Nairobi office occupancy declines by 4.5 per cent
Part of the factors that also contributed to the low up take include currency volatility that affected the Kenyan real estate market, particularly for developers with US$-denominated loans
Nairobi office market occupancy declined by 4.5 per cent in the second half of last year in the first half due to the oversupply as most companies progressively implemented in-office work arrangements.
The occupancy rates declined from 77.2 per cent in H1 2024 to 72.70 per cent in H2 2024. Kenya’s occupancy rates have fluctuated to around 75 per cent. This is consistent with monthly prime office rents, which remain at US$1.2 per sq. ft (Ksh154) per sq. ft exclusive of taxes.
Part of the factors that also contributed to the low up take include currency volatility that affected the Kenyan real estate market, particularly for developers with US$-denominated loans.
“While property owners seek to hedge against foreign exchange losses by preferring denominated leases, tenant resistance, often due to most of their operations being in Kenya shillings, limits the success of this strategy,” Knight Frank Report for 2024 says.
The report says that because Kenya is a tenant’s market, many property owners are compelled to continue accepting Kenyan Shilling-denominated leases to maintain occupancy rates.
A slow shift in the workplace dynamics, units provide flexible office space providers, took an additional 12,000 sq. ft. at Sanlam Towers in Westlands during the review period.
Kenya’s office market has been experiencing oversupply. This reality seems to be catching up with the sector with Knight Frank Kenya noting a decline in future office space supply.
Over the same period, Purple Tower along Mombasa Road, Highway Heights in Kilimani, Matrix One, the Mandrake, and Museum Hill Towers in Westlands were some of the notable completions. They collectively added at least 522,284 sq. ft. of prime office space.
During the same period, the Central Bank Pension Scheme sought to sell two buildings — Timau Plaza and Twiga Hill Park in Nairobi for a price of Ksh 1.08 billion.
Fusion Capital Limited announced that it had successfully sold its acclaimed Kigali Heights development in Rwanda to Yussa Company Limited, a leading local freight and real estate firm, for US$31.8 million.
This Grade A commercial and retail property, situated near the Kigali Convention Centre, was a flagship project by Fusion Capital, with construction completed in December 2016.
Overall, global Knight Frank Corporate Real Estate (CRE) Leader sentiment rose by 1.98 points to reach the highest level seen since Q4 2023. The indicator with the strongest quarterly increase was in relation to increasing the proportion of sustainable buildings within portfolios.
The quarter’s survey also had a special focus on Artificial Intelligence (AI) adoption. Within the next 12 months, respondents expect to see increased levels of AI adoption at both an enterprise level and within the CRE function.
The global emphasis on sustainability is driving developers and occupiers to align with ESG standards. While developers have been hesitant to upgrade existing properties, occupiers are proactively incorporating sustainability measures during office fit outs.
Others include Diamond Trust Bank Headquarters and Kisumu branch, Workable Offices in Westlands, and the Children’s Investment Fund Foundation offices in Parklands.
