14 February 2017

Rwanda: Kigali Enforces Ban On Business Offices in Residential Premises

The office space business in the Rwandan capital Kigali is undergoing remarkable innovations as people dash to beat a March 2017 deadline to vacate offices from residential premises.

The directive announced in early January gave businesses and Non-Government Organisations operating in residential premises a three months ultimatum to vacate.

City of Kigali (CoK) authorities say the move is an implementation of the city master plan, and is a result of more commercial space becoming available lately.

The order targets 968 residential houses and only tenants with proof of having paid rent beyond April 2017 being considered for exemption.

"This relocation drive seeks to establish an organised city, able to accommodate the ever increasing population," said Parfait Busabizwa, the City vice mayor in charge of economic development. Kigali currently has 1.2 million people and the number is expected to grow to 3.9m by 2040.

CoK authorities say that some residential buildings do not have ample parking space, forcing the parking of cars in road reserves, and this does not only cause congestion but also increases accident risk.

Some of the affected have, however, criticised the move, pointing out that existing commercial space is too expensive.

Mark Muramira, the director of Kizere Group, a firm involved in export of fresh flowers to Europe, says they currently pay US$2000 (Approx. Rwf 1.7 million) per month to occupy a residential house in Gikondo suburb, with space (plus compound) totaling to 4,000 square meters but would have to part with US$ 90,000 (Approx. Rwf 72.3 million) for equal space at Kigali Heights, an upmarket office block. Each square meter costs US$22.5.

Enforcement of the order comes at a time when major commercial structures in the city like CHIC Complex , Kigali Heights, towers built by Rwanda Social Security (RSSB), and M. Peace Plaza all remain largely unoccupied, yet for some, bank loans were used for development.

Fusion Capital, for example, invested about $40 million (Rwf32billion) in the 30,000 square metres Kigali Heights. While 100 per cent of this retail space of this Grade A property has been let, office space is still at about 52 per cent.

Parfait Busabizwa, the City vice mayor in charge of economic development, points out that they are currently engaging owners of the commercial buildings in talks geared towards making the spaces more affordable.

Business people say that while there is increased supply of Grade A commercial space, there is still general shortage of Grade B, which most small and medium businesses can afford.

Calvin Rock Gahizi who works with Century Real Estate, however, points out that there has been increased supply of Grade B space.

"Now we have commercial space at a cost range of US$10 and US$12, which was unheard of in recent years."

Gahizi is confident that that the cost of space will go down more, considering that as many as 50,000 square feet of commercial space are still unoccupied.

However, representatives of Nonprofit Organisations (NGOs) observe that many commercial buildings in the city do not meet the tastes of many UN agencies and NGOs as they are constrained by limited parking slots for tenants and visitors.

"Some of these nonprofit organisations do not have any other sources of funds, except donor money, so the directive should be effected in a way that will not push some of them to closure," noted Edouard Munyemaliza, the coordinator of the Rwanda Civil Society Platform.

The Kigali City Master Plan was approved in 2013. The CoK authorities say people were adequately consulted before implementation begun but some members of the public are against it. Some business people have described the move as unjust as it aims to benefit particular complexes.

Busabizwa, however, dismissed the claim, saying "we are not forcing any one to occupy a particular commercial building. People are free to find and occupy any, as long as residential buildings are vacated."

The Private Sector Federation (PSF) Chief Advocacy Officer, Gerard Nkusi Mukubu, says he hopes getting real estate dealers to reduce space prices would not be hard since there is competition as a result of increased supply.

Measures

In a bid to help small business people find affordable space, a number of co-working spaces have developed around Kigali, with an ideal example being, The Office, which is a shared space found in Kiyovu, a Kigali city outskirt. Entrepreneurs, consultants, freelancers, small business owners, and remote employees can rent a workstation here and share the costs of a full-service office.

Founded in 2012, the 870 square meters large office space, complete with internet connection, has a range of 75 to 100 people working on a daily basis. The managers say they have plans under way to expand to suburbs like Kacyiru and Nyarutarama, still in Kigali.

Regus, the world's largest provider of flexible workplaces, in 2012 opened its first business centre in Kigali to serve rising demand.

Regus provides serviced offices, virtual offices, meeting rooms, and videoconferencing to clients on a contract basis.

Regus which has 4000 business centres across 120 countries currently runs a business center at Kigali City tower, with daily charges per individual client ranging from $1.97 to $35.00.

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