Commercial Projects
Tough times for Nairobi landlords as offices sit empty
The rising supply of new offices is giving tenants an upper hand in lease negotiations.
Office-building owners in Nairobi are struggling to retain or attract new tenants amid a rising supply of new offices, in a development that threatens to destroy the glory of the city’s real estate.
According to a report by Cytonn, builders have recently capitalised on office developments – pushing up the total office space to 9.0 million square feet against a demand of 3.8 million square feet.
“We expect the oversupply to increase by 7.6 per cent to 5.6 million square feet in 2019,” Cytonn says in the Nairobi Metropolitan Area Commercial Office Report.
The rising supply of new offices is giving tenants an upper hand in lease negotiations, while forcing landlords to slash or maintain rents in order to become more competitive and attract occupants.
Cytonn’s senior manager for regional markets Johnson Denge says the company has a negative outlook for the commercial office market in the Nairobi Metropolitan Area, and that “investment in the sector should be geared to the long-term horizon for gains when the market picks up.”
READ: Happy times for tenants as Nairobi rents begin to plummet
The report has listed the central business district, Mombasa Road, and Thika Road as bottoming markets experiencing stagnant demand, high office vacancies, and very low pricing.
It has identified Upperhill, Parklands, Westlands, and Kilimani as falling markets characterised by heavy supply coupled with low demand and pricing to attract new tenants.
READ: New offices sit empty as Nairobi’s Upper Hill loses shine
The dwindling fortune of the Mombasa Road and Thika Road markets is largely been blamed on the lack of quality offices and the perennial traffic jams that have made the zones quite unattractive to companies.
The two markets recorded rental yields of 5.8pc and 6.7pc respectively last year.
On the other hand, Gigiri and Karen were ranked the best performing markets in the period – posting rental yields of 10.5pc, 9.2pc, and 9.0pc on increased demand from companies due to availability of high quality spaces and relatively good infrastructure network.
Cytonn has recommended investments in low supply-high returns areas such as Gigiri as well as innovative concepts such as serviced offices that posted rental yields of up to 13.5pc to boost returns.
Saudi Arabia’s 170km City Project, The Line, Scaled Down
The megacity is now expected to span just 2.4 kilometres by 2030.
Moderna Halts Plans for Sh62bn Kenya Vaccine Factory
The US firm had signed a deal with Kenya for the mRNA vaccine facility.
Bunge Tower: MPs Now Moving Into New Offices
The 125-meter-high tower is one of the tallest buildings in Kenya.