Nairobi’s commercial real estate market has flowed with extra office space since 2016. However, latest reports by Knight Frank Kenya show that absorption of Grade A and B office space in Nairobi rose by 12% in the first half of the year compared to the second half of 2017, according to Knight Frank’s Kenya Market Update – 1st Half 2018.
Increased uptake of office space followed the improved political climate and economic recovery in the period, with the country’s Gross Domestic Product (GDP) having expanded by 5.7% in the first quarter.
Slight market corrections in the asking rents for offices to US$1.3 per square metre per month, from US$1.4/sqm/m in the latter half of 2017 have also boosted the uptake.
In the latest Kenya market updates, prime residential prices increased marginally by 0.4% in the period compared to a 1.8% decrease in the second half of 2017, while prime residential rents rose by 0.33%.
“The increase in prime residential prices and rents is attributed to an improved political climate and the thawing of the wait-and-see attitude among buyers and occupiers,” the report notes.
In retail, prime rents remained flat at US$55/sqm/month, with footfall in major shopping malls having increased slightly in the review period as expanding retailers took up anchor tenant spaces vacated by ailing rivals. Occupancy levels remained high for established malls at 90% and between 60-75% for new retail centres.
Over the last 20 years, in Nairobi, office rents in the Westlands commercial district have grown the fastest, having climbed by nearly two and a half times the 1998 levels, according to data compiled by Knight Frank Kenya.
Office rents in Westlands stood at about Sh35 per square foot per month in 1998, and currently average Sh120/sqft/m, a 242% increase. In comparison, average office rents in Upper Hill have increased by 175% over the two decades, from Sh40/sqft/m in 1998 to around Sh110/sqft/m in 2018.
Land values have increased most significantly in Karen, from an average of Sh 2million per acre in 1998 to Sh 65million currently, a more than 32-fold growth. Comparably, Upper Hill land prices averaged Sh 20million an acre 20 years ago and have risen to about Sh 600million per acre today.
“The property market has changed tremendously over the last two decades: land values have skyrocketed, a whole shopping centre culture has evolved across the
country over that time, and Nairobi’s skyline has been completely transformed by new developments,” said Knight Frank Kenya MD, Ben Woodhams.
The company today marked its 20th Anniversary in the Kenyan real estate market, having been established in March 1998. The real estate consultancy has since expanded its portfolio in the Kenyan market.