The Broll Kenya Retail, Office and Industrial Market Report H1 2017 reveal that the growth of office rentals remains positive. Upperhill, being a key outlier recorded a drop in asking rentals due to the rise in office stock over the last two years.
“We expect office rental growth to slow in the first half of 2017 due to new supply and increased caution around Kenya’s economic stability post presidential elections in August 2017,” says Peter Small, Broll Kenya Managing Director.
Small explains that the Westlands area is popular among multinationals, NGO’s and other large office users as it is well served by good road networks, has multiple routes to and from the area, airports and experiences less traffic jams compared to other office locations. It is also conveniently located in close proximity to the CBD, multiple residential, retail and hospitality developments.
According to the report, by the end of 2016 there was approximately 1,579,352m² of office space in Nairobi with rentals ranging between $7.3/m² - $13.6/m². Westlands had the highest office supply of 29%, Upperhill (24%) and CBD (20%).
He notes that the number of office building plans approved declined in 2016 due to rising concerns by developers of limited returns and oversupply of space.
However, there is a shortage of A-grade office properties in Nairobi and this provides an investment opportunity for those looking to enter the office sector. Nairobi has more supply of mainly B and C-grade offices while A-grade offices are found in locations such as Westlands, Gigiri and Upperhill with more quality spaces expected to come on stream in Kilimani and Karen in 2017/2018.
“The high rentals achieved in Westlands are due to the fact that Westlands is in a prime office location and boasts the highest number of A-grade offices in Nairobi. As a result, it attracts top tenants who are willing to pay premium rentals for additional amenities offered in these office buildings.”
Rental rates are highly reliant on the office location and quality. Locations with high tenant inquiries and preferences attract more rental rates and the inverse is true.
Westlands is a popular office location and is well positioned and therefore achieves higher rents as opposed to office locations like Mombasa Road and the CBD that not only have B and C-grade offices but also experience heavy traffic.
Nairobi continues to be a growing commercial hub in East Africa attracting more multinational and foreign corporates looking for office space.
“We anticipate an increase in the supply of A-grade office stock and a continued rise in Nairobi’s office rentals in 2017. “Key developments to monitor in 2017 include Vienna Court, One Padmore, UAP/Old Mutual Tower, The Address and Britam Tower,” he adds.