofs. Gone, too, were the mango and frangipani trees that littered every garden in this neighbourhood.

These have now been re-placed with ugly apartment blocks or office buildings that have eroded the sense of com-munity that once characterised this neighbourhood.

Parklands, like many other old estates in Nairobi, has be-come a victim of developers’ insatiable greed for land and a short-sighted view of urban de-velopment by the authorities.

Homes in which families have lived for generations are being sold purely because the land they sit on is considered more valuable than the houses. The result is that a part of Nai-robi’s unique history and archi-tecture is being destroyed at the altar of profit.

The proposal in Parliament to allow construction of high-rise apartment blocks in similar old neighbourhoods in Nairobi may satisfy the city’s demand for affordable housing but it risks destroying its architectur-al heritage.

It seems that making the most profit, rather than preserv-ing the city’s history, is what is

propelling urban development and construction in this city — which is such a shame because even the most advanced cities in the world have preserved buildings that they consider to be part of their heritage.

In the US, for instance, I can’t imagine New York with-out Greenwich Village or Bos-ton without its Back Bay area, where old homes have been designated as national heritage sites because of their historical significance.

When I was at university in Boston in the 1980s, I lived in an old red-brick townhouse on Marlboro Street in the Back Bay area that had been converted into a students’ dormitory.

The town-house probably belonged to a rich merchant in the 18th or 19th century. It had a parlour, ornate ceilings and carved fireplaces. The tiny rooms upstairs were probably once used by maids.

Even though the building was in a very fashionable area of Boston, there was no danger of it being demolished to pave the way for a highrise apartment or office block because the town-house had been declared a na-tional heritage site.

This is because somebody had the foresight to realise that the demolition of such a build-ing would not only erase the city’s history but also reduce the value of real estate in Back Bay, an area known for its “old English charm”.

Some people might say that the demand for housing trumps the desire to save the city’s her-itage. This thinking has led to almost every piece of land in the city being grabbed or to be-come a target for grabbers.

The scramble to fill up every available space in Nairobi with buildings has led to an unhealthy type of urban de-velopment — where even play-grounds, parks and other open spaces are being grabbed to give way to apartments.

Before any plan to commer-cialise or convert old Nairobi neighbourhoods into highrise buildings, there should be an assessment of every building in the area by the relevant author-ities to determine its historical, or architectural value and to decide whether its demolition would add value to the neigh-bourhood or diminish it.

I am all for affordable hous-ing but we cannot achieve this goal by obliterating the city’s unique history.

- A version of this article was published in Daily Nation.

President Uhuru Kenyatta’s ambitious plan to pro-vide affordable housing

by building a million low cost houses in the next five years is a noble idea that might not come to fruition partly due to a skilled labour crunch that is be-devilling the local construction industry.

The shortage has been oc-casioned by the preference of most students to pursue degree and diploma courses that lead to white collar jobs – most of which are non-existent in the local job market.

As a result, the country has numerous job opportunities for people who are non-existent while people have qualifications for jobs that do not exist.

In addition, the elevation of most technical colleges to uni-versities since 2012, yet most university curriculums focus more on theoretical knowledge at the expense of hands-on mar-ket-driven skills, left only a few institutions with the role of im-parting vocational and techni-cal skills to students.

Unfortunately, even the exist-ing colleges are despised since their programs are seen as a reserve of academic failures de-spite being more marketable.

This comes at a time when the country is experiencing a construction boom and the gov-ernment is spending billions on infrastructure development leading to the regrettable im-portation of skilled manpower such as the recent importation

of welders during the construc-tion of the Mombasa-Nairobi standard gauge railway.

The shortage has in recent years raised wages in the indus-try as builders offer to pay more for skilled labour and even poach workers from other sites by offering them higher wages.

This is evident from official statistics by the Kenya Nation-al Bureau of Statistics which indicate that compensation for workers in the industry rose from Sh8.84 billion in 2012 to Sh16.87 billion in 2016– repre-senting a 90.8 per cent upsurge.

High wages and scarcity of artisans will greatly impede the government’s plan to reduce the current national housing deficit since availability and afforda-bility of skilled labour are cru-cial elements in realisation of low cost housing.

Although there has been some effort to train masons, plumbers, electricians and painters, a lot more needs to be done to bridge the gap.

The government and other stakeholders in the education sector should step in and en-sure that middle level colleges and polytechnics enroll more students and that universities shift emphasis towards practi-cal training in a bid to develop the necessary skills for both lo-cal and international construc-tion market.

Roundtables should be held in high schools to bring about a paradigm shift in the way stu-dents choose what to pursue in college. We need to encourage as many students as possible to enroll in technical colleges for industrial training rather than academic degrees.

A recent structural audit conducted on Everest Park declared the Athi

River houses unfit for human habitation. This is, to say the least, agonizing for 240 inno-cent Kenyans, who had bought and occupied the houses.

It is shocking that instead of taking responsibility for the defects, the management of Everest Park has brazenly dis-missed the findings, accusing the National Buildings Inspec-torate of trying to extort mon-ey from them yet the gigantic cracks from the foundation to the walls are clearly visible.

Buying a home is a lifelong investment and it is absolutely unacceptable for a building to develop cracks and become un-

inhabitable a few months after construction, more so apart-ments selling for millions of shillings per unit.

This can only be likened to daylight pilfering of a buyer’s hard earned cash considering that such mishaps occur due to short-cuts taken by unscrupu-lous developers in a bid to cut on costs and rake in more prof-its, while putting occupants’ lives at risk.

It is for this reason that we urge every property develop-er to strictly adhere to the laid down procedures on construc-tion, employ qualified person-nel and use high quality build-ing materials in their ongoing projects to avoid such occur-rences in the future.

Hunger for profit is destroying Nairobi’s architectural heritage COMMENTRASNA WARAH

“I have all the money I’ll ever need - If I die by 4:00pm today.”

State, private sector must step in to fix construction skills gap

Build high quality houses

EDITORIALREVIEW & OUTLOOK


OPINION & COMMENTS

The current generation of Kenyan youth is the most educated population segment in the coun-try’s history. But despite the high levels of school-

ing, many construction companies are having a rough time finding good recruits.

One of the main reasons is that many candidates lack basic skills needed for the job because most uni-versities and colleges promote more theoretical knowl-edge at the expense of practical market-driven skills.

Young engineers and architects who are seeking employment are highly knowledgeable about the theo-retical aspects of the job, but in most cases, fail to take advantage of the available computer design software tools to make them more effective and marketable.

Building and construction has become a highly au-tomated field. Leading global consultancies, including those operating in Kenya, have integrated modern technology in the planning, design and construction process for all their projects.

Unfortunately, most colleges train aspiring archi-tects and engineers to use out-dated software that is more than 20- years-old, despite the fact that market has and demands modern technology skills.

Projects around the world are today planned and designed on a model-based platform. Manufacturing engineering had previously been dented by inefficien-cies due to manual planning.

Now engineers and manufacturers make decisions faster and much earlier at the initial concept stage and are more invested in marketing, rather than fixing de-sign problems.

Consultants, contractors and developers adopting Building Information Modelling (BIM) experience tremendous benefit in terms of cost management and construction management Projects are also imple-mented within schedule, allowing developers to ser-vice their loans on time.

In the UK, 82 per cent of contractors use modern BIM software whereas in the US, this figure is 75 per cent, underlining the integral role that modern design and drawing software plays in the building and con-struction sector.

University education is very important, but it needs to be combined with technical training on how to use specific computer applications.

This training takes only a few months, but is suffi-cient to equip one with the skills to be highly market-able in the job market.

The fact that most fresh Kenyan graduates in engi-neering and architecture are not familiar with modern design software, yet this is what the market demands, explains why many encounter difficulties while look-ing for jobs.

Joyce Cauri is MD, Centre for Innovation Technology.

TALKING POINT | JOYCE CAURI

Why most construction firms are struggling to recruit fresh graduates

Letters to the editorThe editors welcomes readers comments on topical issues. Send your letters via email to [email protected]. Letters may be edited for space, clarity and legal considerations. Views expressed here are not necessarily those of the editor or publisher.

Every year, the gov-ernment allocates nearly half of Ken-

ya’s development budget to infrastructural devel-opment as the country works towards attaining its Vision 2030 goal of be-coming a middle-income nation.

But despite the huge cash allocations, there is little or nothing to write home about. Most of the mega projects under vi-sion 2030 with a total es-timated cost of about $50 billion are moving at a very slow pace, while oth-ers have stalled.

Although we have wit-nessed some progress on projects such as the Mom-basa-Nairobi standard gauge railway, Lapsset corridor, and Lake Tur-kana Wind Power, others

such as the expansion of Jomo Kenyatta Interna-tional Airport and Konza Techno City which were launched over five years ago are yet to take off.

The projects are meant to spur economic growth and further position the country as the region’s economic hub and top in-

vestment destination.It is unfortunate that

as we grapple with poor regulatory frameworks, Ethiopia has in the last few years done really well in implementation of de-velopment of its projects.

Considering the pro-jects are funded through debt, currently estimat-

ed at Sh4.5 trillion, and which Kenyans will be paying for many years to come, it is only fair that the government ensures that there is zero laxity in their timely implementa-tion and monetization.

SARAH KAHIGA

The writer is a Nairobi resident

Most projects under Vision 2030 are moving at a very slow pace. FILE

Last month I missed a meeting due to a magnif-icent and timely idea that was terribly executed.

The much flaunted Out-ering Road, constructed to ease traffic congestion on the densely populat-ed eastern side of Nai-robi failed to put a few crucial aspects into con-sideration. As a result, a

distance that would nor-mally take a few minutes ends up consuming more than an hour.

The road lacks a ser-vice lane and pick-up-points where matatus can load and off-load passen-gers forcing them to do it smack in the middle of the road. This causes obstruction, a lot of con-

fusion and traffic jam es-pecially near former Taj Mall where the road was forced to navigate around the mall.

To make matters worse, the road has no pedes-trian walkways and foot bridges making it a death trap for pedestrians who wish to cross from one side to the other.

What happened to the bus rapid transport corri-dor meant for public ser-vice vehicles, cycle tracks, walkways and footbridges included in the initial de-sign? The Kenya Urban Roads Authority should look into this.

- Simon WafulaKomarock, Nairobi

Outering Road is poorly designed and so dangerous

Mega projects fail to take off despite cash allocations

A graduation ceremony. FILE

“The biggest risk is not taking any risk... In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks.” - Mark Zuckerberg, Facebook Founder & CEO


NEWS INDEPTH

Imagine you’re part of a crew con-structing a new office building: Mid-way through the process, you’re on-

site, inspecting the installation of HVAC systems.

You put on a funny-looking construc-tion helmet and step out of the service elevator.

As you look up, there’s a drop ceiling being installed, but you want to know what’s going on behind it.

Through the visor on your helmet, you pull up the Building Information Model (BIM), which is instantly project-ed across your field of vision.

There are heating ducts, water pipes, and electrical boxes, moving and shift-ing with your point of view as you walk along the corridors.

Peel back layers of the model to see the building’s steel structure, insulation, and material finishes.

It’s like having comic book–style X-ray vision—and soon, it could be a reality on a construction site near you.

This magic hat, the DAQRI Smart Helmet, is a wearable augmented-reality system being developed for use in indus-trial fabrication industries—especially the building and construction industry.

Essentially, it allows builders, engi-neers, and designers to take their BIM model to the construction site, wear it on their heads, and experience it as an immersive, full-scale 3D environment.

Giving construction crews access to this level of multilayered building in-formation would let them effectively see through walls and see spatial relation-ships better; detect MEP clashes earlier; and in general, allow faster, more in-formed decisions with fewer errors.

“It empowers you to make decisions

in the field, as opposed to waiting till the end of your shift to check with your su-pervisor,” says Roy Ashok, DAQRI’s chief product officer. “It empowers the end construction worker.”

The augmented-reality helmets (which cost $15,000 each in this early development phase) are just starting to trickle onto construction sites as DAQRI begins short trial runs, including a col-laboration with Mortenson Construction and Autodesk.

As part of a proof-of-concept test, Mortenson used the helmets during con-struction of the Hennepin County Medi-cal Center in Minneapolis.

“The BIM model is step one,” says Mortenson’s Senior Director of Project Solutions Ricardo Khan.

“The reality is that the value of the model is probably 25 percent of the real value. The next 75 percent is connecting the field teams to the rest of the contrac-tual project information in the space.”

The track record for augmented-reali-ty wearables is marred by one notorious flop—but unlike Google Glass, DAQRI is focused squarely on industrial applica-tions.

In this arena, slightly goofy headwear like these helmets are readily accepted, and fewer privacy concerns apply.

In terms of hardware, the AR helmets have three different types of cameras that work together to locate users at a specific point in space and interpret the geometry around them.

There’s a 166-degree, wide-angle gray-scale lens that defines the user’s position in an environment, accurate to one cen-timeter.

Then there’s a depth-sensing camera (the Intel RealSense) that deciphers the

geometry of the space and the objects within it, telling you, “this is a door, this is a window, this is a table,” Ashok says.

This awareness allows you to place virtual content and alter a model. It also remembers a “map” of each room that’s created.

“It’s almost like a cartography func-tion,” Ashok says. A third, thermal, cam-era also allows users to map temperature readings onto objects rendered in 3D.

“With the combination of where you are with the visual odometry system and what is around you, you know pret-ty much everything you need to know about the world,” he says.

The DAQRI helmet’s software design was driven by functional concerns for the unique and relatively dangerous en-vironment of a building zone.

An initial idea was to use hand sig-nals, which would be picked up by the helmet’s camera, to wade through its menus—but that didn’t work.

“There are two big reasons,” Ashok says. “One is reliability. The technology is just not mature enough have 99.99 percent reliability, and because of that, it leads to fatigue.”

A construction site is also a bad place to be wildly flapping your arms to high-light an array of lighting fixtures that haven’t been built yet: Hence the second concern about using hand signals.

Due to the showers of sparks, spin-

ning blades, exposed wiring, and tons of metal swinging though the air on con-struction sites, you want everyone’s full attention on the task at hand and the ac-tual physical surroundings.

“Once you pull your awareness away from what’s happening around you, it exposes us to potential hazards on the job,” Khan says.

To address these concerns, the DAQRI team decided the helmets would have to operate completely hands-free, and the engineers settled on what they call a “gaze and dwell system.”

A reticule oriented in your field of vi-sion moves as you move your head, “just like a mouse and cursor,” Ashok says.

If you hover over a menu item, hyper-link, or model layer for a few seconds, it’s selected.

The helmets come with Autodesk BIM 360 out of the box, but it’s mostly up to each company to create its own custom software (which DAQRI supports), be-cause the product’s range of uses is so broad.

Using DAQRI helmets during a pro-ject’s construction phase seems like the most intuitive application, but Ashok says it’s worth bringing to a building site on “day one of design” as well.

An architect could show his or her model to engineers and builders on-site before construction begins, and they can point out potential issues—when mis-

How augmented reality helps property buyers to see through the wallsTECHNOLOGY: AR allows developers to take their BIM model to the site and experience it as a full-scale 3D environment.

The track record for augmented-reality wearables is marred by one notorious flop—but unlike Google Glass, DAQRI is focused squarely on industrial applications. FILE

Customers can leverage AR to improve operating and maintaining their facility. COURTESY


NEWS INDEPTH

The track record for augmented-reality wearables is marred by one notorious flop—but unlike Google Glass, DAQRI is focused squarely on industrial applications. FILE

takes are far easier and cheaper to fix. The system’s clear visual interface

means it could also provide construc-tion crews with step-by-step instruc-tions for punch-list inspections or even for maintenance after construction is complete.

“AR has far-reaching impacts on how society will interact with information in context to the environment,” Khan says.

“For the construction industry, we see it as a needed disrupter to resolve a wide range of business problems, such as increasing safety awareness for the field crew related to just-in-time knowl-edge. As a downstream value, our cus-tomers can leverage AR to improve op-

erating and maintaining their facility.”The current incarnation of DAQRI

promises to change the way buildings are made, but it still relies on importing a static virtual model of a building and overlaying it with the real thing.

The next frontier will be creating a device that can detect components hid-den from view and then represent them dynamically to users—whether they are included in the model or not.

That would bring augmented reali-ty to the cusp of X-ray vision, and the construction industry into a world of in-the-moment material omniscience.

- ZACH MORTICE, AUTODESK REDSHIFT

If you hover over a menu item, hyperlink, or model layer for a few seconds, it’s selected. COURTESY

BY NEW YORK TIMES

Stephanie Small spent months thinking about what kind of countertop to get for a new wine bar she will soon open with a partner in Somers, N.Y., part of West-chester County.

Besides mulling over the durability and price, Ms. Small thought long and hard about how the 16-foot bar would look, not just in the inside, but through the window from the outside.

“I spent hours trying to visualize things and I just couldn’t,” she said.

Then a friend who worked for Cam-bria, a countertop manufacturer based in Eden Prairie, Minn., told her about the firm’s new augmented reality app, which lays digital images on top of the real world when people look through a smartphone lens.

After downloading the app onto her cellphone, she pointed the device to where the counter would be installed.

An image of the bar appeared in its intended spot and she quickly realized that one of her most recent picks — a dark gray marble top — would look too much like the concrete floor.

“It was remarkable to see it in the real space,” she said.

“It changed my whole vision.”Cambria, along with home furnishers

like Ikea and Wayfair, are at the fore-front of the home augmented reality revolution.

By superimposing a computer-gen-erated image of an object into real life, augmented reality is allowing consum-ers to see what a potential purchase will look like in its exact location.

Some experts predict that in just a few years, mobile augmented reality tools will surpass the use of virtual re-ality, where one is fully immersed in a computer-generated world via goggles or a headset.

Although the technology behind augmented reality has been around for years, the average consumer had little to do with it until last summer, when Ap-ple released ARKit, a tool kit that allows developers to make augmented reality applications.

Then Apple also made its latest op-

erating system augmented reality com-patible, suddenly allowing millions of people to use any augmented reality tool available through the app store.

Tim Merel, managing director of Di-gi-Capital, a Menlo Park, Calif.-based augmented and virtual reality adviser, predicted that by the end of 2018, there could be as many as 900 million smart-phones and tablets capable of support-ing augmented reality apps created from tool kits like Apple’s ARKit, Google’s ARCore and Facebook’s Camera Effects. And that number could grow to more than three billion by 2021.

At the moment, developers are creat-ing simple tools. For example, Measure-Kit is essentially a digital ruler, while PLNAR helps a user take dimensions of a room to create a floor plan. And Homesnap, a real estate search engine, has a “Walk the Property Lines” tool that shows the property lines around any home.

When you’re able to swap or move images at a push of a button, you can convey the “what-ifs instantaneously” to clients, making the decision-making process quicker, said Matthew Miller, the founder of StudioLAB, a Manhattan architectural and design firm.

With new technology, it’s all about the ease of use, said Brian Peters, chief mar-keting officer at Cambria.

“I made sure both my 12-year-old daughter and my 41-year-old wife were able to use the app,” he said.

Augmented reality is also helpful for home-goods manufacturers who need to send out samples or swatches, he said.

“We think our customers will be able to narrow their choices further on the app, before requesting a sample.”

Michael Schroeder, the director of virtual design and construction at SGA, an architectural and design firm with of-fices in New York and Boston, said that augmented reality could also help fill a major data gap for developers.

For example, a tool could be created to show traffic patterns at a building site, or another could depict the texture of various building materials, which a developer could then change on an iPad as while walking around a raw space.

Augmented reality enables developers to show potential of unfinished spaces

Augmented reality enables consumers to see what a potential purchase will look like. COURTESY


REGIONAL NEWS

Traffic will soar above the muddy swamp between Uganda’s capital and its

international airport when a new Chinese-built highway opens in a few months’ time, but the road itself is mired in controversy.

The government has partly funded the 51-km $580 million expressway with a loan, part of $11 billion in borrowings in the decade since the World Bank cancelled debts about a third that size as part of debt relief for poor states.

Uganda says the four-lane road is the jewel in the crown

of an infrastructure programme that will boost economic growth; critics accuse President Yoweri Museveni of squander-ing debt relief and mortgaging much-anticipated oil revenues before crude starts to flow in 2020.

China alone has loaned the east African nation nearly $3 billion and is in talks for $2.3 billion more as part of its vast overseas development Belt and Road scheme.

“Uganda will grind to a halt as a country because of Musev-eni’s reckless borrowing. We’re like a patient on life support,”

said opposition lawmaker Ibra-him Ssemujju Nganda, alluding to a debt warning from the cen-tral bank last year.

The government says the criticism is misplaced.

“We’re not borrowing for consumption and luxury, we are investing,” said Finance Minis-try spokesman Jim Mugunga. “The heightened borrowing is deliberate, it’s to put up mod-ern infrastructure and push up economic growth.”

Uganda’s first expressway should trim the two-hour trip between the capital and inter-national airport to 30 minutes.

Begun in 2012, construction should end in May, missing the initial target by a year. But it is the price, rather than the de-lays, that has alarmed Uganda’s

auditor general, John Muwan-ga.

In a 2015 report, he noted the new road’s cost per lane per kilometre was double Ethiopia’s six-lane Addis-Adama Express-way, a road built by the same company -- the China Commu-nications Construction Co. Ltd -- with more features like un-derpasses and link roads.

“The project costs could have been much lower if the contrac-tor had been procured through competitive bidding,” said the damning report.

The company did not re-spond to queries and the Chi-nese embassy in Kampala was not immediately available for comment.

- REUTERS

Exports of construction materials’ sector rose 3 per cent in 2017, record-

ing $5.08 billion, compared to $4.92 billion a year earlier, the Export Council for Building Ma-terials has said in a new report.

The exports of mineral in-dustries sector increased 1 per cent to reach $3.9 billion in 2017, up from $3.8 billion in the previous year, as iron exports soared 97 per cent to $863 mil-lion from $438 million in 2016, according to the report.

Copper exports recorded $237 million last year, up from $162 million in 2016, marking an in-crease of 47 per cent. Dielectric

materials’ exports went up 17 per cent to $23 million, com-pared to $20 million in 2016.

According to the ECBM re-port, glass exports registered $339 million in 2017, compared

to $240 million in 2016.Egypt’s cement exports in-

creased 49 per cent during 2017 to record $94 million, com-pared to $63 million in 2016, according to a report from the General Organization for Ex-ports and Imports Control.

The report showed that ce-ramic exports also surged 29 per cent to reach $158 million, up from $122 million.

Libya ranked at the top of the countries importing local cement and ceramic in 2017, with a total value of $49.5 mil-lion, the report stated.

- AGENCIES

BRIEFLYCAPE TOWN

University of Cape Town struggles to offer housing

The University of Cape Town is facing a student accommoda-tion crisis, with many students having to turn to private accom-modation at the last minute. Student representative council chairperson Karabo Khakhau says the problem lies with the university’s allocation process.

“Annually the university over allocates, so students who were allocated student accommoda-tion no longer have a place to stay,” she told reporters.

LUSAKA

Mwenda Kashiba road to cost $475m under PPP model

GED Africa and the Devel-opment Bank of Southern Af-rica have started conducting the environmental assessment process of the 187-km Mwen-da-Kashiba road project which will be constructed at a total cost of US $475 million under the Private Public Partnership (PPP). The project, which will include the construction of a modern bridge across Luapu-la River and a Border Post at Kashiba, will connect Zambia to Congo DR in Luapula Province.

DAR ES SALAAM

Tanzania unveils plan to tame traffic jam in Dar es Salaam

Tanzania has unveiled plans to build seven new flyovers in Dar es Salaam as part of contin-ued efforts to ease traffic con-gestion in the city. The new fa-cilities, whose feasibility studies will be completed in June, will be built at Chang’ombe, Uhasi-bu, Kamata, Morocco, Mwenge, Magomeni and Tabata junc-tions. They flyovers will be addi-tional to Tazara junction flyover in Temeke District and the Ubu-ngo interchange in Kinondoni District, both of which are at various stages of construction.

HARARE

Harare takes $30m loan to acquire road equipment

Harare City Council has ac-quired $19 million worth of road maintenance equipment under the $30 million loan fa-cility accessed from local banks for recapitalisation.

The city recently took deliv-ery of a new asphalt chipping spreader valued at over $265 000 from local company, Ma-chinery Exchange. The deliv-ery coincides with the roll-out of the council’s citywide road maintenance programme fund-ed to the tune of $24 million.

SPEED: The new road should trim the two-hour trip between Kampala and Entebbe airport to 30 minutes.

Chinese-built $580m expressway splits Uganda as costly debts mount

Motorists and riders use the newly built Uganda expressway. FILE

Egypt’s building material exports now hit $5bn

Egypt is a key exporter of building materials. FILE


WORLD NEWS

BY THE GUARDIAN

The collapse of UK construc-tion giant Carillion has dragged the British building industry to the brink of stagnation, as house building activity fell last month for the first time since after the EU referendum.

The slowdown in home con-

struction is likely to embarrass the chancellor, Philip Ham-mond, after he unveiled tax cuts for first-time buyers and extra support for house building at the budget in November.

The headline reading on the latest Markit/Cips UK construc-tion PMI was 50.2, far below City economists’ expectations for ac-

tivity in the building sector and down from 52.2 in December.

While that was just above the 50 mark that separates contrac-tion from expansion in econom-ic output, it leaves the industry teetering on the edge.

The fallout from Carillion’s collapse has rattled the build-ing industry in the past month, with its failure threatening to drag down tens of thousands of

smaller sub-contractors that re-lied on it for work.

Max Jones of Lloyds, which is among high street banks offer-ing emergency support to build-ing firms, said: “The impact of Carillion’s liquidation has rip-pled down the supply chain and shaken confidence across the (British construction) industry.”

BY NIKKEI ASIAN REVIEW

Hotel owners in Hong Kong are tempted to rede-

velop their properties into office towers as prices in prime business districts continue to soar amid strong demand from mainland companies.

Luxury office buildings in the city have become so valuable in the past year that William Cheng Kai-man is preparing to con-vert his six Hong Kong hotels to office towers, de-spite a steady recovery of the tourism sector here.

“I am in the process of

applying for approvals for all my hotel properties,” Cheng, chairman of Hong Kong-listed Magnificent Hotel Investments, told the Nikkei Asian Review.

He expects that the revamp may double the properties’ value.

The average price of Grade A office space in Hong Kong jumped 17.5 per cent last year to $2,956 per square foot,

outpacing growth of 5.5 per cent in 2016 and 4.8 per cent in 2015, accord-ing to data compiled by property services compa-ny Jones Lang LaSalle.

Mr Cheng’s confidence mainly stems from recent high-profile office tower transactions, most re-markably the sale of bil-lionaire Li Ka-shing’s The Center in November.

The 73-story tower in the heart of the city’s Cen-tral financial district sold for a record $5.2 billion to a consortium led by a Beijing-based company -- a price that translates to $4,208 per square foot.

Like Cheng, many ho-tel owners in Hong Kong also want a slice of the lu-crative office market.

The drive for bigger profits appears set to change the fate of The Ex-celsior in Causeway Bay, a four-star hotel owned by Mandarin Oriental Hotel Group.

The once largest hotel in Hong Kong obtained approval for conversion to a 26-story commercial building and went up for sale last year.

Though the deal fell apart as the bids failed to meet management’s high expectations, Hong Kong still could see the land-mark building demol-ished sooner than later.

Hong Kong hotels turned into offices as demand soarsBOOM: The price of Grade A office space in Hong Kong jumped 17.5pc last year.

Giant contractor’s fall rattles British building industry43,000

The total number of Carillion employees globally

$5.2bnThe amount Li Ka-shing’s The Center was sold for in November.


WORLD NEWS

A bribery scandal orches-trated by Brazilian con-struction giant Odebre-

cht is wreaking havoc in Peru, in what appears to be a case study in the ability of corrup-tion to damage a nation.

Odebrecht, which recently admitted to paying $29 million in bribes to public officials in Peru between 2005 and 2014 in exchange for $12.5 billion in contracts, is the subject of the largest corruption investiga-tion in Latin America’s history – spreading across 14 countries

and implicating even Venezue-lan president Nicolás Maduro.

After Brazil, no other country is feeling the weight of the scan-dal more than Peru.

Billions of dollars’ worth of major construction projects have been stopped as the nation grapples with how to respond to a scandal engulfing the high-est ranks of its political class.

“The entire country has come to a halt,” said Hugo Alache, whose cement materials firm is near bankruptcy due to the vast array of frozen state projects.

“Peru is paralyzed.” So far, three former presi-

dents of Peru stand accused of taking Odebrecht cash. Sitting President Pedro Pablo Kuczyn-ski survived one impeachment attempt in December but may face another following revela-tions that a firm he set up in the 1990s received $782,000 from the Brazilian giant.

“And we’ve probably only seen one-fifth of the impact so far,” said Mauricio Mulder, a member of a parliamentary committee probing Odebrecht.

“Every new revelation keeps telling us that this is bigger than we ever thought.”

Owing to the scandal, Peru is descending into a devastating financial crisis.

Economists estimate that halted projects and frozen contracts shaved as much as 1.5 percentage points off Pe-ru’s gross domestic product last year. This year, economists say, the investigations will cost Peru at least another point.

- SPECIAL CORRESPONDENT

Accelerated growth in the US construction industry is set to support a strong expansion of construction across the globe, according to a new report from Oxford Economics.

Although the US construc-tion market stagnated in 2017, it is expected to pick up sharply and fuel several back-to-back years of robust growth in global construction at a pace signifi-cantly higher than the average growth rates seen over the cur-rent decade.

Growth in global construc-tion is predicted to accelerate to 3.2 per cent this year and 3.3 per cent in 2019, from an ex-pected 2.4 per cent in 2017 and 2.5 per cent in 2016.

The report said that US con-struction would likely register growth of just 0.2 per cent in 2017, having seen a 0.6 per cent contraction in the second quar-ter, and with an expected de-cline in the third quarter.

However, an expansion by 2.8 per cent has been forecast for 2018, to be followed by an even stronger 2019 with pro-jected growth of 3.3 per cent.

Oxford Economics said that this would be driven by strong global economic growth and a further strengthening in world trade. A further boost is also likely to come from the Trump’s Administration’s proposed in-frastructural spending. - AGENCIES

US to drive growth ofconstruction across globe

World’s biggest construction scandal wreaks havoc in Peru

CORRUPTION: Odebrecht paid $29 million in bribes to officials in Peru to win $12.5 billion contracts.

Workers take a rest break at a construction site in Lima, Peru. COURTESY

Faced with a serious and chronic labour shortage, Japan’s construction in-

dustry is beginning to adopt a five-day working week in the hope of attracting younger workers.

Generally, workers building homes and offices in Japan get only Sundays off.

Workers in the industry work about twice as many hours per year as the average for all in-dustries.

Daiwa House Industry is set to introduce non-work days at its construction sites that will start in April this year.

In addition to Sundays, work-ers at those sites will be able to take a day off every month. In principle, the additional day off will be Saturday to create a two-day weekend.

From April 2019, workers

will be able to take two days off per month other than Sun-days. The company plans to ful-ly introduce a five-day working week in April 2021.

More days off could mean

longer construction times. Dai-wa House, however, intends to sidestep the problem by in-creasing efficiency with the help of support robots such as a wearable robot developed by

Cyberdyne, in which the com-pany has invested.

PanaHome is also consider-ing introducing a five-day work week. Takenaka is preparing to draw up by March a con-

crete plan to fully introduce a five-day work week by the end of fiscal 2021. The plan will be implemented in April this year. Haseko plans to introduce a four-week working schedule with eight days off.

According to the Japan Fed-eration of Construction Con-tractors, the number of skilled construction workers in Japan, of whom there were 3.43 mil-lion in fiscal 2014, is expected to decline by as many as 1.28 million by fiscal 2025 due to aging. With the labour shortage expected to worsen further, at-tracting young, skilled workers is becoming urgent.

To realize the five-day week, construction companies will have to try to shorten construc-tion periods by using robots.

- NIKKEI ASIAN REVIEW

Japan builders adopt 5-day week to attract young workers

The number of skilled construction workers in Japan is expected to fall by as many as 1.28 million by 2025. COURTESY


OBITUARY

Ingvar Kamprad, whose boyhood business of selling pencils and seeds from his bicycle in Swe-

den eventually grew into the Ikea furniture chain, has died at 91.

“The founder of Ikea and Ikano, and one of the greatest entrepre-neurs of the 20th century, Ingvar Kamprad, has peacefully passed away at his home in Smaland, Swe-den, on January 27,” Ikea said in an emailed statement on January 28.

He was “surrounded by his loved ones,” and died “following a short illness.”

Kamprad had an estimated net worth of $58.7 billion, according to the Bloomberg Billionaires Index, making him the world’s eighth-rich-est person.

The wealth was accumulated by producing furniture for the mass-es that was affordable and easy to transport. The Ikea flat packs revo-lutionized the way in which tables, chairs and other items could be stored and shipped, before being assembled by the customer.

“We are mourning the loss of our founder and dear friend Ingvar,” Jesper Brodin, chief executive of the Ikea Group, the largest retailer in the Ikea franchise system, said in a statement.

“His legacy will be admired for many years to come and his vision — to create a better everyday life for the many people — will contin-ue to guide and inspire us.”

Entire families descended on the company’s stores each week and

Ikea’s merchandise became ubiqui-tous. Shoppers drop off their chil-dren at Ikea day-care centres, dine at Ikea restaurants and select from among thousands of products rang-ing from sofas to soup ladles.

In 2017, 403 Ikea stores in 49 countries received 936 million vis-itors, and the chain generated sales of 38.3 billion euros.

UK style magazine Icon in 2005 named Kamprad the most influen-tial taste-maker in the world, and wrote “if it wasn’t for Ikea, most people would have no access to af-fordable contemporary design.

The company has done more to bring about an acceptance of do-mestic modernity than the rest of

the design world combined.”The name Ikea is made up of

the founder’s initials and the first letters of the Elmtaryd farm and Agunnaryd village where he was raised. His flat-pack furniture was invented by Ikea employee Gillis Lundgren in 1956 when he tried to fit a table into the back of a car.

Realizing the table was too bulky, Lundgren removed the legs. Stor-ing and selling Billy book shelves or entire kitchens in pieces has let Ikea cut storage space and fill its trucks with more goods.

The concept of having customers pick up most of their own furniture in adjacent warehouses and trans-port it home for self-assembly also removed the need for costly deliv-ery services and furniture salespeo-ple assembling the products.

Ingvar Feodor Kamprad was born March 30, 1926, near the southern Swedish town of Almhult. His father, Feodor, looked after the family farm and his mother, Berta, ran a lodging house on the property during the summer.

At age 5, Kamprad started his business ventures by selling match-es to his neighbours. Buying in bulk in Stockholm and selling at a pre-mium in smaller quantities, he got his introduction to a business prac-tice he would cherish at Ikea.

The entrepreneur, who was still attending high school in Goth-enburg, moved on to fish, Christ-mas-tree decorations, seeds and pencils, which he sold from his bi-cycle. Founding Ikea in 1943, Kam-

prad then started marketing pens, wallets and nylon stockings in the local media, and distributed them using a milk van. He began selling furniture in 1948.

Ikea opened its first store in Almhult, Sweden, in 1958.

Kamprad stepped down as CEO in the late 1980s. He continued to wield power as an adviser to the holding company, and he designed an ownership structure to ensure Ikea’s future survival and inde-pendence.

An Ikea employee magazine in 2012 revealed that his three sons had been given more active roles at the closely held company. In 2013, he relinquished his role as chair-man of Inter Ikea Group.

“Since 1988 Ingvar Kamprad did not have an operational role within Ikea but he continued to contribute to the business in the role of senior adviser, sharing his knowledge and energy with the Ikea co-workers,” the company said.

- BLOOMBERG

IKEA’s frugal billionaire founder Ingvar Kamprad slips away at 91SUPERMAN: At age 5, Kamprad started his business ventures by selling matches to his neighbours. He got his introduction to a practice he would cherish at Ikea.

IKEA has 355 stores in 29 countries . COURTESY

Ingvar Kamprad poses at IKEA’s head office in Almhult, Sweden, in August 2002. REUTERS

QUICK FACTS

World’s top furniture retailer in figures1943The year Ingvar Kamprad founded IKEA in Almhult Sweden. He was 17.

355The total number of IKEA stores in 29 IKEA Group countries.

$37.5bnIKEA Group’s total sales of goods amounted to $37.5 billion in 2016.

$58.7bnThe net worth of Ingvar Kamprad, according to the Bloomberg Billionaires Index


BY CK REPORTER

Political uncertainty and lim-ited access to finance under-mined the development of the Kenyan real estate market last year, with some segments post-ing their worst performances in 17 years.

The Hass Property Index cov-ering the fourth quarter of 2017 shows significant drops in rents and sales returns relative to previous years in most residen-tial property markets.

“Asking rents for all proper-ties fell by 1.2 per cent in the quarter and overall fell by 3.9 per cent in the year,” said the head of development consult-ing and research at Hass Con-

sult, Sakina Hassanali, during the report’s release last month.

The highest declines were reported in Lavington, Kilelesh-wa, Upperhill, and Westlands, where rental prices fell by 13, 14, 11, and 10 per cent respec-tively compared to 2016.

“The protracted election pro-cess, limited financing, high in-flation, and tightened liquidity were felt in the low and top-end market segments,” she said.

“Reduced spending meant those who would otherwise con-sider a high-end market house compromised and settled for community living in a semi-de-tached housing neighbourhood available on both sale and let.”

The index indicates total re-

turns (rental yields plus price appreciation) in semi-detached houses fell from 21.1 per cent in 2016 to 7.3 per cent last year.

Rental yields for apartments,

on the other hand, were record-ed at six per cent last year, the lowest since 2001.

Developers of large family apartments have felt the pinch

more as a glut in the market segment has meant tenants with larger discretionary in-comes have more options to choose from.

Meanwhile, the Kenya Bank-ers Association (KBA) housing price index released on January 31 shows that house prices rose by 0.68 per cent compared to the Q3’s 0.42 per cent.

The banker’s lobby linked the situation to slowdown in cred-it access owing to the law cap-ping interest rates that has seen banks ration loans.

KBA is fiercely opposed to the Banking (Amendment) Act 2016 that came into force on September 14 2016, introducing legal caps on rates.

BY PETER MWANGI

The Kenyan government has laid out an elaborate low-cost housing strategy

that is likely to revolutionise the local real estate sector by bringing into the market some new residential houses for as little as Sh500,000.

According to Transport, Ur-ban Infrastructure and Housing Cabinet Secretary James Mach-aria, the State will provide land to private investors who will then take advantage of various building technologies and econ-omies of scale to deliver “truly affordable” homes for citizens.

The government has already shortlisted 35 local and interna-tional companies to undertake a pilot project in Mavoko, Macha-kos County, which will serve as a prototype for a planned na-tional rollout of an ambitious housing plan that aims to meet the needs of the low-income ur-ban workers.

Under the pilot project, a to-tal of 8,000 low cost two-and three-bedroom houses will be built on a 55-acre parcel of land that has been provided by the government – each of which

will be sold to the public for between Sh1 million and Sh1.5 million.

“Some 60 contractors ex-pressed their interest in putting up the houses under an Engi-neering and Procurement Con-tract (EPC) that allows them to build and deliver houses to the government.

“We have since shortlisted 35 local and international firms that will be allowed to partici-pate in the tendering process expected to commence shortly,” he said.

Under the EPC model, a con-tractor funds an entire project and is paid upon completion of the project once the State is satisfied with the quality of the homes.

The project is expected to promote the use of low-cost building technologies that are currently shunned by many Kenyans who view them as in-ferior compared to traditional brick and mortar structures.

A total of Sh2.6 trillion will be spent to build a million low cost homes across Kenya in the next five years as the coun-try seeks to bridge its national housing gap that now stands at about 1.85 million units.

According to Mr Macharia, some 800,000 houses will be built under the private public partnership (PPP) model while the remaining 200,000 homes will be built under a social hous-ing scheme – where a unit will

be sold for between Sh500,000 and Sh700,000.

Social housing refers to dwellings provided for rent or sale at a fairly low price by housing associations and local governments. It is typically of-fered to citizens on extremely low incomes or those with spe-cial needs.

To meet its target, the gov-ernment has pledged to offer private developers about 7,000 acres of land as part of an in-centive package.

“We are putting together a land bank because one of the ways we are going to realise affordable housing is when the

government provides land for the private sector to work on because 30 per cent of the cost of housing is actually land,” Aidah Munano, principal secre-tary in the ministry of housing and urban development said in a statement early this month.

“If the government can pro-vide land, then we may be 50 per cent there (meeting the af-fordable housing target),”she said.

In addition to land provision, the government has halved cor-porate tax for property devel-opers who build at least 400 low-cost residential houses to encourage construction of at

least 200,000 affordable houses a year.

According to the govern-ment, a low-cost house is one that costs a maximum of Sh3 million.

“We are thinking of hous-es where the sale value will be around Sh3 million. These are houses such as studios, two bed-room and three bedroom units. If we go beyond Sh3 million it will not be affordable housing anymore,” says Ms Munano.

Incentives to developers will also include development of support infrastructure such as access roads, electricity, water, health facilities and schools.

“We are currently open to di-alogue with investors who want to partner with us in this agen-da. We are offering incentives that are cushioned in sound win-win partnerships to house the nation,” Ms Munano said.

Although the actual sizes of the proposed homes are yet to be revealed, the pricing of the State-backed homes is expected to disrupt the ‘low-cost hous-ing” market that is currently dominated by small housing development firms and saccos – whose units are sold for more than Sh3.5 million.

Early last year, the World Bank urged the Kenyan govern-ment to come up with tangible incentives that motivate prop-erty developers to shift focus to truly affordable houses that can be acquired by low income earners.

This came amid revelations that house prices in the country had recorded a ten-fold rise in the past seventeen years – push-ing a majority of Kenyans into slums.

The cheapest home in Nairo-bi, said the World Bank, is now priced at Sh4 million up from Sh500,000 in 2000. This has rendered more than 90 per cent of Kenyans incapable of acquir-ing the cheapest home.

MONEY & INVESTMENTS

How Kenya plans to deliver homes for as little as Sh0.5mHOUSING: The State plans to build a million low-cost homes in the next five years.

A worker at a construction site in Nairobi. FILE

Property owners, developers record worst returns in 17 years

Residential houses in Nairobi. COURTESY


MONEY & INVESTMENTS

BY DANSON KAGAI

The global heavy construc-tion equipment market is projected to reach Sh9.5

trillion by 2025 driven by a rise in infrastructure development around the world.

According to a new report by Grand View Research, Inc., the sector will post a compound an-nual growth rate of 5.4 per cent – mainly as a result of increased investments in airports globally to meet the rising demand for air travel.

In Kenya, for example, the to-tal number of passengers trav-elling via the Jomo Kenyatta International Airport (JKIA) in Nairobi has risen exponentially over the past decade leading to congestion at the facility.

To overcome this, the Ken-yan government is undertak-ing massive expansion of the airport with the aim of raising its capacity from the current six million to 10.3 million passen-gers per year.

Paris-based international air-ports operator Groupe ADP has been awarded a contract to de-sign a new passenger terminal at the JKIA – marking the start of a project aimed at increasing capacity of the airport by more than 70 per cent.

Development of roads and railway transport infrastruc-ture is also expected to boost the heavy construction equip-ment market as nations seek to promote cross-border trade and industrial growth.

Mega infrastructure projects

promote increased construction activities that eventually create a demand for heavy duty con-struction equipment.

In October, specialist con-sultancy Off-Highway Research said it expected global construc-tion equipment sales to grow 16 per cent in 2017, to 810,000 units valued at Sh8.1 trillion. This is, however, 200,000 units less than the last sales peak of 2011 when more than a million

units of machinery were sold. The global equipment mar-

ket peaked in 2011 on the back of Beijing’s Sh60 trillion stimu-lus spending programme. This boom was, however, followed by a drop in sales – which saw market demand fall to 25 per cent of its peak size at the bot-tom of the cycle in 2015 and 2016.

Graeme Macdonald, chief ex-ecutive of JCB, was earlier this year quoted by Financial Times as saying that the privately owned UK group “began to see a pick-up in towards the second half of last year’” and that 2017 started robustly worldwide.

“One swallow doesn’t make a summer [but] there’s definitely momentum in the market – we are seeing it from our custom-ers and dealers,” he said.

Global unit sales of construc-tion equipment grew in 2016 for the first time since 2011, but only by 1 per cent according to Off-Highway Research.

Although the industry gen-erated total revenue of $70.1 billion in 2016, the market is 30 per cent smaller in US dollar terms compared with its 2011 peak, Off-Highway’s data shows.

JUDY MWENDE

The Kenya National High-way Authority (KeNHA) has disclosed the looming

award of the long-awaited ten-der for expansion of the Nairo-bi-Nakuru-Mau Summit road, slightly more than a year after the agency invited global firms to bid for the project.

The Sh150 billion contract that will be awarded by end of May involves expansion of the 180-kilometre road into a four-lane dual carriageway from Rironi in Limuru to Mau Sum-mit in Nakuru County.

The scope of work, which also involves rehabilitation of the Mai Mahiu Naivasha road, will also involve the erection of toll stations along the highway under a Public Private Partner-ship model to enable its financi-ers to recoup their investment and make a profit for the next three decades.

“The tender for the construc-

tion of the Nairobi-Nakuru-Mau Summit road will be awarded in the next four months and we expect the contractor to move on site in November,” KeNHA director general Peter Mundin-ia said in an interview.

Mr Mundinia disclosed that three global companies had been shortlisted for the project that sets the stage for construc-tion of several other toll high-

ways across the country. “Ten contractors had placed

their bids for this job. After thorough evaluation, the num-ber has been reduced to three. We will award the best contrac-tor for the job.

“[The contractor] will be ex-pected to build, maintain, man-age and operate the highway and recover his money from motorists in the form of user

fees,” he said in an interview.The proposal, under which

drivers will pay an undisclosed fee to use the upgraded high-way, marks a significant policy shift by the government, which had previously done away with tolls in all roads across the country due to widespread cor-ruption at the toll stations.

The company that will be awarded the contract will be

expected to operate and main-tain the Nairobi Southern By-pass, as well as maintain the Gitaru-Rironi segment, whose rehabilitation started last year under James Gichuru-Rironi Road Project.

The Nairobi Mau Summit road, which is part of the North-ern Corridor, is one of eastern Africa’s most important roads as it connects western Kenya to the port of Mombasa and the capital Nairobi.

The expansion of the busy and very crucial highway is ex-pected to significantly reduce the travel time between Nairobi and Mau Summit while ending the perennial traffic jams that are often experienced in Naku-ru town and around Gilgil.

Last year, KeNHA disclosed that the government was plan-ning to erect toll stations on other four major roads in the country, including Thika Road, Nairobi to Mombasa highway, Nairobi Southern Bypass, and a second Nyali bridge in Mom-basa.

The proposed tolling of roads is likely to face massive legal challenges including demands that the State provides alterna-tive toll-free roads for motorists who may not want to use the toll roads.

Great times ahead for construction equipment dealers

A construction site. FILE

Disquiet as Sh150bn toll road plans gather speedSHOWDOWN: Tolling of road likely to face major legal challenges, including demands for toll-free alternatives.

Expansion of the highway is expected to reduce the travel time between Nairobi and Mau Summit. FILE

BACKGROUND

Equipment market is set for big growth

•Global heavy equipment market will post a compound annual growth rate of 5.4 per cent – mainly as a result of increased investments in airports to meet the rising demand for air travel.


STRATEGY & MANAGEMENTLEADERSHIP I TRENDS I SUCCESS

Hardest word: Why saying ‘No’ is key to successIn business, this can be people

reaching out to you on social me-dia or email asking for your time for free. It can mean saying no to business partnerships that don’t make sense for both parties. It can even mean only letting certain partnerships and interactions get to a certain level. The point is you do what makes you most comfort-able and you say no to everything that doesn’t.

It helps you to focus on your core businessSaying no frees you up to focus on what will actually grow your busi-ness. Truth be told, you need tre-mendous focus to build and grow a successful business.

Your time this year needs to be focused on your business’ foun-dation, lead generation, audience building, establishing expertise, picking the right opportunities, and scaling.

You don’t have time to run down rabbits holes, give into in-formation overload, and chase shiny objects. Say no so that your focus is in the right place.

This is going to be an amazing year for you. You need to see it, believe it and do something about it. You should say no as much as needed to guard your time and your mental well-being.

Don’t let other people control your time and decisions. This is your life and business. Selfishly decide what’s best for you. - ENTREPRENEUR

Right now, you’re busy work-ing hard to achieve your goals for 2018. You are de-

termined to make this year the best yet, so you’re going after all the things you may not have done before.

These goals will help you be-come a better person and a better entrepreneur who grows a suc-cessful business. You don’t have to call them “resolutions,” but you should have a clear plan and strategy for growth.

Life is short. We know this con-ceptually but very few of us live that way. We have bills to pay, kids to take care of, business ob-ligations, friends and family to spend time with, networking and a bunch of other life stuff.

We go about our days busily striving without understanding that “busy” does not necessarily mean “productive.” By mid-year, we look back and wonder why we aren’t nearer to accomplishing our goals. All that time is eaten up and we can’t figure out why.

To make this your break-through year you need to do some-thing different than all of the pre-vious years. You need a new plan, but also a different mindset. This stronger mindset involves you us-ing every bit of the little time you have on this earth wisely.

This means you’ll have to say yes to the things that fit your val-ues, goals and plans.

But, it also means saying no to the things that won’t help your business grow.

When you stop promising to do everything and anything other people want, your own goals be-come more attainable.

Here is why saying no more often should be one of your busi-ness goals.

Right way to be selfish.The word and idea of being selfish has gotten a bad rap.

Dictionary.com defines selfish as “devoted to or caring only for oneself; concerned primarily with one’s own interests, benefits, wel-fare, etc., regardless of others.”

While there are circumstanc-es when being selfish is negative, there are more times when it’s the best decision for you.

There is a reason why airlines tell you to put your own mask on first before trying to assist others. You can’t help anyone else unless you’re first in a stable position to do so.

This means you selfishly choose what is important to you and your business. You put your needs and goals first.

Once you are in the stable po-

sition to help others with the ex-tra time you have, then you will. Building a business requires a lot of you. It’s going to take using your time and resources effec-tively. To do so, selfishly say no to the things that aren’t in align-ment with your values, goals, and schedule.

You’ll need every bit of your time this year.Time is your most valuable re-source as an entrepreneur. To be productive you can’t let the agen-das of other people keep you from what’s important.

To make this year count, you’ll have to dedicate every spare min-ute to what will help you reach your goals in life and business -- the two work hand-in-hand.

You’ll have to say no to the things that threaten to derail your agenda.

Say no to people, situations and even opportunities that look and sound good but aren’t the right fit for what you’re working to accomplish.

It’s time for people to under-stand your boundaries.Boundaries are a concept and lifestyle we were never taught but should have been. Setting boundaries means saying no to the things you aren’t comfortable with.

It means setting firm walls so that people and situations don’t enter your space.

RESIST No is the new yes. Saying no is one of the most important productivity skills you can develop.

Say no to people, situations and even opportunities that look and sound good but aren’t the right fit for what you’re working to accomplish. COURTESY


STRATEGY & MANAGEMENT

The path to producing more, at-tracting massive numbers of cus-tomers, selling more and dominat-

ing your industry starts with cultivating a strong work ethic.

Here are the top five components of an excellent work ethic that will elevate your brand and accelerate your success.

1. HonestyHonesty is a strong work ethic that every founder, CEO and marketer should weave into his company culture.

As it happens, being truthful is not just important for your sales. It’s also essential for converting your one-time buyer into a loyal customer.

You have to be humble to develop this core work ethic.

2. HumilityIf you want to succeed, you have to be humble. As they say, humility is a virtue.

No matter how expansive your cus-tomer base becomes, if you don’t come down to earth to respect them, serve them with consistent value, remain ac-cessible to them, listen to their queries, invent for them, then you will lose them.

3. Hard workI’m a firm believer in hard work.

When I started out as a freelancer, I’d show up to write on my blog for a day or two, and then I’d suffer from writer’s block for the rest of the week.

Prospecting for clients, guest posting, and social media marketing were not even part of my agenda.

I’d just pen a few words when I felt like it and enjoy the rest of my week with my pals on the beach. The result? Zero traffic and zero income.

Then I read somewhere that An-dre Agassi, the tennis champion, had a strong work ethic.

He would hit 500 balls every day. That was what elevated his career, making him “the biggest worldwide star in the sport’s history,” according to BBC. That changed my work life forever.

I began to work ten hours a day, writ-ing and prospecting for clients like cra-zy. And that really paid off. Not only did I start building my brand identity, but I also saw a spike in my income. I started

making $1000 plus per month, courtesy of hard work.

4. RespectMost startups don’t value their cus-

tomers. By respect, I don’t mean bowing to or saluting your customer.

You respect your customer when you sell them a product that exceeds their expectations, when you listen to their feedback, when you apologize for your misdeeds.

While these might seem unimportant, your customers actually feels valued when you do these things.

5. ResponsibilityNo matter how big your company is,

if you do not to take responsibility for your actions, you will fail. Take Uber, for example.

While the company has grown mas-sively, reaching as high as $70 billion in value, the ride-hailing service has suf-fered setbacks in its revenue, credibili-ty and public image because its leaders failed to honour their responsibilities.

The executives were at war with pol-iticians and government regulations in Taiwan, had combative relations with London transport authorities, failed to abide by regulations in Japan, and the list goes on.

These problems caused many set-backs for the firm and forced its found-er, Travis Kalanick, to resign. To help the company bounce back, its new CEO, Dara Khosrowshahi, drafted what he called Uber’s new “cultural norms,” a new work ethic that the company must undertake moving forward.

- ENTREPRENEUR

TOPPING OUT

Great leaders understand that success is something that is cultivated over time. They create habits that back their suc-cess and reputation. These include:-

1.) Reading every day.Reading makes you smarter, it im-

proves mental clarity, it expands memo-ry while activating your reasoning skills. The skills you gain from reading greatly increases your potential to succeed.

2.) Focusing on challenging tasks.To become a great leader, you must

make it your habit to focus on high level tasks that will get you and your team to that next highest level.

3.) Making your health a priority.Make it a habit to exercise regularly,

to eat a balanced diet, get enough sleep and take your daily supplements to help sustain your focus, energy and endur-ance throughout the day.

4.) Learning from people you admire.Getting advice from the person you

admire helps to return you to an emo-tional state of composure, which allows you to successfully traverse through the stressful obstacles you are facing.

5.) Planning next day the night before.Planning your next day the night be-

fore sets you up to start your day in an organized flow, allowing you to get more done in less time.

6.) Keeping your goals in front of you.Making it a habit to have your goals in

front of you is priceless when it comes to increasing your capacity to succeed.

The basic idea is to keep refreshing goals in your mind as a way to ensure you’re on the right path to achieving them.

7. Taking action, even when it’s scary.Make it your habit to get out of your

own way and take some risks. You may not win but you will at least learn.

8. Having a powerful “Why.”When you know your Why, working

and risking become well worth the ef-fort. Your Why, almost always has some-thing to do with love.

Great leaders are driven by an all-con-suming desire to love others and give back to their communities.

Always be accessible to your clients no matter how expansive your customer base becomes. FILE

5 Elements of a strong work ethic that accelerates successGOALS: Cultivate a solid work ethic to elevate yourself to the highest level of success

Eight daily habits of highly successful business leaders

Get out of your own way and take some risks. FILE

RELATED

How to improve your work ethic, productivity

i) Get things doneCultivate the habit of doing rather than talking about what needs to be done. This is the first law of great work ethic.

ii.) Stop being ‘busy’Instead of being busy, running up and down, and thinking about everything that needs to be done, think and focus instead on activities that will have the greatest achievement.

iii.) Be availableReply to emails and texts as quickly as possible and do not rule out any meetings based on time alone.


SITE REPORT

BY SPECIAL CORRESPONDENT

Work is well underway at Beijing’s new air-port, with internal

decorations and equipment in-stallation currently underway, following the completion of the main terminal building on New Year’s Eve.

The yet-to-be named airport, which is being built at an es-timated cost of $12.3 billion, is expected to be the world’s biggest airfield when it finally opens in September 2019 – un-seating the Hartsfield-Jackson Atlanta International Airport (ATL), which served a total of 104 million passengers in 2016.

The terminal’s roof and glass walls were installed in Decem-ber, and most of the remaining construction is scheduled to be completed by the end of this year, according to the city gov-ernment.

Next year, the airport is ex-pected to go into test opera-tions before finally opening to passengers, just five years after construction began in Decem-ber 2014 amid a massive in-frastructure drive overseen by President Xi Jinping.

The project is one of the re-gion’s largest infrastructure investments under Xi’s rule, which has been plagued by fears of slowing economic growth,

offset slightly by a construction boom.

Leaders said last year that “Beijing will make every effort to ensure the development of Xiongan New Area” – set up to accommodate Beijing’s noncap-ital functions – and accelerate integrated development of the Beijing-Tianjin-Hebei region.

The airport is being built 67 kilometres south of downtown Beijing on land that straddles the capital’s Daxing district and Hebei province’s Langfang. It will be linked to urban areas

by a high-speed railway, inter-city trains and a major express-way.

Construction of a fast rail link between Beijing and the

new airport is currently under-way. The 41-kilometre line is being built by state-owned Bei-jing Urban Construction Group, which plans to open it in time for the launch of the airport next year.

The railway will carry trains at speeds of up to 160km/hr. The facility has three stations, one of which (in Caoqiao by Third Ring Road) will include off-airport check-in facilities.

According to the contractor, the trains will take 19 minutes from Caoqiao to the airport.

With Beijing Capital Interna-tional Airport being over-crowd-ed, the new airport, located 46 km south of downtown Beijing, is expected to take some pres-sure off it.

Beijing Capital Internation-al Airport, in the city’s north-east, is the second-largest in the world in terms of passenger volume. The airport served 94.4 million passengers in 2016, ac-cording to the Airports Council International. Dubai Interna-tional Airport is the third bus-iest airport in the world with 83.7 million passengers.

Construction of Daxing air-port has so far involved 1.6 mil-lion cubic meters of concrete, and 52,000 metric tonnes of steel covering a total 47 square kilometres, including runways.

Spread over 313,000 square meters, the airport terminal buildings will have four run-ways and will be able to accom-modate 620,000 flights every year along with up to 100 mil-lion passengers and 4 million tonnes of cargo. It is expected to serve an initial 45 million passengers a year, with plans to expand that to 100 million.

It has been designed to be passenger-friendly, with the far-thest boarding gate 600 metres from the centre of the terminal about an eight-minute walk.

China Southern and China Eastern airlines, along with oth-er SkyTeam airlines, will move to the new airport, while Air China and other Star Alliance carriers will continue to oper-ate flights from Beijing Capital International Airport.

Pictures of the massive air-port have in recent months flooded social media with some calling the look of the construc-tion ‘incredible’ and some say-ing its spectacular design has a ‘space age influence’.

Above: An impression of the Daxing airport in Beijing, China. Right: Journalists tour the newly build terminal hall. COURTESY

Beijing-based world’s biggest airport takes shape, eyeing next year launchAVIATION: The starfish-like airport is expected to be the world’s biggest, unseating the Hartsfield-Jackson Atlanta International Airport, which served a total of 104 million passengers in 2016.

On-going construction of the new airport. COURTESY

SUMMARY

World’s biggest airport in figures

45mThe new airport is expected to serve an initial 45 million passengers a year, with plans to expand that to 100 million.

$12.3bnThe total amount of money to be spent on construction of the new airport in Daxing, Beijing.

313,000The size, in square metres, of the airport’s terminal building. The facility will have four runways.

$12.3bnEstimated construction costs for the new airport in the Daxing district of Beijing.

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