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Reits returns lag equities on bullish Nairobi bourse
An analysis by the Reits Association of Kenya covering five years shows that the average price returns for Reits stood at seven percent in 2024 and 2.7 percent in the first half of 2025.
Returns from real estate investment trusts (REITs) have fallen behind those from equities after recording single-digit gains at a time when shares have rallied to an all-time high valuation at the Nairobi bourse.
REITs are a form of collective investment schemes in real estate that allow an investor to own interest or rights in a property by buying units that earn returns from the income and capital gains generated by the property.
Given that their returns and value are derived from the underlying properties, they are less prone to volatility compared to equities. The market capitalisation of Reits in Kenya stood at Sh24.6 billion in June 2025, up from Sh24.3 billion in 2024 and Sh9.8 billion in 2021.
An analysis by the Reits Association of Kenya covering five years shows that the average price returns for Reits stood at seven percent in 2024 and 2.7 percent in the first half of 2025.
These returns were well below the gains of 34 percent and 51 percent in the two years for the equities market, which is currently enjoying a bullish run after a prolonged period of price erosion.
The Reits also lagged government bonds, which offered yields of between 12.4 percent and 13.6 percent for benchmark 10-year papers in the period.
The widening returns gap between equities and Reits was in contrast to the period between 2021 to 2023 when the latter’s returns of between 4.2 percent and 11 percent outperformed shares significantly at the tail end of a prolonged bear run for the Nairobi Securities Exchange (NSE). In that period, the equities market saw returns ranging from negative 26.8 percent to seven percent.
The Reits association pointed to the consistency of returns as a key selling point for Reits, which in Kenya are mainly marketed to sophisticated or professional investors with a minimum ticket size of Sh5 million.
“Analysis from the income, yield, and price indices (of the Reits) indicates that while capital values remain constrained, income streams are becoming more predictable,” said the Reits association.
In the equities market, investors booked a Sh1 trillion gain to Sh2.94 trillion in their paper wealth last year, adding to a gain of Sh500 billion in 2024.
Compared to equities and bonds, Reits are a relatively new investment class in the Kenyan capital markets, having had a maiden issuance in October 2015 through the Fahari Investment Reit, which is now managed by ICEA Lion Asset Management (ILAM).
Other Reits issued in the past decade include the Acorn Holdings’ development and investment Reits, and the Laptrust Imara I-Reit.
All four Reits are listed on the NSE’s unquoted securities platform, which is a formal Over-The-Counter (OTC) market that allows for trading of unlisted forms or securities.
Previously, the ILAM Fahari I-Reit was listed on the main market segment of the NSE, where it was accessible to retail investors.
However, the company opted to restructure the Reit in 2024 by converting it into a restricted entity by redeeming units held by non-professional or small investors, who held units valued at less than Sh5 million.
The move to restructure was expected to usher in growth for the investment vehicle by restricting it to a pool of deeper-pocketed investors who could back funding for new property acquisitions. The limited ability of small investors to raise funds for new investments was cited by analysts as one of the reasons for dragging the growth of returns from the security.
