Knight Frank’s Kenya Market Update H2 2024 reveals declining occupancy rates in the commercial office sector.
According to the market report, average monthly asking rents for prime office space remained stable at USD 1.2 per sq ft. However, occupancy fell by 4.5% to 72.7% in H2 2024, down from 77.2% in H1 2024.
This decrease is attributed to two primary factors: a challenging economic environment impacting tenant demand and the introduction of substantial new office supply including Purple Tower, Highway Heights, Matrix One, The Mandrake, and Museum Hill Towers, adding 522,284 sq ft to the market.
Despite this overall decrease, Grade A office space remains in limited supply, with increased uptake observed. Demand for this premium space is driven by international investors, governments, diplomatic missions, and multinational corporations.
Workplace Trends
Despite global discussions on remote work, the Kenyan market continues to favour in-office arrangements. Factors such as justifying office costs, direct supervision, and fostering collaboration contribute to this preference. Even with this trend, the flexible workspace sector continues to grow.
Market Dynamics
Currency volatility poses a challenge, particularly for developers with USD-denominated loans. Landlords’ preference for USD-denominated leases is often met with tenant resistance.
“Since Kenya is a tenant’s market, many landlords are compelled to continue accepting Kenyan Shilling-denominated leases to maintain occupancy rates.”
The sales market remains subdued due to high asking prices. Notable transactions during the period include the Central Bank Pension scheme’s attempt to sell Timau Plaza and Twiga Hill Park and Fusion Capital’s sale of Kigali Heights in Rwanda.
Global Trends and Sustainability
Globally, corporate real estate sentiment is positive, with a strong focus on increasing sustainable building portfolios.
AI adoption is also expected to rise within 2025. In Kenya, the emphasis on sustainability is growing, with occupiers proactively incorporating ESG measures during office fit-outs.