UAP Tower 87pc full as owner sweetens deals for tenants

The amount of occupied space in UAP Old Mutual Tower in Nairobi has continued to inch up over the past 12 months following an aggressive campaign by the proprietor to woo new tenants.

The Sh5 billion building, which opened its doors for business in July 2016 after more than five years of construction, is now 87 per cent full – according to UAP Group chief executive Peter Mwangi.

“We’re quite happy with the improving occupancy,” Mr Mwangi told an investors’ briefing in Nairobi on Monday.

Located on Hospital Road in Upper Hill, about 1km from the city centre, the 33-storey UAP Old Mutual Tower offers some 300,000 square feet of Grade A office space in Nairobi’s fastest growing commercial district.

Standing 163m tall with an altitude of 5,700 feet above sea level, the building unseated Rahimtulla Tower as the highest point in Nairobi. Its location and magnitude affords it some unobstructed visibility in Nairobi, with panoramic views of the Kenyan capital.

However, the tower’s prestige has not been enough to fill its offices. For instance, UAP Old Mutual Tower had only achieved 35 per cent occupancy one year after opening forcing the developers to slash rents to attract tenants.

During its opening in 2016, the company said it had put up for lease 300,000 sq feet of Grade A office space and 25,000 sq feet of retail space at rents of between Sh120 and Sh180 per square feet.

The minimum office space offering had been capped at a minimum space of 3000 sq feet – which translated to a monthly rent of Sh360,000.

The advertised rates have now been lowered to Sh110 per square feet, and this as well as other sugared deals has resulted in better occupancy levels.

“We have to recognise the depressed property prices,” Mr Mwangi said.

This supports a new study by real estate management firm Broll Property, which notes that the Nairobi office market remains strongly tenant driven, with landlords now offering innovative occupational terms to woo new tenants.

“Commercial concessions have resulted in some landlords successfully attracting tenants and improving occupancy rates, with most of the net uptake being evident in A-grade space,” the Broll market report says.

The study shows that the top grade office space recorded an uptake growth of 27 per cent to achieve take up of 83 per cent, largely attributed to demand from new entrants and occupiers realising their expansion plans.

“A-grade office space registered the highest year-on-year occupancy growth of more than 27 per cent from 65 per cent in the first half of 2018 to 83 per cent in first half of 2019,” the report shows.

During the period under review, some landlords accepted revenue share rent as opposed to the typical rental based on space occupied and tenants were offered longer fit out periods beyond the standard three months.

READ: Tough times for Nairobi landlords as offices sit empty

A growing number of landlords are also accepting security deposits of a combination of two months’ rent as a bank guarantee and one month’s rent in cash unlike the traditional three months’ rent cash security deposit.

EXPLAINER: A-grade offices are basically top quality buildings that have been built within the last five years. They offer superior finishes and ample parking – an average of 2.2 parking bays per 100 square metres.

Join 15,000+ pros getting our weekly digest of news and insights.