Prime office rents in Kenya declined in the first half of 2020 following the continued oversupply of commercial space in some locations and current economic slowdown.
This has resulted in most organizations putting on hold office space requirements as they focus on operational rather than capital expenditure.
According to Knight Frank’s Africa Office Dashboard, occupancy rates on average were recorded at 73% at the end of the first half of the year with higher levels recorded in certain areas such as Westlands.
In Uganda, downward pressure on rents has not been witnessed. Office rents in Kampala recorded a 7 per cent increase in the first six months of 2020 according to the report
However, liquidity pressure pushed occupiers to request for lease concessions with reference to rent repayment or abatement of their contractual obligations.
Landlords have however remained reluctant to reduce headline rents offering instead, short term remedies by way of rental discounts and or deferred payments. As a result, the report predicts a 10%-20% reduction in net annual rent collections.
In the Africa Office Dashboard, 29 of the cities tracked by Knight Frank recorded a decline in rents attributed to the ongoing pandemic and as a result, the office market performance remained subdued for the first half of the year.
Earlier in the year, Knight Frank noted that a majority of the landlords across the continent resulted in granting their tenants rent deferrals while others have undertaken lease terms renegotiations to ensure tenant retention and attract new ones. These trends are expected to continue in the second half of 2020.
It was also noted that demand for serviced offices will decline in the short to medium term due to the financial stress on SMEs and start-ups as a result of the pandemic.
However, in the long term, there may be an increase in demand as occupiers will be more anchored towards flexibility and efficiency in space occupied.