Factors Influencing Real Estate Companies Investment Decisions In Commercial Properties In Nairobi County, Kenya

Abstract

The real estate industry has become immensely attractive and lucrative for many investors due to its size and measure in term of value. Demand and supply are some of the elements of the business sector that have greatly affected the real estate business sector. Factors that Influence real estate investments include demographic factors, rate of interest, foreign investments, infrastructure developments, inflation rate, performance of the economy among others. Many of these factors are ignored but are they influence how real estate investors prioritize their investment decisions especially in commercial properties. The study focused on determining factors influencing real estate companies’ investment decisions in commercial properties in Nairobi County Kenya. This study was conducted to determine what specific factors controlled investment in real estate in Nairobi County. The study collected information from forty nine real estate companies operating in Nairobi County. Research results showed that increased in interest rate affected investment decisions in commercial properties in Nairobi. This is because the capital needed for investment in commercial properties was high and therefore high interest rate made it impossible for these companies to secure credit from commercial banks and other financial institutions. Inflation factor was found to be associated with real estate companies’ investment decisions in Nairobi County. However, coefficient results showed that it was not a significant factor influencing investment decision in commercial properties. Foreign investment was found to be influencing decisions by real estate companies in Nairobi. For instance, entry of multinationals companies in Nairobi in Kenya created demand for housing by professionals employed there. Infrastructure development was found to be a key driver of investment in real estate business in Nairobi. Areas that relate to road network, electricity and communication infrastructure recorded high growth of commercial properties in Nairobi. Urbanization was found to positively influence investment in real estate investment projects in Kenya. For instance, high population growth in Nairobi over the years has created demand for housing in different parts of the city