The real estate firm during the review period outlined a continuously stabilising monthly prime rent at Ksh156.28 (USD 1.2) per square foot per calendar month, exclusive of taxes.
Kenyans who have embraced working from home for the past four years will be upset to know that more companies in the country are shelving the work-from-home model in favour of physical working environments, a matter which has raised the demand for office spaces.
According to Knight Frank’s Kenya Market Update report covering the first half of 2024, there is a significant shift from the option of working from home, prompted by the Covid-19 outbreak, which not only forced employees to work remotely but also increased digital activity and led to the boom of online businesses.
The real estate firm during the review period outlined a continuously stabilising monthly prime rent at Ksh156.28 (USD 1.2) per square foot per calendar month, exclusive of taxes.
A photo of office buildings in Westlands, Nairobi. /MARVIN CHEGE.VIRAL TEA KE
“Coupled by supply constraints, prime offices have shown resilience and leveraged their allure, remaining strong as highlighted by their occupancy rates of 77.2% as of June 2024, a slight improvement from 76.5% at the end of 2023,” the report reads in part.
Knight Frank noted that the trend of returning to physical office spaces has been prominent throughout the first half of 2024, with many organizations showing a preference for physical offices to the working-from-home model, a matter which has facilitated the continued expansion of the flexible workspaces market in Nairobi.
However, the revival of physical office spaces has also prompted firms specialising in remote workspaces to come to the fore in Kenya. In the first half of 2024, IWG, a global leader in flexible workspaces, opened new offices at Pramukh Towers, Westlands, under their HQ brand– occupying over 20,000 sqft, spread over four floors.
“Meanwhile, Kofisi, which operates 10 locations in Kenya, entered a partnership with Workshop17. Workshop17 has 12 outlets in Africa – 8 in South Africa and 4 in Mauritius. The objective of the partnership was to enhance connectivity for their 10,000 members distributed across 22 outlets, totalling a workspace area of 645,835 sqft,” added the report.
It was revealed that developers utilised differentiation strategies such as green certifications to attract a premium, especially from multinational corporations (MNCs) since they are perceived to be more environmentally sensitive, earning the MNCs much-needed carbon credits.
Even though there continues to be a growing emphasis on sustainability among occupiers, efforts by investors to improve the sustainability credentials of their real estate portfolios were hampered by limited capital expenditure.
“Upgrading a traditional building to a green building is capital intensive, made harder in cases where the property is still financing a loan. Relocation due to the functional and physical obsolescence of buildings is a significant concern, but once again, capital expenditure limitations restrict short-term responses,” the report continues.
Knight Frank also cited the recent anti-government demonstrations that rocked the country, with Nairobi being the epicentre, a matter which affected the office market as most offices closed due to overall insecurity issues such as vandalism, forcing employees to revert to working from home on Tuesdays and Thursdays – significantly creating a non-conducive business environment.
“Supply in the prime office market remains limited, creating an opportunity for strategic investors. The significant decline in the supply of prime offices in 2024 has been neutralised by the historical oversupply of these prime office spaces.
“Consequently, rents and occupancy rates are expected to continue remaining stable in 2024,” added the report.
Knight Frank’s Kenya Market Update report covering the second half of 2023 revealed that the demand for office spaces in the capital dropped mainly due to the challenging economic conditions that were precipitated by the pandemic. This is despite Kenya boasting a significant inventory of grade-A office buildings.
Since 2010, the development of these premium properties has steadily increased in response to the growing demand from international investors, governments, diplomatic missions, and multinational corporations attracted by Kenya’s appeal as a top investment destination in Africa.
