HomeBusinessCorporateMain StoryNational NewsNews

Commercial office uptake in Nairobi likely to grow in 2025, a new report shows

Occupancy levels are anticipated to rise due to the expansion of international corporations in Kenya

The increased growth in rental rates by 3.0 per cent will boost the overall outlook for the Nairobi Metropolitan Area Commercial Space in 2025 with a slight improvement of 0.2 per cent in rental yields, a new report on real estate reveals.

Occupancy levels are anticipated to rise due to the expansion of international corporations in Kenya, the growing popularity of co-working spaces, the return to “work from office” following the COVID-19 pandemic, and the rise in start-ups.

According to Cytonn Outlook for 2025, the commercial sector is currently facing challenges due to oversupply of office space, which stands at 5.8 million square foot.

“Despite these challenges, investment opportunities in Gigiri, Westlands, and Kilimani, which offer rental yields of 8.8, 8.5, and 8.3, respectively – which is higher compared to the market average of 7.8 per cent,” a Cytonn real estate report reveals.

The study reveals that the real estate sector performance will be positive in 2025 on account of continued expansion by retailers, driven by evolving consumer preferences and market trends.

Other factors like infrastructure improvements, including ongoing road and railway projects, will also increase accessibility to key retail zones, unlocking further investment opportunities, and favorable demographic trends, such as a growing urban population, thereby sustaining demand for retail goods and services.

However, this growth could face challenges from oversupply, with around 3.6 million square feet of retail space available in Nairobi and an additional 1.9 million square feet countrywide, thus leading to low occupancy rates and rental yields.

The adoption of online commerce, increasingly shifting retail demand online, pushing brick-and-mortar outlets to adapt, and limited financing options for retail developments, along with high costs, are likely to hinder investment, especially for the small and medium-sized enterprises (SMEs).

See also  Junior staff members at Bomas of Kenya decry of alleged bosses' ploy to victimise them in corruption cover-up

On hospitality, the report says aggressive marketing campaigns promoting tourism in Kenya are expected to boost tourist arrivals and improve hotels occupancy rates. “Continued international recognition of Kenya’s tourism industry, strategic partnerships within the tourism sector, and events and initiatives aimed at increasing tourism activity and improving guest experiences are also expected to increase growth in the sector,’ the study reveals.

However, because Kenya continues to face significant competition from neighbouring markets, such as Rwanda, Zanzibar, Tanzania, and South Africa there is need to focus on areas that can make Kenya be seen ahead, the outlook remains cautiously optimistic.

The report further says low access to funding due to demand for collateral to cushion themselves owing to elevated credit risk, and occasional release of cautionary statements by governments like China and United States to their citizens advising them against travelling to Kenya due to threats like terrorism and elevated crime rates are also creating uncertainty in the sector.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button
error: Content is protected !!