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Nairobi faces glut of office space on peaking growth

Nairobi is expected to have a glut of office space in the next two years with more than 2.8 million square feet vacant in upmarket Upper Hill and Westlands areas of the city.

Mentor Management Ltd (MML), a property development firm, said yesterday that a number of offices in Nairobi’s Upper Hill area will be particularly affected.

In its second Office Market Report for 2014, MML said that Upper Hill was entering the peaking phase of development which is characterised by supply exceeding demand by at least 20 per cent.

EXCESS SUPPLY

‘‘This excess supply of office space is expected to originate from Upper Hill and Westlands during 2015,” said MML chief executive James Hodell.

The report said that Upper Hill and Westlands will supply 64 per cent or 1.8 million square feet of the 2.8 million office space that is expected to come into the market by the end of 2016.

“We predict that by the end of 2016 there will be over 2.8 million square feet of office space — 19 per cent of the total stock of new buildings delivered since 2009 — lying vacant.

Properties in Upper Hill and Westlands that are easily finding occupancy are those of high quality and have ample parking space but are charging higher rents.

HIGH RENT INCREASES

The international accepted parking ratio for ‘Grade A’ offices is four square feet for every 1,000 square feet, and only one in 20 buildings in Nairobi has met this ratio, enabling them to charge higher rents.

The report also found that the two districts had the highest year-to-date rent increases, both averaging 17 per cent.

 

Rents in Upper Hill rose to Sh105 from Sh90 per square foot, while in Westlands they increased to Sh117 from Sh100.

 

KCB, Britam, UAP and Fusion Group are some of the firms that are putting up huge office blocks in Upper Hill.

The area is also home to the World Bank Group, Coca-Cola, CBA, Equity Bank, CIC Insurance and Shelter Afrique.