Factors influencing adoption of real estate investment trusts among real estate developers in Nairobi, Kenya

Abstract

It was anticipated that the establishment of Real Estate Investment Trusts (REITs) would revolutionize Kenya’s real estate sector by providing developers with patient capital, enhancing market liquidity, and diversifying financing sources. However, despite being regulated by the Capital Markets Authority (CMA) since 2013, REIT adoption among real estate developers remains critically low. This study investigated the factors influencing the adoption of REITs among real estate developers in Nairobi, Kenya. Specifically, it examined how compatibility, trialability, relative advantage, complexity, and observability shape adoption decisions, anchored on the Diffusion of Innovation Theory and the Technology Acceptance Model. A positivist philosophy guided a cross-sectional design targeting 69 property developer firms registered with the Kenya Property Developers Association (KPDA). From a frame of 207 executives (CEOs, CFOs, and Finance/Operations Managers), a sample of 136 was drawn using the Yamane formula. Data were collected via a structured 5-point Likert scale questionnaire, validated through content and construct checks, and tested for reliability (Cronbach’s α > 0.75 for all constructs). Descriptive and inferential statistics (SPSS) were employed. Correlation analysis revealed strong positive relationships between all independent variables and REIT adoption. Multiple regression analysis showed the model explained 63.6% of the variance in adoption (F = 36.968, p < .001). Observability (β = 0.804, p < .001), relative advantage (β = 0.615, p = .004), and complexity (β = 0.553, p = .006) emerged as significant predictors, while compatibility and trialability lost significance in the combined model, indicating overlapping perceptual effects. The study concludes that visibility of successful REIT projects, clear financial superiority over traditional financing, and developers’ capacity to navigate structural complexity are the primary adoption drivers. Recommendations include re-engineering REIT structures to align with local project cycles, mandating transparent performance disclosures, and developing financial simulation tools to enhance trialability. Future research should adopt mixed-methods and longitudinal designs, and incorporate regulatory, tax, and governance variables to capture the full ecosystem of REIT adoption in emerging markets.